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The Observer: Corporate UK plays the green card

Progressive businesses are taking environmental issues seriously, but others still need a prod. Heather Stewart and Ditte Hesse report

Sunday July 23, 2006

Business is jumping on the green bandwagon, with Ford the latest corporate giant to promise to clean up its act. It is spending £1bn over the next six years on developing more environment-friendly technologies – and calling on the government for financial help.

The car maker’s decision is the latest in a series of very public conversions by corporations not previously known for their environmental credentials. Supermarket chain Tesco has promised to cut emissions from its distribution lorries; broadcaster BSkyB is working towards reducing its carbon emissions; fuel giant BP now describes itself as being ‘beyond petroleum’ and has spent millions on advertising its enthusiasm for alternative energy.

For all these firms, the main motivation, as every business textbook would suggest, is not saving the planet, but boosting the bottom line. In part, they are simply responding – belatedly, say campaigners – to a marked change in public mood. David Cameron’s decision to put the environment at the heart of his party’s rebranding was the clearest sign yet that environmentalism has shifted from the cranky fringes of politics to the mainstream.

The cross-party consensus, together with numerous dire public warnings of the consequences of climate change from such luminaries as television naturalist Sir David Attenborough, have helped to transform public perceptions of environmentalism. Just as Cameron believes turning a deeper shade of green will help him to win over the voters, businesses hope that doing their bit to save the planet will improve their image with consumers.

‘It’s interesting that the corporate social responsibility wing of companies is usually closer to the public affairs department than to the finance director,’ says Andrew Simms, of the think-tank New Economics Foundation, who warns that many companies’ green activities are simply ‘window-dressing.’

A recent report by the Institute of Grocery Distribution showed that more than half of British shoppers care about the green credentials of what they buy, creating a £25bn-a-year market for ‘ethical consumerism’. Sales of ethical products such as fair trade foods are growing at 7.5 per cent a year, compared with 4.2 per cent for other goods.

According to the CBI’s head of environmental issues, Matthew Farrow, businesses have been helped along the green route by soaring gas and electricity bills, which give firms a financial, as well as ethical, imperative for energy efficiency. ‘Some of the market signals have got a lot stronger recently,’ he says.

The government has also been using persuasion to further the environmental cause with businesses – Environment Secretary David Miliband called supermarket bosses in last Thursday for an ear-bashing about their obligations to go green, for example.

Environmental campaigners are encouraged by the steady trickle of announcements about individual initiatives, but they say companies cannot be expected to change the world of their own accord. ‘The free market is not going to deliver the solutions on its own – there are never going to be enough ethical consumers,’ says Craig Bennett, head of the corporate accountability campaign at Friends of the Earth.

He argues that if the government set the framework for environment-friendly investment by establishing clear standards – for fuel efficiency in cars, for example – innovative companies would have an incentive to invest, and UK plc could become a world leader in clean, green technologies. ‘We need to start accepting that sensible, well-constructed regulation has a real role to play,’ he says.

Surprisingly, the Tories appear to agree. Former environment minister John Gummer, who sits on David Cameron’s Quality of Life policy group, recently criticised the CBI for its knee-jerk anti-regulation stance, and lauded the newly set-up Aldersgate Group, which claims to represent progressive businesses.

The Corporate Leaders’ Group on Climate Change, made up of blue-chip directors including Standard Chartered chief executive Mervyn Davies and Shell’s UK chairman, James Smith, bypassed the CBI and wrote to the Prime Minister earlier this year, urging him to use regulation to overcome ‘the Catch 22 situation in which governments refrain from introducing new policies to reduce emissions because they fear business resistance, while companies find it difficult to take their investments in low carbon solutions to scale because of the lack of long-term climate policies’.

However, since former Financial Times editor Richard Lambert took over from Sir Digby Jones as director-general of the CBI earlier this month, there appears to have been a marked change of tone at the organisation’s Centre Point headquarters. ‘Environmental goals are very important for society and for business. Regulation is part of the way to achieve that,’ says Farrow.

The CBI’s emphasis seems to have shifted from opposing regulation in principle to attacking the detail of how it is drafted and implemented. Farrow singles out several particular rules for criticism, including the latest EU Waste Directive, known by its acronym of WEEE. Despite its gripes about particular policies, the CBI seems to be tiptoeing closer to Greenpeace, Friends of the Earth and the rest, and opening the way for a new consensus on environmental challenges.

Green consumers are already dragging firms towards changing the way they do business, at least in superficial ways; but there seems to be a surprisingly broad consensus that, with the right regulatory framework, Britain could go further – and become a leader in environmental technology.

‘Why are we importing all our wind turbines? Why are we importing most of our recycled paper? Because other governments put measures in place to support those industries in the early 1990s,’ Bennett points out.

Lambert published a paper last week urging the government to ‘provide a favourable policy environment which can help UK business win a greater share of the growing global market for environmental goods and services’.

Surprisingly, both the business lobby and the environmentalists seem to agree with Tesco and the rest: with the right incentives, going green does make good business sense.

Environmental manoeuvres from UK plc

· Tesco has outlined a ‘green offensive’ that ranges from offering more local produce to providing customers with biodegradable carrier bags. The main initiative is a £100m environmental fund that will provide cash for ambitious plans to power stores with wind turbines, solar panels and geothermal power and to introduce ‘gasification’, which produces energy from waste food.

· Ford last week announced plans to invest in environmental projects such as biofuels, new-generation diesels and cars made of lightweight materials. The firm is aware of the success of hybrids such as the Toyota Prius, but the move is also, at least in part, designed to divert criticism from some of its divisions, such as Land Rover and Jaguar, which largely produce gas-guzzlers.

· BSkyB has turned ‘carbon-neutral’, which means it aims to offset its carbon emissions by investing in green technologies that produce clean energy outside the company. It has also moved its taxi account to Green Tomato a ‘green’ cab company that uses hybrid vehicles. James Murdoch, chief executive of BSkyB, said: ‘People and even businesses feel disempowered by climate change… It’s important to show what we can do.’

· BT is the biggest company to commit to taking all its electricity from renewable and fuel-efficient sources. The company has signed contracts to that effect with Npower and British Gas, thought to be worth ‘several hundred million pounds’. According to environmental charity the Climate Group, BT has saved more than £100m through its energy efficiency policies since 1991, and £421m from using greener modes of transport.

· HSBC is planting thousands of trees around the world, cutting its energy use and reducing greenhouse gas emissions in a bid to become the world’s first international bank to be completely carbon-neutral. and its sister non-profit websites,,,,,, and are owned by John Donovan. There is also a Wikipedia feature.

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