How Corporate Greenwashing Could Be Good for You

Hey, investors, have you missed the flag corporations are waving in plain sight? Simply turning on the tube can cue us in to corporations' ads touting their sustainability initiatives; they wouldn't spend the big bucks if it didn't matter. Many websites generally outline sustainability practices and release annual sustainability reports. For those who automatically scream greenwashing, an interesting and unexpected result could happen: Even initiatives that start out inauthentic may end up driving real sustainability and even boost profits.

The opinion split in this country sadly sucks reasoned dialogue out of the issue. There's the side with the megaphone crying out, "That massive evil corporation is greenwashing!" camp. The other camp's thundering response, "Green of any kind kills corporate profits and it's total hogwash!"

Let's chew on this for just a couple minutes at least: Maybe both sides are wrong.

Indeed, in a shocking turn of events, maybe both sides can do well, even if some companies are still brushing on a little "green sheen."

Mean, green corporate machines
It's worrisome that many investors still ignore sustainability when so many major companies are embracing change in visible ways. Some corporations downright admit that climate change and the increasing awareness of negative externalities are real material financial risks, too.

It's possible many environmentalists also don't fully understand how economics fits into the picture, and could cause different reasons for change than they've contemplated -- but these will add up to change nonetheless.

Some companies are making big changes -- massive ones -- that could potentially really move the needle. I would never say that all of our small moves like recycling, electric cars, and so forth are useless; we can all contribute. However, giant corporations can drive big-time change through sheer size and scope.

Wal-Mart  (NYSE: WMT  )  is by no means a perfect corporation in the public eye; for some, it's hate-worthy. However, its attempts to tackle environmental initiatives have been impressive. Its grand influence on suppliers and exposure to a very large customer base give it serious change-making powers.

Just recently, Wal-Mart and General Electric  (NYSE: GE  )  announced cheaper -- and even more important to many consumers, value-priced -- LED bulbs for shoppers. These will cost less than $10. These bulbs sip 80% less power and, in another win-win, last longer than traditional bulbs, too. Consumers who fretted about mercury in the previously green bulbs, CFLs (and that was definitely something to fret about), no longer have to worry about mercury and proper disposal.

Back in 2007, in the beginning of Wal-Mart's interest in sustainability, former Sierra Club president and environmentalist Adam Werbach openly acknowledged the power for change Wal-Mart and other huge corporations have. Environmentalists skewered him; he lost friends and was not surprisingly accused of selling out. Whether Wal-Mart has been able to fully realize its goals or not, Werbach actually brought a realistic argument into the conversation: Big companies can do a lot.

Factory farming is an increasing consumer concern, spanning animal welfare as well as the environmental ramifications of raising animals for food. Organizations like the Humane Society of the U.S. and regular consumers have been demanding better treatment of animals, at least for starters, and eradication of cruel practices like gestation crates.

Many people might not think of McDonald's  (NYSE: MCD  )  as the kindest corporation around, even if it slings some, cheap, mean sausage and egg McMuffins. However, McDonald's vow to finally address the gestation crates and demand that its suppliers come up with plans to phase them out within 10 years was a huge win for this issue. Why is this particularly significant? McDonald's buys a heck of a lot of pork -- about 1% of the entire U.S. pork supply.

Lockheed Martin's  (NYSE: LMT  )  reputation really doesn't scream green, either. However, it's included in the Dow Jones Sustainability Index and last month the company ranked high on the Carbon Disclosure Project's (CDP) list of companies dealing well with climate change management.

Last year, the defense company met its green goals early, and energy and water-use cost reductions generated $20.6 million for reinvestment. It plans to aggressively carry on.

The massive megamover
Gigantic global conglomerate Unilever  (NYSE: UL  )  has been one of the aggressive of all, even if it's mostly known for products like Ben & Jerry's, Dove, Lipton, and many more. It's actually been a big proponent -- and a great example -- of exactly what investors should be monitoring closely.

Unilever cut its carbon emissions significantly and reduced its operating budget by millions. Lowering energy bills, utilizing biomass technologies, and simply installing regional transport hubs to reduce the pretty ridiculously simple cost of long-distance truck travel cut costs and boost profits. Unilever's successful implementation of sustainable initiatives has saved hundreds of millions of euros since 2008.

