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Eco-Idiots

Generally, I like BusinessWeek magazine. It has a lot of good information, and it provokes thought into many issues involving Business. But the magazine also makes the mistake of playing to the fad of the moment, in which case it sometimes forgets important rules of business, even logic, in order to press the story for popularity. That's what happened in its most recent issue, with a cover story titled "Imagine a world in which socially responsible and eco-friendly practices actually boost a company's bottom line. It's closer than you think." Yeah, that's the title. It shows up that way on the cover, in the index, and it starts the article that way. The exact wording every time, although when you get to the actual article, it does include the header "Beyond the Green Corporation". Pete Engardio, who wrote the story, is very proud of his words.

Before I go further, I want to emphasize that I like the notion of ecological responsibility, especially a company which considers the needs of its community and works to be a good citizen. My complaint with the BusinessWeek article is the major premise of the story, that "eco-friendly" practices directly make a company more profitable. To be blunt, the story fails to make that case, and there are danger signs in the story for serious investors to count against this claim. Chiefly, the story presents ecological policies as if there was no downside or risk, a claim which is not only false, but which could adversely affect both business decisions based on misleading claims, and which could also lead investors to count ecological efforts as a form of fraud.

The first warning sign is dependence on the buzzword, "sustainability" - there's no real consensus yet on what that word means, especially for specific companies and their goals and practices. Also, I note that companies like Innovest play fast and loose with their ratings of company performance, choosing not only to include subjective social markers but also to discount and ignore traditional warning signs in a company's finances. The story, for example, makes much of Sony, ignoring its recent quality and customer satisfaction issues, simply because Sony has crafted an image for energy efficiency and pollutant control. An image, not documented fact, and the rejection of valid financial data and sector performance hardly makes the case for a credible evaluation. The same for Ford, which has long pursued "green" policies, some of which are now blamed for company mistakes which have dangerously damaged Ford's competitiveness with other carmakers. Innovest issues ratings for estimated risk which seem to have nothing at all to do with genuine financial risk. That is misleading at best. Serious problems are explained away or put off to other causes, a behavior which reminds me a lot of Enron or Worldcom just before they went crash. That's not to say that Ford or Sony are in the same shape, but deceptive stories which ignore problems in a company or attempt to promote indicators which do not accurately represent the company's risk condition, should not be published as the cover story in a major business magazine.


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Comments (25)

Working in the chemical ind... (Below threshold)
dodgeman:

Working in the chemical industry, we politely phrase it as "the cost of doing business", or more politely, "being a good neighbor" gives us our "license to operate". Simply put, the fear of fines or lawsuits drives most of the behavior. Even then, we can be 100% in compliance with all state and federal regulations and still have people in the community complain. However, nothing in that makes us more competitive or more profitable, unless you add up lawsuit avoidance.

The strongest telling point, however, is that no chemical manufacturer is building new facilities on the Gulf Coast. Period. They may renovate old facilities, buy existing plants from other companies, or even build up small units within existing plants, but there are no new large scale constructions. All capital investments are going overseas.

If we were more profitable, wouldn't we be building here?

There are companies that ac... (Below threshold)

There are companies that actuially do some good via their activism and community invoolvement - Starbucks is a prime example. Their reputation in theis area no doubt helps their bottom line. But if it ever came down to a choice of purity vs profitability, they will pick profit every time.

OT:Mike Huckabee on ... (Below threshold)
Dan Patterson:

OT:
Mike Huckabee on Fox News Sunday sounds very much like John Kerry. Another goober in politics.

The treatment of the environment by the "pointy-headed oh-so-smarts" is maddening; there is no sense of logic nor of reason, the arguments are of the 'everybody knows' sort. If all capital investment is going to foreign sites, what is the future of our economic sustainability?

Dan Patterson

Ooops.That is Senato... (Below threshold)
Dan Patterson:

Ooops.
That is Senator Brownback not Mike Huckabee.

Brownback is one of SCADS o... (Below threshold)
bryanD:

Brownback is one of SCADS of Republican politicians and media types who converted to Catholicism in the midst of the child-rape scandals. It's really weird.

