Get Real About Green

To some retailers, social responsibility smacks of philanthropy, a nice-to-have, feel-good initiative. More of an annoying distraction or passing contagion than a bottom-line concern.

We know two things for certain even if we don't know exactly what effects climate change will have: climate change will directly impact societies, customers and business; and governments will step in with far-reaching regulations to try to mitigate the effects.

Retailers who sit on the sidelines are putting their companies at risk relative to those already devising strategies that reduce exposure to economic shocks.

Seeking to protect their holdings, large investor groups have filed a record number of shareholder resolutions in the last 18 months seeking greater disclosure of corporate response to business impacts from climate change. Among retailers challenged by these resolutions are Kroger, Rite Aid, Lowes, Best Buy and Big Lots.

Some companies choose to fight these resolutions. But this is a dangerous game. Resolutions filed with Lowes and Big Lots were withdrawn after the retailers agreed to respond to the 2008 Carbon Disclosure Project survey, which examines greenhouse gas emissions management and other issues related to climate change.

Since many of these filings are from members of the Investor Network on Climate Risk (INCR), an alliance of 60 institutional investors who manage more than $5 trillion in assets, fighting them risks alienating powerful shareholders and consumers.

There is no one-size-fits-all approach to climate change. Each retailer's approach should mesh with its overall strategy. The first step is to begin treating energy consumption as a rapidly rising cost of doing business. The second is to asses and reduce risks to climate-related economic shocks.

One way retailers can reduce energy costs is to install small, efficient generators on their fleets of trucks so drivers can turn off their engines while parked. Wal-Mart is doing this and reaping a $25-million per year savings.

Climate-related economic shocks can be expected from increased heat waves and tropical storms. Frequent heat waves mean stores will consume more energy and water. Frequent tropical storms mean more flooding and infrastructure damage to and coastal regions.

All of this means retailers will be paying higher operational costs and exploding insurance rates in the Gulf Coast states and other heavily afflicted regions.

Green is the hot color of the day, but more importantly it is a bottom-line strategy for your business.