The Greener Guys
by: Jad Mouawad 30 May 2006
When Timberland, the outdoor clothing company, studied ways to reduce its carbon emissions four years ago, it weighed several options: building a wind farm in the Dominican Republic, buying power generated by renewable resources and setting up a vast bank of solar panels at one of its distribution centers in Ontario, Calif.
It chose to do all those things, but that was the easy part. When Jeffrey B. Swartz, Timberland's president and chief executive, considered how much carbon dioxide was produced in making leather for the company's famous boots, the answer came as a surprise.
"As it turns out, the vast majority of the greenhouse gases associated with manufacturing leather comes from cows in the field," Mr. Swartz said. "Yes, methane."
While Timberland figures out how to reduce these emissions it is examining ways to change the feed for cows the company has already cut its greenhouse gases by 17 percent from their 2002 level and aims to become carbon-neutral by 2010 by offsetting its emissions through renewable or alternative energy sources.
Americans are increasingly recognizing that the effects of carbon emissions on global warming are a serious problem, but there are no rules in the United States regulating heat-trapping gases comparable to those that most other developed countries have adopted under the Kyoto Protocol. Some United States businesses, though, are responding for a variety of reasons anyway: to satisfy customers or shareholders who worry about the environment, to improve their public image or to drive down their energy costs. In addition, some states and local authorities have stepped in to try to curb their contributions to global warming.
For Timberland, while it shares the concerns over global warming, it's mostly a matter of dollars and cents. As Mr. Swartz put it: "What idiot will leave costs on the table? I hope it's our competitors. I get paid to create value."
But reducing carbon emissions is no easy task.
Scientists, economists, environmentalists and a growing rank of business leaders warn that corporate America needs to move more quickly or it will face the consequences: higher energy prices, a potential cost for carbon pollution and, eventually, products that will have trouble competing globally because other countries are reducing emissions.
The United States is responsible for a quarter of all the carbon dioxide sent into the atmosphere each year. It has not ratified the Kyoto Protocol, the treaty on climate change that went into effect last year for more than three dozen countries in Europe and elsewhere, that set targets and timetables for cutting emissions.
If consumption of fossil fuels continues at today's pace, the Energy Department predicts that carbon emissions in the United States could rise to more than eight billion tons by 2030 38 percent above current levels as energy use keeps growing.
"This is a huge challenge for American businesses, particularly those trying to compete internationally," said Adam Markham, executive director of Clean Air-Cool Planet, an advocacy group in Portsmouth, N.H. "Most of the rest of the developing world has a legislative mandate to curb emissions, but in the United States, in many cases, there is no real reason for companies to act."
Many analysts predict that the United States will eventually set rules limiting greenhouse emissions. Then, carbon pollution will turn into a cost of doing business.
In Europe, for example, companies that go over their emission limits must buy carbon credits to comply. Under the continent-wide trading system, the cost of a carbon credit reached a high of 30.5 euros for each metric ton, or about $39, last month. (In the last month, prices have dropped by half as many power plants reported much lower emissions than expected.)
But only 86 companies in the United States, accounting for 8 percent of domestic carbon emissions, have enrolled in Climate Leaders, the Environmental Protection Agency's voluntary program to cut emissions. Emissions in the United States have risen 16 percent since 1990, the agency said.
"There is certainly a lot of inertia in the economy, and many companies have their heads in the sand, wishing and hoping that somehow the overwhelming consensus among scientists is going to go away," said Alan Nogee, director of the clean energy program at the Union of Concerned Scientists, based in Cambridge, Mass. But it's not. And ultimately their shareholders and customers are likely to pay a price. The reality is that carbon regulation is coming inevitably to the United States, as it has to the rest of the world."
Freezing emissions at today's levels will not solve global warming. Experts say that large reductions in global emissions 50 percent or more by 2050 are needed to stop carbon concentrations from rising. But reaching that goal requires a major transformation of how economies and businesses operate.