Stick to business, BW. </p... (Below threshold)
Mitchell:

Stick to business, BW.

For business news, you can't beat WSJ and IBD. Alot of the other stuff, even Forbes, is fluff.

There are hundreds of companies exploring ways to create sources of cheap and clean energy. We don't need the commisars in the Dim. Party meddling.

All the gab about investing... (Below threshold)
Mac Lorry:

All the gab about investing is driven by Bussiness Week being the source of the piece, but it's really all about marketing. Simply put, marketing is the science of spin, which businesses employ to make more money. Publicly held companies use marketing to sell more products and services as well as increase the price of their stock. Climate alarmists have successfully created a Global Warming bandwagon that's now being paraded down Wall Street. Unfortunately, enough companies are getting on that bandwagon, as they figure out ways to take advantage of it, that we're now dangerously close to reaching a tipping point that will result in catastrophic stupidity.

Maybe you've seen a TV ad that starts out with Al Gore's global warming talking points and then says "lighting" is the biggest contributor to Global Warming. The company behind the ad is a major manufacture of light bulbs and their spin is that their new flimflam bulb uses xx percent less energy for the same amount of light. That's great and such bulbs have been on the market for many years, but what's new is the marketing. It's no longer buy this bulb to save money on energy, but buy this bulb to combat global warming. If this marketing campaign succeeds you can expect to see many old products spun in new ways as businesses climb on the global warming bandwagon.

I can't wait for the new Beano ad. Beano is a product that reduces flatulence in some people when they eat certain foods. The old marketing plan was aimed at reducing the feeling of bloating or the embarrassment that results when relieving yourself near polite company. Being the form of flatulence Beano prevents contains a significant amount of methane and being methane is 23 times as effective a greenhouse gas as CO2, the new marketing spin will be like the light bulb ad, but with Beano as the product. It could be humorous as more and more products are advertised as a means to reduce global warming. However, imagine the impact in about 10 years when the facts finally catch up with the hype.

I say invest in cork makers... (Below threshold)
jhow66:

I say invest in cork makers. Going to need alot of corks to stop all that methane that comes from a cow's ass.

"The same for Ford, whic... (Below threshold)
Lee:

"The same for Ford, which has long pursued "green" policies, some of which are now blamed for company mistakes which have dangerously damaged Ford's competitiveness with other carmakers"

How about a link? Quote? Example? Who exactly is blaming what, exactly? Which "green" policies are blamed for damaging Ford's competitiveness? Cite some examples, include data please.

Just so we know you aren't making it all up, DJ... Bloggers on Wizbang have this nasty habit of taking a lie which supports their thesis, repeating it as if it were a fact, and then when challenged they never produce any backup.

I'm sure you're better than that!

And we all know Lee never m... (Below threshold)
gdb in central Texas:

And we all know Lee never makes stuff up. (Tongue planted firmly in cheek.)

Of course, the reality is t... (Below threshold)
Brian:

Of course, the reality is that one key area that Ford is aiming at for their recovery is hybrid vehicles. Which doesn't directly map to the company itself implementing green policies, but still, I'd be interested to know how green policies "dangerously damaged Ford's competitiveness".

It isn't coincidental that ... (Below threshold)

It isn't coincidental that many manufacturing ventures are being moved out of this country. The logic behind the moves isn't all personnel costs and benefit costs. COMPLIANCE COSTS can be staggering. Again, it reminds us that when government gets involved, the liklihood of anything good happening is minimal.

My complaint with the Bu... (Below threshold)
Brian:

My complaint with the BusinessWeek article is the major premise of the story, that "eco-friendly" practices directly make a company more profitable. To be blunt, the story fails to make that case

You know, I don't even have to read the story to suspect that you are misrepresenting the premise just so you can attack it. You state that the title is "Imagine a world in which socially responsible and eco-friendly practices actually boost a company's bottom line. It's closer than you think."

What this title implies is, "this is not currently feasible, but it perhaps it will be sometime in the future". So for you to start off by claiming that the premise of the story is that eco-friendly practices available today can make companies more profitable today just seems counter to that title.

