Like most investors, you probably aim for the best possible return when picking potential investments. But as consumers increasingly clamor for companies to embrace social responsibility, good corporate citizenship is becoming a vital part of many companies' success. And it can boost the performance of our portfolios, too.
CR magazine recently released its "100 Best Corporate Citizens" list for 2013, in which it rated members of the Russell 1000 large-cap index on 325 different elements related to responsible behavior. In the coming weeks, I'll delve into each of the seven categories that contribute to a company's overall score.
Today, we'll look at the climate change category, which gets a 16.5% weighting. Here are the top-rated companies:
United Parcel Service (UPS 1.96%)
Exelon (EXC 1.57%)
PepsiCo (PEP 2.09%)
IBM (IBM 2.09%)
Spectra Energy (SE)
To earn their high scores, the companies above engaged in a variety of good practices, including, among many other things, disclosing carbon dioxide emissions, disclosing greenhouse gas emissions, and applying their climate-change policy standards to their suppliers and vendors.
So what, exactly, are these companies doing right? Here are a few examples of their climate-change-related activities:
UPS has a "Corporate Climate Change Statement" (link opens PDF file), and reports on its progress annually in a company sustainability report. Its strategy includes optimizing its logistics to minimize miles flown or driven, conserving energy, and investing in fuel-saving technologies. It has also been highly ranked by the folks at ClimateCounts.org. Between 2008 and 2011, it reduced its gallons of fuel consumed per ground package delivered from 0.127 to 0.116, an improvement of close to 9%.
Exelon is a major American electricity and gas company, and also our largest nuclear-power utility. Though its "Energy Reduction Challenge," the company aims "to reduce our own building purchased energy consumption by 25% and auxiliary power at our plants by 7% by 2012 [vs. 2001 baseline levels]." As an example of how profitable green-ifying a business can be, the company updated a 45-year-old lighting system at one plant and achieved 80% savings in annual energy costs.
PepsiCo's climate-change initiatives have helped it win the EPA's Energy Star "Sustained Excellence" Award for four years in a row. Between 2006 and 2010, it reduced its per-unit use of thermal energy in its food and beverage plants by 12% and electricity consumption by almost 8%. The company has many environmentally friendly initiatives under way, such as using low-carbon fertilizers on a trial basis in Florida to grow oranges for its Tropicana drinks. It also plans to try the fertilizer with potatoes.
IBM has also been recognized by the EPA, "for its ambitious emissions reduction goals, and for being at the leading edge of setting requirements for suppliers to measure, disclose and reduce their operational greenhouse gas emissions." The company has had energy policies in place since the 1970s, and between 1990 and 2011, it has "saved 5.8 billion kWh of electricity consumption, avoided 3.7 million metric tons of CO2 emissions (equal to 55% of the company's 1990 global CO2 emissions) and saved $442 million through its annual energy conservation actions."
Spectra Energy specializes in the transport and storage of natural gas, among other things. Its climate-change commitments and achievements include reducing its air emissions by 10% between 2007 and 2011, and between 2007 and 2010, it reduced its carbon-dioxide-equivalent emissions by 4.3 million metric tons. It's looking into the feasibility of a major carbon capture and storage project in British Columbia, which might capture and store 2 million tons of carbon dioxide, equivalent to removing 500,000 cars from the road each year.
Earning green while being green
Companies doing good can boost your portfolio's performance. And various other studies have suggested that socially responsible investments are at least competitive with the overall market, if not outperforming it on occasion. That's a solid motivation for even the most coolly rational investors to take social responsibility to heart.
If you're in the market for solid socially responsible candidates for your portfolio, check out the real-money portfolio run by my colleague Alyce Lomax. Out of all the Fool portfolios in the group, hers was recently in first place.