A sustainability megatrend is building, promising to transform the way many corporations do business and damage those that fall behind. The incorporation of clean and green elements into business models will increasingly separate the winners from the losers in corporate America and investors' portfolios: Going green is becoming a coveted competitive advantage.
Some big companies with big green plans
Last year, Newsweek teamed up with Trucost, which specializes in quantitative metrics to rate environmental performance, and Sustainalytics, which conducts independent environmental analysis, to rate the greenest companies in 2011. These organizations measured metrics including greenhouse gas emissions, water use, waste disposal, and acid-rain emissions in order to come up with Newsweek's third annual Green Rankings, published in October.
Let's examine the top five companies, and a few of the reasons they came in high in Newsweek's Green Rankings.
Who knew an old-school stalwart like IBM
At No. 2 was Hewlett-Packard
If you're like me, you're just as curious about the companies that bottomed out instead of floating to the top.
Financial services companies have enjoyed their share of vilification recently, and apparently that's just as relevant in the environmental realm. Several of these showed up at the bottom of the list, due to their investments in companies with environmentally unfriendly track records, such as coal mining and gas drilling concerns.
Specifically, T. Rowe Price Group and BlackRock were ranked as the least green, and genetic modification giant and big, bad lightning rod Monsanto came in at No. 3.
Trendsetters set the pace
Clearly, some companies are realizing that sustainability goes far beyond do-gooding; it can also boost bottom lines. Reducing waste and energy use and using other methods of conducting business more efficiently mean saving the earth and yielding long-term cost savings, too.
Investors should be concerned if their companies are falling behind the curve on this building megatrend, and not just because their companies could face public relations problems.
Costs that used to be considered "externalities," such as greenhouse gas emissions and water usage, are increasingly having material impacts on companies' financial well-being. In fact, the Securities & Exchange Commission has ruled that climate risk is literally a material issue that must be disclosed to investors.
Increased public and government attention, with fires fanned by social media and other high-powered, high-speed information channels, further underscore why companies that don't address these issues could doom their shareholders' long-term returns.
Watch the sustainability trendsetters in 2012, and also keep an eye on how other companies respond in their own business models. The most innovative and forward-looking should carve out some competitive advantage over the long haul. On the other hand, the sustainability laggards will prove costly to the Earth as well as to their shareholders.
Check back at Fool.com every Wednesday and Friday for Alyce Lomax's columns on environmental, social, and governance issues.
Alyce Lomax does not own shares of any of the companies mentioned. The Motley Fool owns shares of IBM. Motley Fool newsletter services have recommended buying shares of Dell. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.