Corporate Canada grooms green image, changes ways
OTTAWA (Reuters) - Canadian companies are trying to cultivate a green competitive edge as concern about the environment mounts, but they risk investor wrath if their claims don't hold up.
Shareholder and consumer pressure have fueled an unprecedented green marketing push that has moved beyond products like soap and light bulbs to whole sectors ranging from oil sands to telecoms equipment.
Nortel Networks NT.TO, for example, is aggressively promoting its new network gear as twice as energy efficient as arch rival Cisco's (CSCO.O) posting videos on YouTube and running ads about a Cisco energy tax.
Nortel - which once asked "What do YOU want the Internet to be?" in advertisements - boasts that its equipment lets people work from home instead of commuting, or run energy-sucking data centers more efficiently.
"They're saying hey, some of the stuff we do isn't just a good technological idea, it also happens to be really energy efficient. And when your electricity bills are going up that's a really good idea," said Duncan Stewart of Duncan Stewart Asset Management and manager of the DSAM IQ CleanTech Fund.
Nortel is not alone.
Canada's oil sands producers, in an effort to polish their environmental image, have launched a communications campaign to counter growing concern over the ecological costs of their developments.
Alberta's oil sands represent the largest source of crude oil outside the Middle East, but the operations to extract the oil are major emitters of greenhouse gases, while swathes of forest are ripped up for open pit mines.
And Canadian banks now tout green loans, investments and corporate responsibility. TD Bank (TD.TO) says its Canadian operations will be carbon neutral by 2010.
"LOWER RISK, HIGHER OPPORTUNITY"
Companies with reliable green claims have a potentially powerful appeal to investors' core instincts, said Tima Bansal, professor at the University of Western Ontario's Richard Ivey School of Business. They avoid risk related to climate change and have a crack at capitalizing on new green markets.
"It's lower risk, higher opportunity," she said. "Investors are going to be much more concerned about this."
Toyota, whose fortunes got a lift from hybrid cars, is a perfect example, as is Toronto's Bullfrog Power, a green electricity retailer that has attracted customers including Wal-Mart Canada (WMT.N) despite higher rates.
It's hard to calculate the impact of a green image on investors. But missteps can hurt.
As an example, take Lululemon (LLL.TO). Shares in the trendy yogawear retailer fell 13 percent last year after a scandal surrounding unproven benefits from fabric said to contain seaweed.
"Marketers and communications folks struggle with this, because it is not like communicating flavor or taste or fashion, all of which are subjective. The environment is about empirical fact," said Scott McDougall, president of environmental marketer TerraChoice.
TerraChoice last year sent researchers into big-box stores to evaluate environmental claims on 1,018 products. Only one was legitimate, while the rest were false or misleading, such as insecticides which were wrongly promoted as "chemical free" or a detergent in a plastic container that claimed 100 percent recycled paper packaging.
"It's a complex problem...It's very hard for anybody to tell the difference as to how deep the green is," said Bansal, director of Ivey's Centre for Building Sustainable Value.
"Ultimately, it's a moving target and what we can do is reward the companies that are moving toward the target...it's about forgiving the mistakes and rewarding the risks."
($1=$1.01 Canadian)
(Reporting by Susan Taylor; Editing by Janet Guttsman)
