ENVIRONMENTALISM: THE NEW CRUSADE It may be the biggest business issue of the 1990s. Here's how some smart companies are tackling it.
By David Kirkpatrick REPORTER ASSOCIATE Alicia Hills Moore

(FORTUNE Magazine) – TREND SPOTTERS and forward thinkers agree that the Nineties will be the Earth Decade and that environmentalism will be a movement of massive worldwide force. How massive? Listen to Gary Miller, a public policy expert at Washington University in St. Louis: ''In the Nineties environmentalism will be the cutting edge of social reform and absolutely the most important issue for business.'' Futurist Edith Weiner of the Manhattan management consulting firm Weiner Edrich Brown concurs: ''Environmentalism will be the next major political idea, just as conservatism and liberalism have been in the past.'' The smartest companies are not just facing this thunderous music, they're singing along. Consider: -- Du Pont is pulling out of a $750-million-a-year business because it may -- just may -- harm the earth's atmosphere. -- McDonald's, which produces hundreds of millions of pounds of paper and plastic waste annually, has become a crusading proponent of recycling, and aims to become one of America's leading educators about environmental issues. -- 3M is investing in myriad pollution controls for its manufacturing facilities beyond what the law requires. -- Procter & Gamble and other smart marketers are moving to cast their products in an environmentally friendly light (see box). -- Pacific Gas & Electric teams up with environmental groups -- some of them outfits it used to fight -- to do joint projects, such as a $10 million study of energy efficiency. ''The 1990s will be the decade of the environment.'' That's not the chief druid of Greenpeace talking, but rather the new president of the Petroleum Marketers Association of America in a November speech. Mere corporate ecobabble intended to placate the latest group of special-interest loonies? Any company that thinks that way will probably regret it. Exxon provides the obvious if inadvertent example of the bitter costs of seeming unconcerned about the environment. Not long after the March accident in Valdez, Alaska, 41% of Americans were angry enough to say they'd seriously consider boycotting the company. Bill McInturff, senior researcher at the Wirthlin Group, a polling firm with close Republican ties, blames Exxon not for the accident but for its response: ''It was a disservice to American industry the way the pullout last fall was handled. Exxon seemed satisfied with what they had accomplished. It hardened the notion that business is just interested in making a buck and doesn't give a damn. It flabbergasts me that a company that size doesn't get the drift.'' Even spending over $1 billion on cleanup hasn't salvaged the oil giant's reputation. Such salvage won't get any easier. The New York Times/CBS News poll regularly asks the public if ''protecting the environment is so important that requirements and standards cannot be too high, and continuing environmental improvements must be made regardless of cost.'' In September 1981, 45% agreed and 42% disagreed with that plainly intemperate statement. Last June, 79% agreed and only 18% disagreed. For the first time, liberals and conservatives, Democrats and Republicans, profess concern for the environment in roughly equal numbers. Environmentalism is likely to continue as an issue at the forefront for several reasons. One is demographic. Says futurist Weiner: ''The combination of baby-boomers having children and a significant part of the population moving into senior years means an enormous percentage of the population is taking the attitude of stewardship.'' The Gallup Organization reports that 49% of people over 50 feel strong identification with environmentalism, compared with 39% of those between 30 and 49 and 31% of those under 30. This reverses the pattern that prevailed during the country's last upsurge in environmentalism 20 years ago. The new crusade will be different from the old in other ways as well. Miller of Washington University explains, ''In the Sixties, environmentalism was the tail end of a period of social activism that was primarily based on civil rights and the antiwar movement,'' while now it's a movement of its own. The players are different. Far fewer activists of the 1990s will be embittered, scruffy, antibusiness street fighters. AS AN EXAMPLE of the new breed, consider Allen Hershkowitz, who freely drops the names of his CEO acquaintances. As a solid-waste-disposal expert at the litigious Natural Resources Defense Council, Hershkowitz has won many legal battles with business. Now high-ranking executives of major companies regularly make the pilgrimage to his office in the elegant, airy, and amply funded New York City headquarters of NRDC, coming to him lest he go after them. As he explains, ''They come in here to see what they've got to cover their asses on.'' The cocky 34-year-old Ph.D., who serves as an adviser to banks and Shearson Lehman Hutton, among others, elaborates, ''My primary motivation is environmental protection. And if it costs more, so be it. If Procter & Gamble can't live with that, somebody else will. But I'll tell you, Procter & Gamble is trying hard to live with it.'' Still, for all his militancy, Hershkowitz is no fanatic or utopian. He understands that a perfect world can't be achieved and doesn't hesitate to talk of trade-offs: ''Hey, civilization has its costs. We're trying to reduce them, but we can't eliminate them.'' Environmentalists of this stripe will increasingly show up even within companies. William Bishop, Procter & Gamble's top environmental scientist, was an organizer of Earth Day in 1970 and is a member of the Sierra Club. One of his chief deputies belongs to Greenpeace. Eager to work with business, many environmentalists are moving from confrontation to the best kind of collaboration. In September an ad hoc combination of institutional investors controlling $150 billion of assets (including representatives of public pension funds) and environmental groups promulgated the Valdez Principles, named for the year's most catalytic environmental accident. The principles ask companies to reduce waste, use resources prudently, market safe products, and take responsibility for past harm. They also call for an environmentalist on each corporate board and an annual public audit of a company's environmental progress. The group asked corporations to subscribe to the principles, with the implicit suggestion that investments could eventually be contingent on compliance. Companies already engaged in friendly discussions included Du Pont, specialty-chemical maker H.B. Fuller, and Polaroid, among others. Earth Day 1990, scheduled for April 22, the 20th anniversary of the first such event, is becoming a veritable biz-fest. ''We're really interested in ^ working with companies that have a good record,'' says Earth Day Chairman Denis Hayes, who predicts that 100 million people will take part one way or another. Apple Computer and Hewlett-Packard have donated equipment. Shaklee, the personal and household products company, paid $50,000 to be the first official corporate sponsor. Even the Chemical Manufacturers Association is getting in on the act, preparing a list of 101 ways its members can participate. The more than 1,000 Earth Day affiliate groups in 120 countries propose to shake up politicians worldwide and launch a decade of activism. THE MESSAGE that leading environmentalists are sending, and progressive companies are receiving, is that eco-responsibility will be good for business. Says Gray Davis, California's state controller, who helped draft the Valdez Principles and who sits on the boards of two public pension funds with total assets of $90 billion: ''Given the increasing regulation and public concern, there's no question that companies will eventually have to change their ways. The first kid on the block to embrace these principles will increase market share and profit substantially.'' While that's hard to prove, few dispute that farsightedness today will pay off tomorrow. Environmental regulations will continue to be tightened. Says Lester Lave, a professor of engineering and public policy at the Carnegie- Mellon business school: ''If you build a plant that just squeaks past now, you'll have to pay much more money down the line.'' That is partly why Minnesota Mining & Manufacturing is going beyond the call of duty and government deadlines. For example, new federal regulations require replacement or improvement by 1998 of underground storage tanks for liquids and gases. The company decided to comply by 1992 instead, and to have all tanks worldwide in compliance by 1993. Cost: more than $80 million. ''Regulations are about to overwhelm us,'' says Robert Bringer, 3M staff vice president for environmental engineering and pollution control. ''The only way we see to deal with that is to reduce the number of materials we emit that trigger regulation.'' Chastened in part by Exxon's example, some corporate bosses don't see red when faced with green activists -- they see themselves. One of Edgar Woolard's first acts after becoming CEO of Du Pont in April (just after the Valdez spill) was to deliver a speech in London entitled -- and calling for -- ''Corporate Environmentalism.'' Said the top man of the chemical giant ( in remarks subsequently reprinted by the company on recycled paper: ''Avoiding environmental incidents remains the single greatest imperative facing industry today.'' He bemoaned industry's lack of credibility on the issue and called for spending more money than ''mere compliance'' with laws would require.

