Dirty Companies Try to Clean Up Their Acts

The Ohio utility's power plants, which run mostly on coal, emitted more carbon dioxide, sulfur dioxide, nitrogen oxide and mercury than any other electric utility's in the country as recently as 2001, according to the Connecticut Retirement Plans & Trust Funds, a large shareholder. Sierra Club and Public Citizen sued American Electric in 2005, saying the company "seems to think that violating the Clean Air Act is good for business."

Fast forward a few years later, though, and what once were enemies now look like allies — well, almost. American Electric is investing millions in environmentally friendly projects from wind generation to carbon offsetting. Sierra Club's monthly magazine, meanwhile, printed an article last year headlined, "Can Coal Be Clean?" and noted American Electric as being willing to invest in a new cleaner-coal technology despite the costs.

Whether it's for public-relations reasons or to protect business interests, or both, more companies not considered green in the past are joining the movement. These businesses are launching major environmental initiatives as pressure mounts for Corporate America to be not just profitable but also socially responsible. They're also winning over would-be foes who concede that the meaning of "green" is changing to include more than organic food and alternative energy.

"We believe no company is good or bad, and any company can be redeemed," says Julie Tanner, of Christian Brothers Investment Services, a Catholic investment firm with more than $4 billion in assets under management that urges companies to change their environmental policies. "It's hard to compliment inherently dirty industries like electric or mining, but sometimes companies under the most pressure are also doing some of the most innovative work."

There's no question the heat is on for big business. Activist investors filed a record 54 shareholder resolutions on global warming this year, according to the Interfaith Center on Corporate Responsibility, a large group of faith-based institutional investors. The targeted companies include electric utilities, oil and coal producers, airlines and home builders. Some companies, such as utility giants Dominion Resources (D) and Southern (SO), were quick to bow to the pressure, while others were holding out as of early March, including Exxon Mobil (XOM) and US Airways Group (LCC).

"The definition of an environmental company has evolved to cut across sectors," says Eric Becker, a manager of the Green Century Balanced Fund (GCBLX), which invests in companies it considers committed to protecting the environment. "Companies with their heads in the sand are going to fall behind."

Becker points to industrial carpet manufacturer Interface (IFSIA), of Atlanta, as an example of a nontraditional but very green company. Carpet manufacturing consumes a lot of energy and water, and like other industrial businesses, emits chemicals into the environment. But Interface has a plan in place to eliminate any negative effects it has on the environment by 2020, by investing in renewable technologies and using biodegradable or recycled materials in its carpets. So far, it says it has cut the amount of manufacturing waste it sends to landfills by 70%, reduced energy use at its carpet factories by 45% and cut greenhouse gas emissions by 37% since 1996.

Newmont Mining (NEM), one of the world's largest gold producers, is also winning unlikely plaudits for its efforts to improve its environmental reputation. It was only last year that a Newmont executive in Indonesia faced potential jail time amid complaints by local villagers that pollution from a company mine was causing health problems. An Indonesian court absolved Newmont and its executive of any wrongdoing. Newmont has also faced major protests in Peru. In response to shareholder pressure, Newmont is now working with independent advisors including members of environmental group Earthworks and nongovernmental organization Oxfam America, to improve its relationship with local communities, including becoming more environmentally conscious.

"Until the world is ready to say, 'I don't want gold,' you've got to at least look at companies in the industry who are doing some good stuff," says Tanner, of Christian Brothers.

Businesses launching these eco-friendly initiatives say doing so creates shareholder value because it increases competitiveness and efficiency. "We want to be the gold company of choice," says Newmont spokesman Omar Jabara. "We want to increase our chances of being able to develop gold resources. We can do well as a business, while doing good."