IntroductionIn this, our sixth annual State of Green Business report, we’ve made somesignificant changes — not just in the look and feel of the document you’rereading, but in its content.First and foremost, we’ve partnered with Trucost, a leading research firmfocusing on natural capital and sustainability metrics, to revamp theindicators by which we assess progress by the private sector in addressingglobal environmental challenges. In the spirit of continuous improvement,we scrapped the set of metrics we’d used for the previous five reports infavor of a more comprehensive and robust set that is global in scope. Theycover companies’ natural capital costs, their supply-chain impacts, variousmeasurements of transparency and disclosure, and other things.Unchanged is our Top Trends section, which looks at where the world ofsustainable business is headed — the leading indicators of future progress.Our efforts mirror those of the business world we reflect: a work in progress. Joel MakowerI hope you find insight and inspiration from this year’s report, and look Chairman & Executive Editorforward to your feedback. GreenBiz Group 03
ForewordThe global economy needs deep and liquid markets of all types of capitalto run effectively. Natural capital, long overlooked in traditional financialaccounting, is now recognized as a material economic input as businessesincreasingly seek to manage volatile commodity prices linked to resourcescarcity and extreme weather events. Important steps are now being takento account for the natural resources that fuel economic growth, as well asthe pollution that undermines it. We are pleased to partner with GreenBizGroup to bring natural capital metrics to the “State of Green Business”report.Trucost has been valuing natural capital and putting a price on resourceuse and pollution for more than a decade to help companies and investorsaddress sustainability issues in board room business decisions. Trucost’sEnvironmental Register, the world’s most comprehensive database ofnatural capital metrics, provided the data insights for this year’s report,showing that companies became more environmentally efficient over the Dr. Richard Mattisonpast five years. Simply put, businesses used fewer resources and pollutedless to generate revenue. Notably, though, U.S. companies were found to CEOlag their global peers, suggesting that without improved corporate efforts Trucost Plcin North America to measure and manage the natural capital in theiroperations and supply chains, their global competitiveness may stall.Although companies are developing ways to deliver goods andservices more efficiently, their overall reliance on natural capital grew,with environmental costs rising by 8 percent to almost $352 millionbetween 2007 and 2011. Companies have yet to decouple growth fromenvironmental damage. This is mainly because of our global economy’scontinued reliance on carbon-intensive fossil fuels, which meant that 42percent of costs came from greenhouse gas emissions.
It’s clearly not just about greenhouse gases, though. Water is also Many of the companies analyzed are already reaping the rewards ofmaterial, as the repercussions of drought in the U.S. and elsewhere have strengthening supply-chain resource management, from cost savings toshown, from shipping disruptions to rising crop prices. The majority of innovation that leads to new revenue streams. The number of S&P 500the S&P 500’s $84 million in water costs are embedded within global companies reporting on profits from environmental activities rocketed bysupplier webs, so any business aiming to be more resilient and avoid 61 percent over five years. Their environmental R&D more than doubled,commodity price shocks will need to scrutinize supply chains and engage despite economic gloom. The best is yet to come.with strategic suppliers. The opportunity is ripe for forward-thinking leaders of multinationalMost companies now disclose at least some environmental impacts, companies to take the lead in remaining competitive in a resource-and a growing number are having third-party assurance completed on constrained, volatile economy that has become the “new normal.” Thattheir quantified performance data to make their reporting more credible. journey begins by measuring and understanding reliance on naturalDespite improvements by U.S. companies, their global peers are ahead capital and using that insight to cut costs, extract value, and unleashon most Trucost indicators captured in this report, including disclosure. opportunity.Investors now need to rout out the most material risks and opportunities,allocate financial capital effectively and start rewarding companies takingthe initiative to measure and disclose natural capital.Where there are risks, lie opportunities. The cost of protecting naturalcapital creates strategic opportunities for businesses that can optimizeresource use, and deliver innovative products and services to helpcompanies better align business success with environmental megatrends. 05