Last year, Google invested more than $915 million in clean energy projects–solar, wind and transmission.

That’s a lot of money, even for Google, which had $38 billion in revenues in 2011. The investments don’t appear to be core to the company’s mission of organizing information, and they have attracted criticism, as well as some careless reporting, implying that the Internet giant is exiting the alternative energy business.

Does Google have an energy policy? Does it need one?

To find out,  I recently went to see Rick Needham, Google’s director of green business operations, at the company’s fabled headquarters (well, fabled for a 13-year-old company, anyway) in Mountain View, CA.

I came away not merely persuaded that Google’s energy investments make sense, but thinking that other companies that consume lots of electricity and have a pile of cash on their balance sheets  — Apple, Microsoft and GE come to mind — should consider deploying some of their cash in the clean energy sector.

Clean-energy investing isn’t philanthropy for Google. It’s business. In fact, it’s a classic double-bottom line investment, one that is intended to deliver environmental as well as financial benefits.

“We originally came at this by asking how we can make ourselves a more sustainable company,” Needham told me. But Google executives have come to believe that the company can generate  healthy, long-term returns by investing in wind farms, utility-scale solar plants and even solar photovoltaic panels on the rooftops of homes and businesses. “It’s a way of helping us to diversify our cash, put it into businesses that can earn good returns and that aren’t correlated to other investments,” Needham said.

Rick Needham

Needham, who is 41, has an interesting background. He’s a graduate of the US Naval Academy, has a master’s in aeronautical engineering from MIT and an MBA from Harvard. He spent eight years as a submarine officer, and then worked for Dean Kamen at DEKA Research on a project to develop a cleaner burning combustion engine. He’s been with Google since 2008.

Press reports last fall indicated that Google was dropping its clean-energy initiatives. Wrong. What happened was that the company shut down a small group of engineers who were researching solar power, among other things. The company is still working aggressively on data-center efficiency, procuring clean power for its data centers and investing in clean-energy projects elsewhere, as Needham explained.

These are big investments. Google put $100 million into Shepherd’s Flat, an Oregon wind farm that is expected to be the world’s largest, with 845MW of capacity. The company put $168 million into the Ivanpah Solar Electric Generating System, a solar thermal plant being operated by BrightSource Energy. It has invested in distributed, rooftop solar, through a $280 million project with Solar City and a $75 million fund with Clean Power Finance. Most recently, it invested $94 million, alongside private equity fund KKR, in a portfolio of four solar PV projects being built by Recurrent Energy.

Google isn’t betting on any one kind of renewable power because its executives believe that wind, solar thermal and solar PV all have a role to play in generating electricity. “The source of energy in the future is going to be clean energy,” Needham said, but no single source will dominate. “You wouldn’t put a solar on the windy planes plains of North Dakota if you could put a turbine there,” he noted.

While clean energy deployment still depends on government subsidies, he said: “We’re getting to the place where the technology will allow you to have a low cost of power.
Costs of wind turbine have come down. Costs of PV have dropped, just 40 percent in the last year. It’s amazing how the cost curves have come down.”

All of Google’s large-scale energy investments (as opposed to its smaller, venture-like bets on startup companies) have two things in common. First, they are tied to specific projects which should deliver a steady stream of long-term revenues; utilities, businesses or individuals (in the case of rooftop solar) have agreed to purchase the power that these projects produce for a decade or two. Second, they are tax equity investments, under which the lenders–Google in this case, but typically big financial institutions–invest in renewable energy projects and become eligible for credits that offset their federal corporate tax obligations.

Tax equity investments are important to the future of renewable energy because other federal subsidies, notably a U.S. Treasury cash grant, have expired or are in danger of being phased out. According Bloomberg New Energy Finance, which researched tax equity finance for the Reznick Group, a big accounting and tax firm with a clean energy practice, the wind industry alone will require about $2.4 billion of third-party tax equity financing in 2012. The Bloomberg report [PDF, download] says:

Incorporating other renewable generation sectors, the total tax equity financing need could be more than $7bn. That requirement exceeds the investment appetite of the established tax equity providers, according to a clean energy trade group. Yet there is a vast pool of potential incremental tax equity supply: the 500 largest public companies in the US alone paid $137bn in taxes over the past year.

This is where Google is filling an important financial gap. Other companies could, too. Apple recently reported eye-popping earnings which left it with $97 billion cash and short-term investments (although much of it is parked overseas). GE has $78 billion. Toyota has $48 billion. Microsoft has $43 billion. Here’s a list from the WSJ of the companies with big cash hoards.