Change does not come quickly when so many megacorporations have hardwired practices. However, truly market-minded investors should appreciate increased efficiency, cost savings, and profit. It fits in investing, even if some of the benefits take a while to be realized and fully implemented.

Environmentally minded folks should appreciate that companies are thinking more about the resources they waste and scrap, how to rethink and reuse, and maybe even coming up with the inklings that resource scarcity will ultimately destroy them.

Competition breeds innovation
Are most companies greenwashing with industrial-size brushes? I don't know for sure; who knows what's in others' hearts. Corporations are complex organisms with many moving parts -- including people. They are often besieged with a marketplace conflict, which has too long insisted that quarter-by-quarter short-term profits were more important than long-term sustainable profits.

I believe some do have authentic teams pushing powerful initiatives. Of course, we still all have to watch out for the tricky little things that are misleading. It's no time to fall down on the job if we care about sustainability.

I'm sure plenty still believe that this is corporate wickedness and corporations can never be clean. Still, one way or another, many are responding. If consumers weren't increasingly demanding it, many of the biggest wouldn't bother to take the time or make the investments in a better future. The biggest have to evolve, after all, even if "what worked before" is a huge risk for huge companies.

Meanwhile, the monkey-see-monkey-do element is an interesting psychological element here. Even attempts to keep up with the big corporate Joneses can instigate a race to outdo the rivals. Competition, and even imitation, is part of business. It can work in the environment's favor and a huge evolution.

Would Wal-Mart have cared so much about some of the major green initiatives it has been attempting to tackle if it hadn't seen the success and torrid growth of companies like Whole Foods Market  (NASDAQ: WFM  ) ? I believe it's an interesting and significant question to ask, and I daresay maybe not.

The dawning of conscience
As for my original premise -- could greenwashing be good? -- I offer another simple bottom-line observation about human nature. At some point can't immersion cause positive adaptation?

The more corporate executives and workers who become involved in a greener, more responsible, more ethical way of doing business, the sea change will surge. It actually is a nice feeling to be a force for good instead of one that's vilified, hated, and feared by a large part of the population. Right?

Are environmental problems fixed? Not yet, not even close. Still, though, with big companies getting on board, we can get much closer.

"The investor and the environmentalist can't get along" conventional wisdom is black and white. This issue is not black and white; it's green, and it's good.

Check back at Fool.com for more of Alyce Lomax's columns on environmental, social, and governance issues.


Read/Post Comments (4) | Recommend This Article (9)

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  • Report this Comment On October 09, 2013, at 11:57 AM, penchy1 wrote:

    Alyce

    Great article. Maybe the book Conscious Capitalism is becoming the beaon leading the leaders out of the woods. I will still invest alongside you. Keep it up. I'm a big fan. And my kids ports have taught them a few surprising things of companies they thought were never ethical.

    Thanks

    Mark

  • Report this Comment On October 09, 2013, at 4:06 PM, TMFLomax wrote:

    Thanks Mark! Yes, the book "Conscious Capitalism" is a great book with so much hope for upward, positive evolution. I think so many of these issues really are not as black and white as so many people believe they are! And that there is so much good that can be done and we are in the early stages of much more responsibility. Seeing some peeks of light!

    We've had so much to say on the Prosocial board so thank you for commenting here. I like the idea of "leading the leaders out of the woods." Great turn of phrase.

    I am always happy to hear about kids investing in an ethical manner, or even rethinking conventional wisdom about what is ethical or not!

    Always good to hear from you Mark!

    Alyce

  • Report this Comment On October 12, 2013, at 8:33 PM, mazske wrote:

    Conscious Capitalism is a great book. I hope that individuals of all types, to include CEO's and prospective CEO's all read this book. I just wrote a short post on the SA Investing Lounge board about this and other books.

    mazske, another Fool named Mark

  • Report this Comment On October 14, 2013, at 8:40 AM, TMFLomax wrote:

    Hi to another Mark! Another Conscious Capitalism fan! I also wish everyone would read this book, including CEOs like you say as well as people who have a very negative view of business and investing, since (as John Mackey has often said) capitalism has such a bad reputation in the modern world. I will have to check your post on the SA Investing lounge board! That's awesome!

    Alyce

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