Business loses its environmental virginity

by Ari van Schilfgaarde

This week, the environmental news was full of the promise of Sir Richard Branson, who pledged the sum total of the profits of his transportation businesses towards the development of renewable and carbon-neutral fuels. He is quoted as saying that the “transportation industry must be at the forefront of developing environmentally friendly business strategies.”

To bring his companies to the fore, Branson has committed $400 million to a new venture, Virgin Fuels, which will invest in and develop green energy projects. His reasoning behind the transfer may well be a deep-seated desire for philanthropy, or perhaps a strong belief in the importance of addressing global climate change, or perhaps a preemptive strike against the coming regulation of airline fuels. At some level the motive is irrelevant, what matters is that there is a commitment by the business community to bring about change.

It is impossible to deny that injecting 18 times what the entire United States Government spends on alternative fuels will make a difference in the global energy industry, but the reapportionment is still effectively a drop in the bucket. Greenwashing at best, a publicity stunt at worst. Drug companies, who make hefty profits on their own, expend about 10 percent of total revenue on R&D costs. Energy companies in contrast spend about 0.3 percent of their revenues on finding alternatives to petroleum.

So, how do we identify greenwashing from true values and separate the marketing from the real action?

This morning a partner and I interviewed Bob Perkowitz, a business leader in North Carolina. He sells women’s fashion to environmentally conscious consumers. If you spend more than $75 on any one order at his company, he will donate $1 to buy air power in the Dakotas. He says that he regularly cuts $15,000 checks to the wind company in the Dakotas. It costs him 0.5 percent of his revenues to do this and in no way affects his business model. It does, however, provide him with beautiful pictures of windmills in the VivaTerra catalogue, a subtle green logo, and help build a $35 million per year business.

He recommends taking some of the money and much of the experience on the marketing end of business and applying it to NGOs. By marketing an issue—like global warming or the death of pandas—to people trained to be marketed to, Mr. Perkowitz argues, we can mobilize support for the issues that we care about.

Mr. Branson’s newfound focus on fueling his companies is a good example: after being awakened to the dangers last year by Al Gore’s movie “An Inconvenient Truth” he entered into talks with advisors and decided that the best course of action for his organization and the planet would be to reallocate his profits towards renewable and biofuel sources. Imagine who else could be tempted to such a realization. While he acknowledges that the development of such a ambitious goal is difficult and possibly one that will lose him profits in the short run, but he seems to be willing to sacrifice this for the longer term gain that he sees in having his fleet of airlines securely and cheaply fueled.

It is clear that we will not overcome the global climate change issue by simply using more ethanol, but with the aviation industry set to produce 15 percent of all greenhouse gasses in 10 years, Mr. Branson’s gesture is a start.

What remains to be seen is how this huge influx of capital over a sustained time period and without a specific focus will affect change in the nascent biofuels business. More importantly for the business community as a whole, will it successfully make the Virgin Group more profitable?

Ted Turner argues that Mr. Branson’s increased publicity will net him more funding than the advertising that he currently purchases—if other businesses are to follow suit, this has to show a return on investment for the individual. That’s what our economic system is based on, and all the greenwashing in the world won’t change that fundamental fact.

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