"It's going to change everything we do," said Joseph J. Romm, an analyst at the Center for Energy and Climate Solutions, a group that helps businesses lower emissions.
Environmental regulations and energy saving are not new. Since the 1970's and 1980's, when energy saving policies became popular in reaction to high fuel prices, the global economy has made huge strides in efficiency.
But economic activity has grown at the same time, and carbon emissions along with it.
"There is a lot that companies can do, especially in the area of energy efficiency," said Ashok Gupta, an economist at the Natural Resources Defense Council, an environmental group in New York.
Not surprisingly, the biggest strides have been achieved by corporations with operations outside the United States. I.B.M. and DuPont, for example, have long had programs to curb their energy use. In doing so, they have managed to cut manufacturing costs while decreasing their emissions.
At DuPont, the savings from energy projects has totaled $2 billion over the last decade and a half. I.B.M. saved $115 million since 1998 by avoiding 1.3 million tons of carbon emissions, or the equivalent of taking 51,600 cars off the road, according to the climate change program at the World Wildlife Fund.
Other companies, like 3M, Advanced Micro Devices and the Gap, have pledged voluntary reductions in their emissions. Wal-Mart, the world's biggest retailer, announced a sweeping set of environmental goals last October, including doubling its truck fleet's efficiency and improving energy efficiency at its stores.
Johnson & Johnson decided in the late 1990's to meet the Kyoto requirements globally. From 1990 to 2005, the company reduced carbon emissions by 11.5 percent. Meanwhile, sales grew by 350 percent.
"We have not sacrificed business growth to meet our carbon emissions," said Dennis Canavan, the executive director for worldwide energy management at Johnson & Johnson. "As Kyoto has recognized, the environment only sees the absolute amount of carbon you reduce. Allowing emissions to grow will take us to a bad place."
But some business areas remain averse to change. The transportation sector and utilities account for more than 55 percent of all emissions; they are mainly reluctant to commit to reductions without a federal mandate.
Last month, the Senate Committee on Energy and Natural Resources held hearings on climate change that led to a few surprises. Some utilities, breaking with their trade group, asked Congress to set mandatory limits on carbon emissions.
Exelon and Duke Energy, the nation's largest utility owners, said they favored a mandatory cap on emissions. As big users of nuclear power, they stand to benefit more than competitors that burn coal. But they also note that firm rules would level the playing field for everyone.
"Customers and shareholders need greater certainty," Ruth G. Shaw, a senior executive at Duke Energy, told the Senate committee. But Senator Pete V. Domenici, Republican of New Mexico, said it would be impossible to adopt any law this year because of election-year gridlock.
David G. Hawkins, who ran the air pollution program at the Environmental Protection Agency in the Carter administration, said that many utilities were not happy with the current lack of policy.
"At a minimum, the absence of a controlled program creates uncertainty," said Mr. Hawkins, now the director of the Climate Center at the Natural Resources Defense Council.
Local and regional governments have stepped in to fill the gap. California and nine Northeastern states have drawn up plans to limit carbon emissions, and so have many cities.
Automakers have also resisted changing. David Friedman, an auto specialist with the Union of Concerned Scientists, said the average fuel economy of vehicles in the United States today about 25 miles a gallon had dropped by about one mile a gallon in the last 20 years. Most of the improvements in engine efficiency, however, have been lost because Detroit carmakers built larger cars and trucks.
"The automobile industry always feels it is difficult to make changes, whether on safety regulation, on seat belts, on emission standards, on smog and on global warming," Mr. Friedman said. "They always had to be forced to make progress."
Bill McKibben, a resident scholar at Middlebury College in Vermont and the author of "The End of Nature," a book about global warming, said there was no single answer.
"What people don't get is the scale of what needs to be done," he said. "Anybody whose solution includes the phrase 'in 20 years,' hasn't quite caught on to where we are."