Woolard now meets at least once a month with leading environmentalists, and his company is taking what seem dramatic steps demonstrating its concern. In March 1988, Du Pont announced that, based on new evidence that chlorofluorocarbons (CFCs) might be seriously depleting the Earth's ozone layer, it would voluntarily suspend all production of CFCs -- a $750-million- a-year business in which it leads the industry -- by 2000, or sooner if possible. The company has already spent $170 million developing safe compounds to replace CFCs in cleaning, refrigeration, and other uses. It is prepared to spend as much as $1 billion on the best replacements discovered so far, but since even these compounds may slightly deplete the ozone layer, Du Pont wants guarantees that new plants will be allowed to function long enough to recoup the investment. Says Woolard: ''In my opinion it has not been proven that CFCs are harmful to the ozone, but there is a fairly good probability, and we have to deal with that.'' Evidence of increased environmental sensitivity is everywhere in Du Pont, perhaps partly because that's now one of the criteria in determining managers' compensation. The company voluntarily spends an estimated $50 million each year on environmental projects beyond what the law requires, like the $15 million it spent at a Texas plant to reduce the risk of dangerous gases being released. Du Pont's ultimate goal is zero pollution in all activities. While Woolard is certain this new priority will strengthen the company, he admits profits will suffer from the effort over the next few years. Du Pont also sees business opportunity in environmental concern. Building on expertise gained in cleaning up its own plants, the company announced in early December the formation of a safety and environmental resources division to help industrial customers clean up toxic wastes. Management forecasts potential annual revenues of $1 billion from the new business by 2000. Defensive actions sometimes pay off too. Faced with protests over the ocean dumping of acid iron salts off the coast of New Jersey, Du Pont halted a practice its scientists were convinced was harmless. It then discovered the salts could be sold to water-treatment plants. At 3M, CEO Allen Jacobson directs that pollution-control installations be judged by their environmental benefit, not only by return on investment. But 3M too has learned that environmental controls often lead to cost savings. The company specializes in coated products (such as videotapes and pressure- sensitive tapes) whose manufacture has long emitted significant pollutants. It has saved well over $1 billion since 1975 through a program called Pollution Prevention Pays. The program spotlights projects that reduce pollution as well as save money. Solvents that were once emitted to the atmosphere may be recycled and reused, or a volatile solvent may be replaced by a water-based one, eliminating the need for costly air pollution control equipment. If, as many predict, alliances between environmentalists and corporations are the wave of the future, Pacific Gas & Electric has already learned to surf. But it took practice. In the mid-1970s economists and lawyers from the Environmental Defense Fund started fighting the company's plan to build several giant coal and nuclear power plants. The environmentalists proposed instead a combination of smaller-scale generating facilities like windmills or cogeneration plants on the sites of regional businesses, combined with aggressive conservation measures. THE BIG PLANTS were never built. A persistent EDF campaign of pressure at utility commission meetings and sophisticated television advertising came just as the price of fossil fuels started climbing dramatically. PG&E's resistance gradually melted. The company took several steps to conserve energy, and much of the rest of the electric industry eventually followed PG&E's lead. Says EDF attorney David Roe: ''We spoke to them in their own language. We used their type of computer models, their financial analysis sheets. We weren't saying, do what's good for the environment and it will cripple you. We were saying, it will save you economically.'' While the company says it would have eventually taken most of the actions EDF proposed anyway, it acknowledges that the give-and-take was beneficial. Says PG&E attorney Kermit Kubitz: ''I think both sides may have been closer together than either side realized at the beginning.'' Echoes Roe: ''The basic point is, there's usually a lot more common ground than either side realizes.'' Today PG&E has a policy of aggressively seeking discussions and joint projects with any willing environmental group, even those that have opposed the company in the past. Its board includes Melvin Lane, a well-known West Coast environmentalist. In November, PG&E announced a $10 million study, conducted in conjunction with the Natural Resources Defense Council, among others, to improve efficiency in the use of electricity. And that computer model EDF developed to demonstrate the relationships between conservation and electricity costs -- PG&E now rents it from EDF for about $18,000 a year. PG&E chief Richard Clarke believes that on the rocky coast of Northern California, where quality of life has long been a paramount public issue, he has seen America's environmental mood foreshadowed. A few guiding principles Clarke has learned: -- ''Make environmental considerations and concerns part of any decision you make, right from the beginning. Don't think of it as something extra you throw in the pot.'' -- ''Develop an internal cadre of environmentalists. They have minds of their own and will advocate things. They may not get everything they want, but there certainly are occasions where they prevail.'' -- ''Have a continuing dialogue with environmental groups.'' -- ''Put someone on your board to help you factor in environmental issues.'' -- ''Do these things because they are the right thing to do, not because somebody forces you to do them.'' McDonald's might add another principle to the list: Educate your customers incessantly. Faced with growing protests over the volume of waste it generates, especially the polystyrene foam packaging used for hot food, the restaurant giant has taken major steps to reduce waste at the source, to recycle what's left, and to explain what it is doing. Just by making its drinking straws 20% lighter, the chain eliminated one million pounds of waste per year. In October, McDonald's began collecting polystyrene waste in 100 New England outlets and recycling it; the company intends to include all 450 regional stores in the plan by March. Customers are asked to put polystyrene containers, such as those for Chicken McNuggets or Big Macs, in special bins. All napkins in U.S. stores are now made from recycled paper, as are carry-out drink trays and office paper at headquarters. Shelby Yastrow, the company's general counsel and point man on environmental issues, says that since polystyrene is 100% recyclable, it is better for the environment than paper, which theoretically degrades but most commonly ends up in anaerobic landfills -- virtually no oxygen gets through -- which may instead preserve it for decades. Paper is also significantly bulkier than plastic in most uses, thus creating more waste. ''Everything I look at tells me plastic is better,'' says Yastrow. ''I have a little trouble convincing my children or my neighbors, but the scientific community isn't a problem.'' To correct the misconceptions of those kids and neighbors and their peers nationwide, the company is embarking on a major educational campaign. McDonald's is describing its efforts and explaining recycling on the paper liners on customers' trays, in advertising, in brochures it hands out in stores, and in mailings to school teachers. That's a lot of describing and explaining: McDonald's serves 18 million customers in the U.S. each day, making its tray liners alone one of the largest of the nation's mass media.

