Will Going Green be the Next Way We Go Bust?

“Wheel is going green,” blared a television announcer during a Spring broadcast of TV's popular game show “Jeopardy.” The wheel in question? “Jeopardy”'s sister show, the equally well-known “Wheel of Fortune.” Pat Sajak and Vanna White — icons for decades of American dreams of easy money — became the latest public figures to urge mainstream Americans to pay attention to their impact on the environment. The television personalities told viewers how they could find recycling programs in their neighborhoods and offered simple suggestions to conserve, such as taking shorter showers.. Meanwhile, Sony Pictures — which produces the show — convinced sponsors to offer prizes related to the green theme, such as $500 worth of environmentally-friendly cleaning products from 7th Generation or a hybrid Honda Civic. The promotion was an offshoot of Sony's “Take Back” recycling program, and each episode included information about how the electronics giant's employees and customers could stop trashing their stereos and TVs.

But how sincere — or environmentally-responsible — are such appeals?

Whether or not green is the new black, more and more Americans are reaching for ecologically-shaded opportunities as they try to spin their fortunes out of the red. With enthusiasm echoing the early days of the dot-com boom and the heady days of sub prime loans and home flipping, would-be entrepreneurs are starting to gamble that the solution to their economic puzzles is spelled e-n-v-i-r-o-n-m-e-n-t. But are they kidding themselves? Will a wind turbine manufacturer or biofuel harvester generate stock prices beyond everyone's wildest expectations, only to tumble like the next Enron? Will green investment lead to gold, or more empty pockets?

Sony's own investment was small. It already produced the show, and it could get sponsors to pay for the special prizes. The company didn't gamble on a green week just because Vanna started to spend less time under the faucet and reuse her plastic bags, or because Pat changed his stripes from well-documented doubts about anthropogenic, or human-caused, climate change (An April 6 post about “Wheel's” eco-friendly campaign from the Treehugger blog cited columns expressing these doubts and written by Sajak for a conservative Web site). Instead, the effort was the calculated outgrowth of a pre-existing Sony public relations campaign.

About a week after “Wheel” went green, another spin was taking shape during a workshop in a nearly-empty Downtown Los Angeles library auditorium.

“I would like to make this something for you, to help propel you into that green economy,” Alan Tratner, a green-tongued pitchman told his sparse audience, “If you're interested in getting some great ideas, making a difference in the world and making some wealth for yourself, then please get involved with us.”

Us, in this case, meant Green2Gold, a green “incubator” that mentors and nourishes budding inventors and entrepreneurs trying to turn eco-friendly brainstorms to lucrative, marketable products. Tratner founded and directs the Santa Barbara-based Green2Gold, which is an offshoot of his nonprofit, the Environmental Education Group.

“If you do this right there's money out there to fund you,” Tratner said,pacing about the stage and beaming. A natural presenter, he took the stage like a T.V. Pitchman. Clad in a green polo shirt and jeans, both made from organic cotton, as well as eco-friendly shoes, Tratner resembled the love child of a three-way between your neighborhood Amway salesman, the woman down the street constantly giving tours of her solar panels and low-flow toilets, and the man around the corner always tinkering in his garage. At any point during the presentation, it seemed Tratner was moments away from declaring “It slices! It dices! It ... saves our planet!”

Tratner couldn't contain his enthusiasm for the table of products spread out before him on the auditorium stage: pieces of pumice-like “eco-blocks,” a box of “bio-based” cosmetics called “ecogenics,” a bulky solar-powered lantern, and surprisingly rigid slabs of “rumber” — hardened building material made from recycled rubber and plastic.

Each product illustrated Tratner's claim people were already “Cashing in on Great Green Ideas!” — the event's title. Once a year he visits L.A. to promote Green2Gold and explain how it offers business guidance and a sort of shelter for young enterprises to develop, find funding and navigate the complex regulations and practices needed to operate until they can find their own footing.

Despite Tratner's enthusiasm, though, it wasn't clear how many of the dozen so people in the audience were there ready to cash in on the next big thing, and how many were just drifting through, killing time on a Saturday Afternoon. With bad haircuts, ill-fitting suits and faded blouses, some admitted they wandered in after seeing signs at the Los Angeles Public Library announcing the free event. Others watched Tratner with a mix of awe and desperation scrawled across their faces.

What was abundantly clear, though, was Tratner's unflinching belief that capitalism and consumerism could save both the economy and the environment, forces long considered incompatible with one another. Despite operating his incubator amid the worst economy since the Great Depression, Tratner doesn't find any problem with our society's fundamental economic structure. He still believes wealth will drive benevolence. A rising tide — this time with seas of green — will lift all boats.

“People with wealth become philanthropists,” he said. “They help people with needs. That's why this one-two punch of creating green enterprises and green collar jobs is so critical.”

