Gang Green

By Eric Roston

If danger and opportunity drive business decisions, then companies and investors have more and more reason for concern about global warming. The snows of Kilimanjaro are shrinking, as are the polar ice caps, and governments from Canada to New Zealand are joining calls to restrict greenhouse-gas emissions. Consumers and shareholders are steering their money toward companies that demonstrate concern for the environment--or at least appear to do so. And technology is boosting the attractiveness of green products ranging from clean fuel-cell engines to pillows stuffed with a synthetic fiber derived not from oil but from corn. Even as the White House and Congress show little movement away from the U.S. policy of cheap and subsidized coal and petroleum, smart U.S. companies--especially those that operate globally--are investing in new green technologies and in ways of making their old operations cleaner and more energy efficient.

What do these trends mean for your business? For your investments? For the new products you'll be buying in just a few years? To address these questions, TIME's Eric Roston recently convened a Board of Technologists--five top experts in industry, the environment and investing (see box, right).

TIME: Are consumers willing to pay a premium for green products?

LANCASTER: Despite how much they say they prefer environmentally clean products, people just won't pay more. Fuel-cell vehicles, which my company, Ballard, is developing engines for, will sell--but when they do, it will be because they perform better than internal-combustion cars, not because they're cleaner.

TIME: How close at hand is that day?

LANCASTER: Maybe eight or 10 years. The major auto companies have prototypes, and today you can actually put down your credit card and buy a fuel-cell product. Coleman Powermate [a division of Sunbeam] just started selling a quiet, exhaust-free generator that uses our technology. It's for industry--it costs $5,995--but a consumer version is due in the next few months. General Electric is involved in fuel cells. They have an investment in one of our competitors [Plug Power].

When I started at Ballard 12 years ago, I would never have thought that I'd be talking excitedly about, say, the fuel-cell-powered floor scrubber. But companies are looking for a replacement for battery technology, something that can go through an entire shift and therefore cost less money.

BAVARIA: As an investor who promotes an environmental commitment, I often hear the comment "If there's no money in it, we can't do it." Companies have to make money. That is and should be their mandate. But there are times when the public interest can actually help the company.

LIFSET: I think it is unfair to ask companies to get out ahead of their customers. They have got to make money. They have a fiduciary responsibility, and the market would punish them if they didn't meet it. But companies should constantly be asking themselves, "How do we design processes and make products that are more environmentally benign? Are the things that everybody is talking about worthy of investment?"

TIME: Critics complain that leaders in many industries would rather tweak old technologies than seriously invest in new ones. Do you agree?

CORREA: Should somebody hold a gun to the auto industry's head and force higher fuel-efficiency standards? Actually, in the short run that is usually the right answer. But if you are thinking about a real shift, then probably not. Would you like to be the world's best sailmaker in 1880 and predicate your company on that? You'd probably win the next two years' worth of orders. You have to be the best at the game today, and you have to be clairvoyant enough to know the game in the future.

TIME: But in our quarter-to-quarter culture, the future isn't what it used to be.

LANCASTER: Yes, financial markets don't like long-term stories. They want current earnings per share. There is not a fuel-cell company that has that.

BAVARIA: We have owned hydrogen technologies wherever we can in our investment portfolios. In the short run, they don't look like very good investments. This is one of the barriers. Even big companies, which may want to do something, still face a five- or seven-year payoff. Up front, it is a huge capital outlay. They feel hamstrung because of the shareholders and Wall Street.

Most corporations will do whatever will pay them back in the intermediate term. Think of the "low-hanging fruit" issues--waste, energy use, pollution. There is a social mandate to fix those problems. But what in the world does a timber company, say, care about biodiversity? There has to be some other way to inject that interest to make a company use its resources to help solve that problem.

CORREA: But car companies are putting billions into a fuel-cell car before they get any money back. The Beijing Olympics in 2008 will have thousands of buses and trucks that will be running either with hybrid gasoline-and-electric engines or fuel cells. If you drive around Beijing today, you see billboards for the "Green Olympics."

TIME: Even so, it's not clear that renewable energy can replace fossil fuels anytime soon, right?

SMOLIK: You'll need companion technologies. Hybrid fuel cells won't do very well if the car weighs a ton, right? We've developed lighter-weight composite materials that enable cars to have higher fuel efficiency.