Perhaps you can clarify this.

"Of course, the reality ... (Below threshold)
Lee:

"Of course, the reality is that one key area that Ford is aiming at for their recovery is hybrid vehicles"

That matches my understanding, Brian, but Ford... if anything, has been slow to embrace the hybrid as their own -- and I follow Ford somewhat closely, and therefore was surprised to read DJ's statement that Ford's green policies are cited as contributing to their downfall. I've never read that or seen it suggested.

But I'm sure DJ will be along to back up his claim...

My complaint with ... (Below threshold)
Publicus:
My complaint with the BusinessWeek article is the major premise of the story, that "eco-friendly" practices directly make a company more profitable.

In some cases this premise is true; in most cases it is not. That is because most consumers don't make environmental impact an important part of their buying decisions. And even those who are "environmentally aware" can't always know about the origins of the items they buy.

Of course, the economic equation would be different if all companies well help accountable for the damage they do. They'd do less damage...

The impending death of America's auto industry isn't related to environmental issues; it's just about bad management. Those companies had deep pockets and they've been taking a long time to die. But by being so stupid for so long, they've finally dug a hole they probably can't crawl out of...

[sorry about the freaky for... (Below threshold)
Publicus:

[sorry about the freaky formatting!]

The same for Ford,... (Below threshold)
Mac Lorry:
The same for Ford, which has long pursued "green" policies, some of which are now blamed for company mistakes which have dangerously damaged Ford's competitiveness with other carmakers.

To be fair to DJD, the "same for Ford" seems to refer to the "Sony has crafted an image for energy efficiency and pollutant control. An image, not documented fact. . . " in the preceding sentence. It's hard to link to something that's not documented.

Hypothetically, this could happen if Ford expended too much money and effort in being perceived as a producer of "green" products. Too much in the sense that the market value doesn't cover the direct and indirect costs. Toyota has achieved great success with it's hybrid vehicles, but I don't know of any other company that has been able to build hybrids that come close to the higher mileage potential of the technology in production vehicles. According to Consumer Reports

The all out no compromise hybrid-only Toyota Prius gets a real world overall mileage figure of 44 mpg. The 2007 Toyota Camry 4-cyl. Hybrid gets a real world overall mileage figure of 34 mpg with a 0-60 time of 8.4 seconds. The 2007 Toyota Camry 4-cyl. (non-hybrid) gets a real world overall mileage figure of 24 mpg with a 0-60 time of 9.6 seconds. And if you read Consumer Reports you know Toyota has the highest reliability of any passenger vehicle manufacturer world

The Honda Accord V-6 Hybrid gets a real world overall mileage figure of 25 mpg with a 0-60 time of 6.9 seconds. The Honda Accord V-6 (non-hybrid) gets a real world overall mileage figure of 23 mpg with a 0-60 time of 7.3 seconds. Honda also has an excellent reputation for high reliability.

The Ford Escape (a small SUV and the same as the Mercury Mariner) 4-cyl. Hybrid gets a real world overall mileage figure of 26 mpg with a 0-60 time of 10.7 seconds.

Toyota uses hybrid technology to increase mileage substantially and performance minimally. Honda uses it to increase performance significantly and mileage minimally The only hybrid Ford makes offers neither high mileage or even adequate performance. Both the Toyota and Honda hybrids have an Excellent reliability rating from Consumer Reports, but Ford's hybrid has only a fair (below average) rating.

The difference is that Ford follows the U.S. philosophy of hyping up products and itself to sell less than stellar products. Honda and Toyota follow the Japanese philosophy of making stellar products and letting the marketplace supply the hype. That's not the only problem U.S. car manufacturer's have, but it's one they could solve given the right management.