EVEN IF IT IMPROVES public understanding of solid waste, McDonald's will continue to confront one of the nagging realities of the new environmentalism: Grass-roots local groups, many of them misinformed, wield increasing disruptive power. Says David Stephenson, a Boston public relations consultant who specializes in corporate environmental strategy: ''The grass-roots groups are concerned about the value of their homes and the health of their children. That means they are relentless. In general, unlike the mainstream environmental groups, they are not interested in compromise or mediation.'' McDonald's successfully confronted antipolystyrene picketing at several of its Vermont stores with an aggressive local educational campaign. By the end, local activists were asking that the company convert its paper cold-drink cups to plastic. ONE LESSON from the company's experience: Don't ever assume you've solved an environmental problem. As knowledge evolves, attitudes change, and so do solutions. McDonald's switched from paper to polystyrene packaging for Big Macs and other sandwiches in 1976 largely because the public was worried about cutting trees and the energy that paper production consumed. As recently as the early Seventies, CFCs, one of today's leading environmental villains, were believed to be a harmless and inert triumph of modern chemistry. You have to keep looking ahead -- way ahead. For gutsy environmental farsightedness, few companies can top Applied Energy Services. The private, Virginia-based power-plant management firm donated $2 million in 1988 for tree , planting in Guatemala to compensate for a coal-fired plant it was building in Connecticut. The trees, which of course consume carbon dioxide, are intended to offset the plant's emissions of the gas, which may lead to global warming. Says CEO Roger Sant: ''We pride ourselves on being part of the solution, not part of the problem. We weren't trying to do any more than salve our own guilt, I guess.'' The company expects to couple tree-planting programs with all seven new plants on its drawing boards. Several large outfits have contacted Sant to ask his help in refining similar plans. One recent weekday afternoon, three men walked out of the Environmental Defense Fund's midtown Manhattan office on their way to have lunch together. On the left was EDF's senior economist. On the right was an environmental expert in the Soviet government. Between them was a businessman, a trader in the nascent enterprise of buying and selling pollution rights. Together that trio forms a picture of how the new environmentalism is shaping up: global, more cooperative than confrontational -- and with business at the center.