Tratner's “Cashing in” event was his own “one-two punch.” It began with his presentation and continued with a closed-door nuts-and-bolts meeting with anyone who might have shown up ready to pitch a new idea right away. This was Tratner's annual opportunity to reach out to eager inventors and business people looking to create their own wealth; his opportunity to find a few more participants for his incubator, participants whose ideas might be quickly parlayed into the businesses offering the green collar jobs so necessary for his vision of our economic future.

“You're hearing the cusp of what's about to begin,” Tratner told the audience. “We're trying to get every walk of life to find new opportunities that are abounding in this green and sustainable and clean system.”

Across the Country, Eric Becker, the vice-president of Boston-based Trillium Asset Management looks for opportunities of another sort. Becker's buttoned-down, bespectacled appearance belies his experience. Before becoming a financial analyst, Becker worked with human rights groups on the relationship between indigenous people and the environment. Where Tratner is trying to appeal to venture capitalists who want to invest in start-up companies, Becker helps manage stock portfolios for his company. Among the firm's services, it also advises investors on the Green Century Balanced Fund, a collection of 15 stocks involved in the clean energy industry. Companies in the “basket” include solar cell manufacturers, firms exploring geothermal power — driven by heat beneath the earth's surface — and producers of energy efficient lighting. They also include firms working on energy efficiency and so-called “smart grid” projects, which better manage the way electricity is distributed from power plants to consumers.

Becker says both the boom and bust for clean technology companies has come and gone. He says the bust was caused by tightening credit markets for alternative energy producers and the global recession. One clean energy fund known as PowerShares peaked at 28 dollars per share on Dec. 28, 2007 and fell to just below six bucks on March 9. As of June 12 it had crept back up to 11.25 dollars for each share. From 2005 to 2007, Becker says, alternative energy stocks, especially solar, did “phenomenally” well. Now, he says, they might be cheap for investors who believe they'll profit as much as the market predicts they will. He says he's enthusiastic about clean technology, and that he doesn't believe there will be a green bubble, particularly for larger, public firms.

“Global warming isn't going to go away in five years,” he says." We have to turn the globe into a sponge [for carbon dioxide and other greenhouse gases]. The changes we're going to need to see in our society and our economy are pretty dramatic, which is why I think you're going to see the rush into companies that maybe people think are going to be the Googles of clean energy,”

Green-minded practices aren't likely to go away just because the economy is weak, but Becker says a lot of the talk about green jobs and green energy and energy conservation is still hype. There aren't quick fixes. Instead, he says, lasting reductions in greenhouse gases and energy consumption will require wholesale shifts in public behavior.

But business leaders facing a battered economy are far less likely to take risks and spend extra on anything, even if it might help the company in the long run. Public companies, for example, have to report to their shareholders. No matter how many advocates pressure a corporation to “do the right thing,” it won't if it doesn't see a return on the investment.

So most policy and business decisions still come down to the green on dollar bills. But just because people aren't consciously factoring environmental considerations into decision-making doesn't mean sustainable business practices won't become more common, says Adlai Wertman, who leads the newly-launched Society and Business Lab at the University of Southern California's Marshall School of Business. Over time, sustainable practices, like building energy efficient office campuses, will be internalized as standard corporate culture. Once seem as going the extra mile, such practices might soon seem normal

“The best way it was put to me is that what is now called 'green' or 'sustainable building' will just be called 'building',” Wertman, also a professor at Marshall, says. Architects have told him that building codes are changing throughout the country. Municipalities more and more frequently require builders to improve building efficiency before they issue permits. Measures they might require include allowing for more natural light in a building, improving ventilation without air conditioners and using “green roof” technologies to keep urban spaces cool, among many other practices. These requirements and new economic incentives for green building lead Wertman to believe businesses won't have any choice but to build with less of an environmental impact. In some cases, he says, it will even make more economic sense to construct new buildings than to retrofit old ones with alternative energy technology. Likewise, environmental practices seen as niche business now might likely become the norm.

Still, every alternative has drawbacks. For example, popular energy-efficient compact fluorescent light bulbs contain mercury, a toxic chemical that could be dangerous if the bulbs break. Even so, Wertman doesn't think businesses should wait for the kinks to be worked out before feeling comfortable putting their money behind sustainable practices. Meanwhile, green technology continues to evolve, meaning this year's low-emitting car engine could be out of date soon or an expensive solar panel might be obsolete before it even comes down in price.

“You have to do the best when you have it,” he said. “I don't think that what we're doing today will be bad for the environment going forward.”

What were once brand new, expensive technologies will drop in price as they age and improved versions come out. Just because they're not cutting edge, though, doesn't mean last year's products aren't improvements of even older technology, and Wertman says many companies will wait until some products are proven before adopting them. Businesses that want to stay ahead of the curve will drive innovation by springing for more advanced technology when they can afford to do so. Ultimately, those choices will be driven by economic considerations. They'll want to know whether investing in green technology will bring enough of a return to make that technology worthwhile.