LANCASTER: Think about this: fuel cells were invented in 1839. Back in the late 1800s, we could have taken the path that we did--using internal-combustion engines--or another path. So why is it now, and not 100 years ago, that we are thinking about using electrochemistry for power? Well, all of a sudden we are talking about the environment. Efficiency has never been a strong driver of new technologies in the past, but that is changing.

CORREA: Renewable energy is something we should talk about carefully. There is a perception that renewables in a large industrial economy could make up the bulk of our power. But we are just a little too far away from the sun. Whether you're talking about biomass, photovoltaics, or wind moving because the sun heats the earth differentially, it all comes from the sun. If you calculate how many watts per meter the sun puts to the earth and ask whether that is enough to run our very high energy consumption--this is a question.

TIME: Does the U.S. government have any kind of clear vision on all this?

LANCASTER: We are starting to see out of the Department of Energy a vision of where they want to take energy, and therefore technology, in the U.S. This vision is for a hydrogen economy. Time lines are still way out there.

BAVARIA: It doesn't have to be all about the Federal Government. Los Angeles and San Francisco have floated bond issues to promote alternative energy.

CORREA: The right kind of technologies tend to get developed. Government can catalyze it with this policy or that policy, but that may make it happen only a few years earlier. It is hard to imagine what in the last 100 years we might have done differently. There were no other technologies that could have had us grow to a pretty good standard of living for at least a significant fraction of the world's people.

TIME: But at what environmental cost?

LIFSET: Our economy is very effective in driving technological change, and you can see the benefits in terms of resource efficiency and reductions in pollution all around us. Companies as sophisticated as Dow or GE, first-rate companies, will produce good, responsible products. But technological change won't automatically bring about environmental protection. Consider product tagging, which is about to expand in the market in a big way. You buy a hair dryer at the drugstore, and there's a gizmo on the box that looks like a circuit or a circle of wires, and it sets off a buzzer if you leave without paying--that's one variety of product tag.

Now, combine product tags with specialized memory circuits and wireless technology, and there will be some really obvious opportunities for environmental use. We can track products, find out about people's consumption behavior. We can make bottles and cans talk to recycling equipment. But the question is, As these technologies are developed and the software coding gets standardized, will the decisions be made to include environmental information in those codes? If the rules of the game aren't set from outside, companies can't afford as much improvement. As a public, we have to demand it.

TIME: Global firms like GE and Dow have enough muscle to force--or, you might say, to free--their smaller business partners to follow better environmental standards. Is this power being used well?

SMOLIK: At Dow, we typically work with customers rather than suppliers because our suppliers are the oil companies and such. Our customers are typically companies that make products for consumers--a Nike or a Procter & Gamble. A lot of times, we have the technology for a better, more sustainable raw material that they can use. Nike, for example, is a consumer-product company, so just as soon as some particular component becomes very unpopular, they switch pretty quickly. That's why socially responsible investors and environmental groups are good. They put pressure on the system. They put pressure on the consumer-products companies, which keeps us all honest and working in the right direction.

BAVARIA: In socially responsible investing, what we do--besides allocating investment dollars based on our clients' will--is, we become active shareholders. We try to represent a shareholder constituency that might otherwise have no voice.

LIFSET: The leverage to green a supply chain comes from whoever has the power in the chain. In the U.S., that is often the retailer or the consumer-goods companies. It's not surprising that companies like GE and Dow are recipients of pressure rather than the source of it. Such influence is not always something that is conspicuous to the public eye. Yet sometimes it really works.

TIME: Even if we were determined to bring our industrial world into real harmony with the natural one--and it were possible--how long would that take?

CORREA: One of the things we can do--and do do at GE--is behave the same, environmentally, anywhere in the world. In many parts of the world, that means you are doing a heck of a lot better not only with the environment but with safety and cultural diversity. So big companies are actually a force for tremendous good.

LIFSET: We can ask, Will technology automatically solve problems? That's a complicated question and one worth careful attention. We know the fuel efficiency of cars over the past quarter-century has gone up significantly, and they pollute less per mile driven. At the same time, we drive more miles.

Or take something as prosaic as the design of beverage containers. How much plastic, glass and metal do we use now, per ounce, compared with 20 years ago? It is absolutely clear that we use far, far less. But are we consuming more soda and moving from large containers to single-use containers so that we end up having to deal with more containers overall? This is a classic case of opposite forces. Our behavior is at cross-purposes with the potential benefits of new technology.