Ford Motor company just announced that by the end of the year it will issue a comprehensive report analyzing the business case for reducing greenhouse gas emissions from its cars and the factories that produce them. The report will also evaluate production of fuel alternatives, like hybrid and hydrogen fuel-cell.
Laudable, right? I wish.
Motor vehicles are the fastest-growing source of greenhouse emissions, representing 20 percent of the country's and 12 percent of the world's greenhouse gas emissions. Automotive emissions are expected to rise by over one-third in the next 15 years and to double worldwide by 2050. The cars and light trucks from Ford alone will emit about 350 million metric tons of carbon dioxide over their life. Yet twisting Ford's arm wasn't enough. It practically had to be snapped off at the shoulder before the firm would agree to do the right thing.
What's sad is that Ford, a company created to make cars affordable for working class consumers, couldn't see the long-term competitive advantage of making the environment livable for those same consumers. It couldn't see what's so obvious to a growing number of companies, that when you protect the planet, you also protect your shareholders, your brand and -- not to be crass or anything -- your incentive comp.
Cinergy Corp. is an example of a new breed of companies that understands how going green can translate into greenbacks. It's also the last company you might expect to be climte-conscious.
Cinergy operates nine coal-fired generating stations in the mid-west and burns nearly 30 million tons of coal annually. Yet it devoted its entire annual report to the subject of global warming. As the company's CEO James Rogers admits in his letter to shareholders, "I'm sure you might expect us to duck this issue." But he says that "avoiding this debate and failing to understand the implications of the regulation of CO2 and GHG on our company is simply not an option."
Why not an option? Ford Motor Company might benefit from studying Cinergy's analysis:
- The states are getting involved. 4 states have an overall cap on GHG emissions and 2 have caps on CO2. 18 states have mandatory renewable energy portfolio standards. And 8 states filed suit against Cinergy and other coal-burning utilities to curb CO2 emissions.
- Congressional concern about GHG is growing. In 1997, the US Senate voted unanimously to reject the Kyoto Protocol. Yet in 2003, just five short years later, the McCain-Lieberman Climate Stewardship Act that would have regulated CO2 emissions, fell just 8 votes short of passage. That bill was reintroduced this year.
- The Kyoto Protocol to reduce GHG is law in 38 countries. In fact, some European countries are already thinking ahead on what do to after the Kyoto targets are reached.
- Pressure from shareholders to address CO2 and GHG emissions is growing.
- CO2 and GHG trading markets are expanding both here and abroad.
- Global warming is becoming a household world and a mainstream issue.
Cinergy added up all those trends and came to the conclusion that the climate change train was leaving the station and if they didn't climb on board voluntarily, they would exhaust themselves running to catch up. So in the last five years they've added 2,000 megawatts of gas-fired generating capacity and converted their oldest coal plants to natural gas. Since gas-fired plants produce two-thirds fewer emissions than the average coal-fired acility, Cinergy can now meet peak power demand and reduce emissions at the same time.
What's more, between now and the end of the decade, Cinergy will spend an estimated $21 million to reduce or offset GHG emissions. The company worked with independent scientists, economists, environmentalists, investors and consumers to develop a report on reducing GHG through their electrical generation system. They co-sponsored a two-day national summit meeting on the future of coal. And the company is looking into building the first, full-scale Integrated Gasification Combined Cycle (IGCC)plant in partnership with General Electric and Bechtel. IGCC turns coal into cleaner burning gas, while using less water and producer few emissions than conventional coal-fired facilities.
These initiatives make both environmental and financial sense. They allow Cinergy, which is publicly traded on the New York Stock Exchange, to differentiate itself from all the other energy companies in the marketplace. The positive brand equity that will accrue from these efforts is also likely to increase company value over the long run. They position Cinergy to make money selling GHG credits rather than spending money buying them. And, because their new equipment is more efficient, they will let Cincergy meet electrical demands at a reduced cost to consumers. What's more, total shareholder value has gone through the roof since Cincergy adopted these policies, consistently outpacing the S&P Electric, Supercomposite Electric and 500 Indexes.
I mean, who doesn't benefit from this?
Given that more than half of US electricity is generating using coal, Cinergy's do-well-by-doing-good business model is critically important. It shows that even the most fossil-fuel dependent companies can contribute to the greater environmental good and make money at the same time. It shows that good corporate citizenship is good business. And hopefully it will inspire other companies to follow suit.
For those reasons and for leading corporate America down the right path, Cinergy is named winner of the April WAY COOL award. This is the first time we've handed out the WAY COOL. The Aujaqsuittuq Project gives the BIG DRIP award away each month to people who --through ignorance, conflicts of interest, greed or indifference -- contribute to climate change, global warming and destruction of the Arctic. But criticism is easy. Making a positive difference really takes work. So it only seemed fitting that we also honor folks who are kicking a little GHG butt.
Hats off to Cinergy, a WAY COOL company!