Beyond the increasing economic incentives of environmentally-friendly practices, many companies see “going green” as a reputation-building exercise. There's always a risk that the growing cachet of sustainability as a public relations exercise will cause more companies to “greenwash,” though. That is, more might try to tap into the popularity of environmentalism by marketing products and services as green, without actually delivering any quantifiable environmental benefit. Thus, more and more people are insisting that some sort of objective measurement of sustainability or standard definitions of environmental “friendliness” is crucial.

T”here's a large competitive advantage to having your company or your product deemed socially responsible,” Wertman says. That perception can differentiate businesses from competitors. It's not just about attracting customers, either, says Wertman. Hiring and training new employees is always expensive, so having an image of responsibility can save companies money by making it easier to recruit employees will want to work long term for a responsible company, and it helps to retain productive workers who have already been hired.

Finally, Wertman says, social responsibility helps build “banked” reputation. Selling an all-natural cleaner or powering corporate campuses using solar panels doesn't just build the customer base. It helps protect the company in times of public relations crisis. It builds a sort of corporate-level social capital. When the unexpected occurs — say a product recall — corporations can spend some of that reputation to persuade the public they really are doing right by the world.

Still, few people will go on a limb to predict whether or not being green is just a trend, a bubble likely to pop eventually, or a true sea change.

There is no consensus among economists, scientists and business leaders on what constitutes “sustainability” or what makes something “green.” There isn't a uniform measuring stick. There are few standards investors can rely upon.

“It's just a matter of doing your analysis and reading a lot,” says Becker, the financial analyst.

Still, even with “corporate social capital,” Wertman says, businesses won't automatically escape fire just because they have employed some green practices. Instead, they remain big targets. The improvements often just invite critics to further scrutinize the companies for other problems, or to call them out for hypocrisy (say, by using environmental initiatives to distract attention from controversial labor practices).

"When you put yourself out there, you are automatically asking radical activists in the world to start taking shots at you,” Wertman says. This makes widely agreed upon standards for green practices and technology important. If there were a uniform way to easily quantify how much impact a product or action has on the Earth, activists and investors alike would be able to easily gauge how environmentally responsible a business really is. Making those standards stringent and difficult to meet keeps all but the companies committed to spending the time and money to secure them from doing so. One prominent example of a universal standard is the multi-tiered Leadership in Energy and Environmental Design, or LEED, standards which, in a way, measure the “greenness” of a building.

If you get your building LEED certified its hard for anybody to say you've done anything wrong,” Wertman says. “That's the way you protect yourself.”

Wertman isn't the only one touting standardization. Alan Tratner, the green pitchman from Santa Barbara, also recognizes the dangers of greenwashing. That's why attendees of a Clean Business Investment Summit he held March 26 at the University of California, Santa Barbara, discussed the critical importance of a green certification process. He pointed to standards besides LEED meant to measure environmental impacts, such as the U.S. Department of Energy's EnergyStar label and the non-profit Green Seal program as early examples of such standardization efforts.

"Consumers want proof that it's green,” he said.

Proof isn't just important to consumers. Investors need it. They also need to know more than how much pollution a company emits. They need to study a company's carbon footprint, not just in manufacturing, but in the operations at headquarters and at every stage of the production line. They also have to learn about tradeoffs, such as the impact a windfarm might have on its surrounding landscape or the impact a biofuel manufacturer might have an agricultural land. Meanwhile, they also have to understand how to gauge a company's more traditional indicators, such as its management practices or financing. “Every investor has the experience of being wrong some times.”

Moroever, some technologies simply don't pan out, and that's yet another reason why Becker says investors need to diversify their holdings beyond any specific sector. In other words, it's not wise to only invest in wind power producers, or any one technology.

“If you buy one or two companies in that area you take a lot of risk that the technology will become leap frogged,” he says.

"That's true for any given business, not just clean energy or green businesses. Investing is risky. Still, Becker believes that while there are individually volatile stocks in clean energy, the industry as a whole has a lot of opportunity. Investors have to be cautious about putting all their eggs in one basket, and they also have to be just as cautious about greenwashing as consumers.

The Green Century Fund Becker manages uses a number of markers to measure the long term environmental impacts of the companies it follows. The fund is “fossil fuel free” and doesn't own companies involved in oil or gas drilling or utilities that get power from fossil fuel sources. Investors in Becker's fund also own stocks in other sectors, such as health care or industry, as long as their products and services have a limited environmental footprint and will be attractive businesses in a world where people are keeping better track of carbon emissions. Analyses of these companies' carbon footprints and other indicators are becoming more mainstream, making it easier for investors to gauge whether they really are making “green” investments.

"I totally welcome it because our objective here is to make a difference in the world as well as investing in our clients' well being,” Becker says. “Our mission is helping the economy and evolving the capital market toward a sustainable economy.”