Solar panels at a Recurrent Energy project

Interestingly, Google had a partner in its most recent clean energy investment: KKR, the big private equity firm,  formed a new venture called SunTap to invest in US solar projects, including the projects being developed by Recurrent Energy in northern California. That’s because these deals make financial sense, as the Bloomberg New Energy Finance report says:

For relatively good but not necessarily exceptional renewable projects, the internal rates of return (IRR) and net present values (NPV) for most of these structures can meet hurdle rates for both developers and investors.

So why aren’t more companies investing in clean energy? Hard to say. Maybe they’re risk averse, or they find it hard to think outside the box. Maybe they’re saving their cash for acquisitions, or hoping that interest rates will rise.

For his part, Needham says about Google: “We’re lucky to be working at a company that instead of asking why, asks why not?”

This blogpost about climate preparedness is part of the 2012 State of Green Business Report, published by GreenBiz, where I’m a senior writer. You can download a copy of the full report here.

Last December, government officials, corporate executives and activists met in Durban, South Africa, for high-level climate talks. They went home with an agreement … to keep talking. Meanwhile, we’re emitting more carbon dioxide every year, and atmospheric concentrations of greenhouse gases are steadily rising. If CO2 levels were somehow to stabilize now–they won’t–the world will keep warming. The bottom line: Climate change is inevitable. The world needs to learn how to prepare for it.

Increasingly, smart businesses are starting to do just that. Utilities, the oil and gas industry, agricultural companies and insurers are building assumptions about rising temperatures and extreme weather events into their scenario planning. This is what’s being called climate adaptation or climate preparedness.

The payoff from investing in adaptation could be substantial.  In 2011, insured losses in the U.S. from natural catastrophes, including tornadoes, floods and hurricanes, topped $105 billion, breaking the record of $101 billion set in 2005, the year of Hurricane Katrina, according to Munich Re, the world’s largest reinsurance firm. Some of those losses had nothing to do with climate change, but others did.

Let’s get specific about what adaptation means: Entergy, an $11 billion-a-year utility company based in New Orleans, commissioned a Gulf Coast Adaptation Study that has opened up conversations with customers and elected officials about preparing for a warming climate. Not surprisingly, the company got focused on the problem after Hurricanes Rita and Katrina hit in 2005, followed in 2008 by Gustav.

“That really put a face on what the future was going to be like,” said Jeff Williams, director of climate consulting for Entergy. “Clearly we are facing risks from sea level rise, more intense storms, flooding and surge damage.” The company has looked at “hardening” key assets including power plants, substations and transmission lines; the goal is to make Entergy “more resilient in ways that minimize business interruption loss,” Williams says.

For example, Entergy has begun a five-year $73.5 million project to relocate and harden transmission and distribution lines serving Port Fourchon, LA, which is the single largest point of entry for crude oil coming into the U.S., handling about 13 percent of national imports. (After Katrina damaged the electrical instructure, 25 percent of oil production and 44 percent of natural gas production became shut in, Entergy says. National oil prices went from $60/bbl before Katrina to $70/bbl after Katrina because of supply interruption; national natural gas prices went from $8/Mcf to $15/Mcf.) Smaller businesses are acting, too. The McIlhenny Co., which makes Tabasco Sauce and was founded in 1868 on coastal Avery Island, LA, has made its factory and visitor center more resilient to better absorb future storms.

Agriculture is another industry that will be reshaped by a warming world, with some regions and crops doing better, thanks to a longer growing season and higher levels of CO2 in the air, and other suffering. Seed companies have renewed their efforts to develop drought resistant crops, said John Soper, director of product development at Pioneer,  a unit of DuPont.

“We’re expecting some drier weather to move into the key corn growing areas,” he says. “The climate in Illinois might be more like the climate in Arkansas.” Pioneer is testing drought-resistant corn and other crops in desert-like test fields in California and Chile, he said, in part because farmers who now irrigate their fields are already telling Pioneer that they expect limits on the availability of water. In India, Pioneer is working to develop drought-tolerant varieties of rice, which is now grown on flooded land but may have to adapt to a drier climate. Other seed companies including Monsanto, Syngenta and Bayer Crop Science are working on their own drought-resistant crops.

The insurance industry, meanwhile, has been declining to write property coverage along the Atlantic Coast, in part because of fears that stronger hurricanes will do more wind damage. Citizens Insurance of Florida, a non-profit, state-run company which takes on property owners who can’t get private coverage, has become Florida’s biggest insurer.