Eco-responsility like havin... (Below threshold)
spurwing plover:

Eco-responsility like having the eco-freaks put out the forest fires and go around with plastic bags to gather up the carcasses of all those animals that have been killed by the fires they have started with their redoclous lawsuits

Another good example of thi... (Below threshold)
snowballs:

Another good example of this - RadioShack.

http://www.radioshackcorporation.com/cc/environmental.html

Is their environmental awareness/image causing them to struggle? It's anyone's guess really, but they do put a lot of time/effort/money into it while seemingly not yielding anything from it. Perhaps it's actually helping keep them afloat in the face of negative sales growth, but again, who knows.

Brian:"You know, ... (Below threshold)
Les Nessman:

Brian:
"You know, I don't even have to read the story to suspect that you are misrepresenting.."

We would expect no less from you, Brian. As usual.

And you go for the personal... (Below threshold)
Brian:

And you go for the personal attack rather than posting something related to the issue, as usual.

Another day -- and still no... (Below threshold)
Lee:

Another day -- and still no backup to Drummond's apparently un-backable claim that Ford's eco-polocies contributed to the company's downfall.

The whole post was based on the eco-idiot theme, and it appears now that Drummond just plain made up crap to support his thesis.

Why am I not surprised?

I was out with the flu for ... (Below threshold)

I was out with the flu for most of the day Sunday.

Even so, I tend to respond to substantive complaints, not attempts to launch a non-seqitur.

If you would like to support your challenge, please explain which you do not believe - is Ford not financially in trouble, or do you not believe that the CEO was pursuing "green" policies which sucked efforts and resources away from the core business?

I will answer according to your cogency.

I'll just jump in here. Fo... (Below threshold)
mantis:

I'll just jump in here. Ford is in trouble financially. In recent years Ford has gotten into raising fuel-efficiency and manufacturing hybrids (though your assertion they the company has "long pursued "green" policies" is untrue, unless you consider about 5-6 years to be long). That there is a causal relationship here is doubtful at best.

Let's look at some reports about Ford's financial woes.

Ford fighting to keep its shine:

In the United States, Ford is struggling to maintain its share of the market in the face of intense competition from Japanese manufacturers Toyota, Honda and Nissan - as well as its traditional rivals General Motors and DaimlerChrysler.

...

Ford has tried to maintain its market share by offering discounts worth thousands of dollars on new cars. But by slashing prices, the company has cut its profit margins right back.

In Europe, too, Ford has been struggling, while its investments in luxury brands such as Jaguar and Aston Martin have proved less than successful.

And that is not the only problem.

Ford is also hamstrung by the high costs of its retirement and healthcare programmes.

"Ford's total liabilities for healthcare are about $24bn, pensions are something similar," says motor industry analyst Graeme Maxton.

"The total value of the business is only around $17bn. So the liabilities are much, much greater than the value of the business."

And how about when shareholders submitted a resolution accusing Ford of lobbying against tougher fuel standards, despite their "green" rhetoric? Don't miss the mention that Ford "has the lowest overall fuel economy in the American auto industry, a rank they've held since 1999." Green, indeed.

Further, environmentalists gave Ford the top spot on their list of "Greenwashers", companies that publicly promote their environmentalism while doing little to actually change their policies or products.

No doubt Bill Ford has taken a lot of flack for admitting that climate change is a problem and car companies need to respond by changing their products and policies, but there is little reason to believe there has been much action on Ford's part in that regard. Further, I've never seen the assertion that such rhetoric or policies have hurt Ford financially, but rather their enormous pension and healthcare worries, their drop in SUV and truck sales in the late 90's and later, and their difficulty with their luxury lines have all taken a toll. And yes, I've seen their shareholder reports. Have you?

DJ - My question was in eng... (Below threshold)
Lee:

DJ - My question was in english, and there were no big words.

You wrote: "The same for Ford, which has long pursued "green" policies, some of which are now blamed for company mistakes which have dangerously damaged Ford's competitiveness with other carmakers"

I wrote: How about a link? Quote? Example? Who exactly is blaming what, exactly? Which "green" policies are blamed for damaging Ford's competitiveness? Cite some examples, include data please.

----

If you need a translation perhaps you can ask a child to explain it to you.. If you're not going to provide any backup to your claims, then tell us why -- but quit avoiding the issue, please.




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