The environment is often considered a "luxury good," meaning that people are willing to spend more on it as their personal financial conditions improve. Of course, that means that when economic conditions turn sour, funding initiatives to improve the environment takes a backseat to more pressing spending priorities, such as the mortgage or your next meal.
However, there are some companies, organizations, and individuals bucking the trend, showing that it's possible to be a responsible financial and environmental steward at the same time.
Going Green to Save Green for a Good Cause
In Cincinnati, for instance, the local Red Cross chapter was recently awarded LEED Gold certification for its new headquarters and disaster operations center. That's a prestigious recognition of how the chapter used environmentally sustainable materials and practices while building the facility.
Yet the chapter had good economic reasons to go green as well. Its new building is significantlymore energy efficient than the one it replaced. In fact, despite its being more than 10,000 square feet larger than the old one, it uses less natural gas and electricity, enabling the chapter to run a larger, more modern, and more effective disaster center for less than it was spending before.
The less money put toward operating the building, the better, as this frees up more of the charity's resources for its primary mission, providing disaster relief and helping people prevent, prepare for, and respond to emergencies. And these days, every little bit helps.
Not only does it run more cheaply, but it was built inexpensively, too, coming in more than $1 million under its initial budget.
Running the Numbers on Helping the Environment
Cheap to build and cheap to run? It certainly is possible -- but only if you treat green initiatives the same way you would any other investment.
To tell when projects make financial sense over their lifetimes, you need to run a financial analysis including "Net Present Value" calculations. In the Red Cross building, environmentally friendly insulation, lighting, heating and air conditioning had higher initial costs than less earth-friendly options. But the savings over the lifecycles of the eco products came out ahead.
Even Wal-Mart is Getting Greener
The Red Cross isn't alone in realizing that legitimate financial benefits can be found by going green.
General Electric (GE), for instance, has an entire "Ecomagination" business line built around environmentally friendlier technologies. PNC Financial Services (PNC) claims more LEED-certified new construction buildings than anyone else on Earth. PepsiCo's (PEP) Frito-Lay claims eight LEED Gold-certified buildings. And even Wal-Mart (WMT) is working to operate more sustainably.
These giant companies may be reaping the PR benefits of going green, but they realize that there's money to be made, too, or they likely wouldn't be pursuing those goals so aggressively.
For instance, Wal-Mart expects $52 million in annual savings for every mile-per-gallon improvement in its transportation fleet. Likewise, PNC claims a 50% improvement in employee morale and retention in its green buildings, as compared with traditional ones.
Perhaps General Electric best captures the "go green, save green" opportunity when it says this about LEED buildings: "An upfront investment of 2% in green building design, on average, results in life cycle savings of 20% of the total construction costs -- more than 10 times the initial investment."
These days, fewer people have the money to treat the environment like a "luxury good." Given those prevailing economic conditions, it's reassuring to know that there are ways to protect your pocketbook and the planet at the same time.
Motley Fool contributor Chuck Saletta serves as volunteer Chairman of Green Facilities for the Cincinnati Area Chapter of the American Red Cross. At the time of publication, Chuck owned shares of General Electric, and his wife owned shares of Duke Energy. The Motley Fool owns shares of PepsiCo and Wal-Mart. Motley Fool newsletter services have recommended buying shares of and creating diagonal call positions on Wal-Mart and PepsiCo.
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