The Economy
BUSINESS: Frustrated 'Greens' Turn to Boardrooms
By Alan Murray
848 words
7 June 2006
The Wall Street Journal
A2
English

IF YOU ARE awake at the end of Al Gore's movie, "An Inconvenient Truth," you'll be called to action. Go to www.climatecrisis.org , the bold white words on a black screen tell you, and find out what you can do to combat global warming. The Web site allows you to "offset" the pollution of your house, your car and the rest of your carbon-besotted existence by investing in a wind farm or a project to "capture" methane from the hindquarters of farm animals.

This is the new face of the environmental movement in the U.S. Having failed at the ballot box (although Mr. Gore and many of his followers still believe he didn't fail), the greens have turned their attention to private action, exhorting individuals and corporations to do their part to solve the problem.

Among corporations, at least, this tack is yielding some results. While the powers in Washington still drag their feet on climate change, those in Fairfield and Wilmington and Bentonville -- following the lead of their colleagues in Europe -- are taking some surprising strides.

The latest example is Wal-Mart Stores, which said last week it is considering selling a heavy ethanol blend, known as E85, at the 385 service stations it owns and operates at Sam's Clubs and Wal-Marts around the U.S. This is big news, indeed -- although it comes with a hitch. Wal-Mart plans to take this step only if it concludes it can make money in the process. And right now, that's questionable.

For one thing, only about 4% of the cars on the road in the U.S. can run on E85. And those so'called flex-fuel cars tend to be concentrated in the Midwestern corn belt. Elsewhere, the percentage is lower.

For another, E85 is currently selling at about the same price as gasoline. Because ethanol is less efficient than gasoline -- drivers get about 25% fewer miles to the gallon -- that's not a very good deal for consumers.

"The approach we are taking," says Rich Ezell, Wal-Mart's senior strategy manager for fuel, "is how can we get E85 to the marketplace at a price that compensates for the loss in fuel economy and so that we as a company don't lose money on it."

Still, give them credit for trying.

Part of what's happening here is that a new generation of corporate leaders -- people like Chad Holliday at DuPont, Jeff Immelt at General Electric and Lee Scott at Wal-Mart -- are following the example of John Browne at BP and personally pushing this issue. They may agree with President Bush on tax and regulatory policies, but on global warming, they think he's missing the boat. They also believe the green movement could be a business opportunity.

Another prod to corporate action is coming from activist shareholder groups, who are a little too eager to turn the boardroom into a forum for controversial public-policy debates. In the wake of Hank Greenberg's departure as chief executive at insurance giant American International Group, for instance, activists representing labor unions and public-pension funds persuaded the company to create a new board committee to address public-policy issues like climate change. It is headed by Bill Clinton's former United Nations ambassador, Richard Holbrooke.

Last week, Institutional Shareholder Services, which advises pension funds and other institutions on how to vote their corporate proxies, held a Webcast entitled "Corporate Governance and Climate Change: Making the Connection." It highlighted a new report by Ceres, a subsidiary of ISS, which ranks 100 companies on how well they are addressing global warming.

The report gives BP its highest score of 90, DuPont a respectable 85 and GE a passable 58. But other companies, like ConAgra Foods, UAL's United Air Lines and Williams Cos., scored below 5. Representatives for all three companies declined my invitation to challenge whether global warming should be debated in the board room. Instead, they argued the Ceres report overlooked many of the fine things they were doing to address the problem.

The danger here is that boards of directors get turned into debating societies for the most fractious issues of our times. If they are going to take on global warming, why not health-care reform? Or the killings in Darfur? Or gay marriage? Corporations and their boards are lousy forums for settling such prickly partisan issues. They do best when they stick to business.

To be sure, global warming is an urgent issue. As one CEO recently put it: "We don't have a lot more time to deal with climate change." But the same man also emphasized that voluntary action alone can't solve the problem.

Who was that CEO? Hank Paulson of Goldman Sachs Group, recently tapped to be Treasury secretary. Now he's on his way to Washington, where the issue belongs.

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