Green Trends: Why American Companies Are Lagging Behind

Global Trends in Environmental Sustainability

Environmental Sustainability: Global Trends

Environmental Sustainability: Global Trends

Sustainability has emerged as one of the primary drivers of innovation and business development around the world, but not all regions are performing equally. Newsweek’s recently released Green Rankings 2011 report indicates that European corporations continue to lead the pack when it comes to sustainability reporting, while U.S. companies remain some of the most prone to environmental controversies.

Why are American companies lagging behind their European counterparts? Is it the result of cultural differences? Or are regional regulatory disparities shaping industry differently? Read more about global green trends and the driving factors behind them:

Private Sector Takes the Reigns of Environmental Sustainability

Green Business: Private Sector Pushes for Sustainability

Green Business: Private Sector Pushes for Sustainability

Green momentum has largely stalled out in the public sector. In 2009, failure to reach an agreement at the U.N. Conference for Climate Change in Copenhagen signaled an impasse on reaching international consensus, while in the U.S. the politicization of climate science and a deadlocked Congress prevented even the possibility of reaching domestic consensus on sustainability goals.

Yet private companies have continued to take large strides and show no signs of slowing their push toward more efficient, environmentally responsible practices. Businesses are leading the way in sustainability initiatives, cutting waste and inefficiencies that cut into their profits and threaten the long-term viability of their operations.

Measuring Corporate Sustainability

The Global Reporting Initiative (GRI) is one of the most widely used standards for sustainability reporting. Currently, at least 1,500 organizations worldwide comply with GRI reporting guidelines and that number has on average been increasing by more than 150% every year since 2000. GRI’s extensive acceptance around the globe makes it a helpful indicator in evaluating global trends in environmental sustainability.

In terms of the number of companies issuing GRI certified sustainability reports, Europe clearly exceeds the rest of world, accounting for 45% of the total–compared to 24% in Asia-Pacific and 14% in North America. That’s largely due to tighter transparency regulations in European countries.

However, North America is beginning to catch up. U.S. GRI certified reporting increased 22% in 2010 alone, while the number of Canadian companies reporting increased a staggering 53%. Interestingly, Brazil also showed a 68% increase, showing a heartening commitment to sustainability in one of the world’s most prominent emerging markets. South Africa and Korea also made significant gains by this metric.

There are fewer disparities between Europe and North America when it comes to environmental management, although Europe remains in the lead. However, North America has actually risen marginally above Europe in terms of environmental impact.

Green Investment on the Rise

Green Investment on the Rise

In terms of investment, Europe has also demonstrated remarkable leadership, with €5 trillion total assets under management using socially responsible investment strategies, compared to $3.07 trillion in the U.S.

The inclusion of socially responsible indices on national stock exchanges in Brazil and South Africa is another interesting development, which many believe will help promote investment in socially and environmentally responsible companies while providing an additional incentive for corporate responsibility.

What’s Responsible for Differences in Regional Green Trends?

Parsing the causal factors of sustainability on a global scale is a difficult task, but there are some distinct regional differences–both cultural and regulatory.

Market Research Shows Cultural Differences in Environmental Concern – An August 2011 report by market research company Nielsen on Sustainable Efforts & Environmental Concerns Around the World showed that concern for climate change is dropping in the U.S. Less than half of Americans who participated in the survey report that they are concerned with climate change, in stark contrast to 68% of Europeans, 72% in Asia-Pacific, 80% in Africa and the Middle East and 90% in Latin America.

Are Cultural Differences to Blame for Regional Green Trends?

Are Cultural Differences to Blame for Regional Green Trends?

Of the 21% of Americans who report being unconcerned by climate change, 63% believe that natural variation is responsible for global warming–not human intervention.

Obviously, there’s a statistically significant discrepancy in public opinion between North America and Europe. While that may be an important factor behind the differences in sustainability reporting, it is certainly not the only one.

Environmental Regulations Provide Support for Sustainability Initiatives

By 2020, the European Union has committed to ambitious mandates of reducing energy consumption by 20% and greenhouse gas emissions by 20-30% below 1990 levels. In gearing up to comply with these stringent standards, European companies are taking the initiative to get reporting mechanisms in place and implement sustainability plans.

In contrast, the U.S. came close, but was ultimately unable to pass progressive environmental legislation in 2009 with the American Clean Energy and Security Act (ACES). While it was approved by the House, it was unable to pass through the Senate. Regulatory support for sustainability initiatives is largely lacking in the U.S. when compared to European nations.

However, 24 states plus the District of Columbia have implemented Renewable Portfolio Standards (RPS), requiring that utilities obtain a certain percentage of their energy from renewable sources. California is one of the most promising examples, with a standard that aggressively ramps up renewable energy purchasing to 20% of the total by 2014, 25% by 2016 and 33% by 2020.

Global Trends Still Headed in the Right Direction

While progress remains uneven among the regions of the world, entrepreneurs, innovators, corporations, investors and consumers alike are heeding the call-to-arms for a more sustainable future. Between public concern for human posterity and the apparent material benefits for the private sector, sustainability is a trend that is here to stay.

[Photocredit: CalGreek; UWTacoma; Mootee; YesInvesting; MarketGuidePro]

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