Franklin Research & Development of Boston, which calls itself a ''socially responsible'' investment firm and manages $200 million, bases these ratings on several factors. Each company starts with a score of 3, which then rises or falls based on corporate actions that harm or help the environment.

INDUSTRY COMPANY RATING 1=best, 5=worst CHEMICALS H.B. Fuller 1.5 Environmental initiatives in HQ construction Monsanto 4.0 Pesticides, toxic dumps, offset by clean-air efforts W.R. Grace 5.0 Toxic dumps, several environmental lawsuits

COMPUTERS Apple Computer 1.5 Recycles, lets environmental groups solicit on site IBM 3.5 High CFC emissions

ELECTRIC UTILITIES Louisville Gas & Electric 2.0 Leader in installing smokestack scrubbers Southern 5.0 High SO2 emissions contribute to acid rain

ENVIRONMENTAL SERVICES Safety-Kleen 2.5 Leading recycler of solvents and motor oil Wellman 2.5 Leading recycler of plastic Browning-Ferris 5.0 Numerous landfill violations Waste Management 5.0 Numerous landfill violations

FOREST PRODUCTS Jefferson Smurfit 2.5 Leading recycler of paper Louisiana-Pacific 4.0 Air and water pollution violations

NATURAL GAS Consolidated 2.5 Promotes new, clean-burning technologies Natural Gas Panhandle Eastern 4.0 Substantial PCB pollution problems

OIL Amoco 2.0 Strong waste-minimization program Exxon 5.0 Poor response to Valdez oil spill

PHOTO EQUIPMENT Polaroid 2.5 Strong waste-minimization program Eastman Kodak 4.0 Substantial leaks in Rochester sites

STEEL Nucor 2.0 State-of-the-art mills, uses recycled metals Bethlehem Steel 4.0 Old mills with numerous environmental problems

OTHER Wal-Mart Stores 2.0 Promotes environmental products, recycling Borden 4.0 Toxic dumps, air and water complaints General Electric 4.0 Major PCB cleanup problems General Motors 5.0 Toxic dumps, air and water problems