Bloomberg BNA’s Corporate Law & Accountability Report is available on the Corporate Law Resource Center. This news service keeps corporate practitioners informed of legal developments of...
By Yin Wilczek
July 1 — It seems money does grow on trees.
According to a new study, sustainable products and services that minimize environmental damage are driving corporate revenues at companies such as Caterpillar Inc., General Electric Co., Toshiba and Dow Chemical Co.
The study found that between 2010 and 2013, revenues from such products grew by 91 percent in the 12 companies it reviewed, while overall company revenues grew by 15 percent.
It also found that sustainable products represent a growing share of revenues in the 12 companies, on average accounting for 21 percent of total revenues in 2013 compared to 18 percent in 2010.
The study, “Driving Revenue Growth Through Sustainable Products and Services,” was released July 1. It was authored by Thomas Singer, a principal researcher in corporate leadership at the Conference Board, and supported by the Investor Responsibility Research Center Institute (IRRCi).
In a release, IRRCi Executive Director Jon Lukomnik said it is a “totally false dichotomy” to suggest that sustainability comes at the expense of corporate growth.
“In fact, leading corporations are realizing a substantial and positive impact on revenue from their sustainability products and services,” Lukomnik said. “The trend we’re seeing is that corporate sustainability programs are evolving from adhering to the best environmental, social, and governance standards to becoming a critical element of a company’s growth strategy.”
The study did acknowledge certain limitations, including that the data is limited and largely not standardized. It also noted that few companies have developed reporting for their standalone sustainable products and even fewer track revenues from, and research and development spent on, such products.
In addition to the four companies listed above, the sample companies were Allianz, BASF, DuPont, IBM, Johnson & Johnson, Kimberly-Clark, Philips and Siemens.
Timothy Smith, senior vice president at Walden Asset Management and an advocate for sustainable and responsible investing, told Bloomberg BNA that both companies and investors have increasingly highlighted the importance of companies addressing key sustainability issues like climate change, diversity and supply chain matters.
“They see this as both advancing shareholder value and being a responsible corporate citizen in how they do business,” Smith said in a July 1 e-mail, adding that thousands of global companies now measure progress and challenges, and publish sustainability reports.
Smith noted that the Conference Board and IRRCi's report adds a “new dimension” to those efforts. “For investors, this is a useful and welcome study demonstrating the positive effect on the bottom line of innovative and sustainable products.”
In other findings, the report stated that banks are playing an increasingly important role in financing the development of large-scale sustainable products and services, mainly through asset finance, tax equity and green bonds.
It also found that in its sample companies, customer concern related to climate change and other environmental issues was a driving force for their sustainable products.
Moreover, the study found that growth in its sample companies' sustainable products portfolio results in part from the incorporation of sustainable products into the organization's strategic planning and target-setting. It noted, for example, that:
• in 2005, GE set a goal to grow revenues associated with its Ecomagination line to $20 billion. Since then, the products' revenues have increased four times the rate of GE's overall industrial business;
• DuPont set a target to increase annual revenue from its sustainable products by at least $2 billion by 2015. According to the report, the company surpassed that goal by 2012; and
• Dow made it a goal to derive 10 percent of its total revenues from sustainable products by 2015. The target was reached by 2013, the report found.
To contact the reporter on this story: Yin Wilczek in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Ryan Tuck at email@example.com
The study is available at http://irrcinstitute.org/pdf/FINAL-TCB-Sustainable-Products-July-2015.pdf.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)