Corporate Environmentalism: Doing Well by Being Green

Corporations are often, and quite justifiably, accused of harming the environment. Many of their production processes and products degrade the environment. Yet a certain number of corporations, probably an increasing number, go considerably beyond what is required of them legally in minimizing their environmental impact. They meet legal limits on environmental impacts and then go beyond these. This has been called “overcompliance,”1 a descriptive, if not elegant, phrase designating going well beyond what is required by laws and regulations in force. Very visible examples are British Petroleum (BP), Starbucks, Heinz, and the banks that have adopted the Equator Principles. In 1997, before the Kyoto Protocol was signed, John Browne, then the CEO of BP, publicly recognized the reality of climate change and the contribution of fossil fuels, and pledged to reduce BP’s emissions of greenhouse gases below 1990 levels by 2005. BP met its targets, and clearly deployed considerable managerial resources in doing so. Interestingly, BP claims to have made money from this overcompliance, to the tune of $630 million, mainly through capturing and selling rather than flaring the gases associated with oil fields.2 Starbucks operates in a very different business, and has also found overcompliance to be worthwhile.