Even the oil and gas industry–which, of course, is a major contributor to climate change–is paying heed. Several years ago, IBM, a UK consulting firm called Acclimatise and the Carbon Disclosure Project published a report called Building Business Resilience to Inevitable Climate Change [PDF, download] urging oil-and gas companies to review their strategies, business models and supply chains to “check their resilience to the new risk landscape created by inevitable climate change.”

Environmental groups, which once focused solely on curbing carbon pollution, are now looking at adaptation, in part to underscore the urgency of the climate threat. Theo Spencer, a senior advocate at the Natural Resources Defense Council, which helped organize a meeting early this month with utilities, insurance companies and others to talk about climate preparedness, says companies are coming to understand that “the weather is changing and we really need to do something about it.” He quotes the White House science adviser John Holdren who said the task ahead is not just “avoiding the unmanageable” but also  “managing the unavoidable.” Unavoidable climate change, and its consequences, is likely to be a corporate worry for years to come.

Should we worry about Chinese government subsidies to its solar industry? Or send the Chinese a thank-you note?

A group of seven US-based manufacturers of solar panels is alarmed. These manufacturers, led by Solar World, a German firm with a plant in Oregon, filed a complaint with the United States International Trade Commission, which reached a preliminary conclusion in December that US companies were, in fact, being harmed by subsidized imports. If the Commerce Department goes on to find that Chinese firms have been dumping solar panels on the US market at prices below their costs, it could impose steep tariffs of 50 to 250% on Chinese panels, according to this report in The Times by Matt Wald. The Chinese government provides billions of dollars of low-cost financing and free or cheap land to Chinese solar firms.

Jigar Shah

But much of the solar industry–led by Jigar Shah, the founder of Sun Edison, entrepreneur and environmental advocate–thinks this complaint is a terrible idea. Tariffs  would raise the costs of solar power to US business and consumers, at a time when those are coming down; they could also set off a solar trade war that would harm other US solar companies.

As it happens, the U.S. had a trade surplus of nearly $1.9 billion in the solar sector with China in 2010, as exports of raw material and factory equipment more than offset imports of finished solar panels, according to the Solar Electric Industries Association,. What’s more, Jigar says, most of the 100,000 or so jobs in the US solar industry — he says as much as 97-98% — are downstream of the manufacturing business in project development, logistics, construction and installation.

“SolarWorld’s petition will do far more damage than good to the U.S. solar industry as a whole,” Jigar wrote in this letter to Gordon Brinser of Solar World. “Every morning, thousands of hard-working Americans put on their tool belts and go build solar power plants. Our country needs more of those jobs, not fewer.”

What got me thinking about this brouhaha was an email the other day from a California company called Solar Power Inc., or SPI, that underscored for me just how committed the Chinese are to getting their solar panels onto rooftops in the US.  SPI said it had secured construction financing worth $44 million from the state-owned China Development Bank to fund construction of solar projects in New Jersey.

Why would a Chinese bank finance solar panels in the US? Well, it turns out that SPI is 70%-owned by LDK Solar, a Chinese company founded in 2005 that now says it “the world’s largest producer of solar wafers in terms of capacity and a leading high-purity polysilicon and solar module manufacturer.” LDK bought its controlling interest in SPI Solar last year in an effort to gain direct access to the US commercial market. With revenues expected to top $90 million last year, SPI is small to mid-sized developer of rooftop PV–it installed panels atop the Staples Center and the Fox Studios in Los Angeles and a Costco in New Jersey. “We’re a downstream market for LDK,” said Mike Anderson, vice president of communications for SPI Solar.

Now consider those solar panels on their way to rooftops in New Jersey–the Chinese manufacturer, LDK, gets low-cost land and financing from the Chinese government, SPI borrows from the state-owned China development bank to construct the solar arrays, the US government grants the panels a 30% investment tax credit and New Jersey’s renewable portfolio standard makes the project that much more attractive to the state’s utilities. No wonder the solar market is growing!

Supporters of the petition filed by SolarWorld, which employs more than 1,000 workers in Oregon and is the only company named in the trade complaint, argue that too much of the solar PV market is going to China. Chinese manufacturers now enjoy better than 50% of the global market for modules, up from single digit percentages in the late 1990s. Cheap Chinese solar helped drive US firms like the now-infamous Solyndra and Evergreen Solar into bankruptcy.

In a blogpost titled Educating Jigar Shah on Solar Trade, Hari Chandra Polavarapu, a solar analyst at a small firm called Auriga USA, declares: “The lower prices of solar cells and modules from China have so far served as a battering ram in destroying overseas solar PV manufacturing competition.”

“It’s true that lower prices benefit all rate payers — but if that is all there is to an economic argument, then the U.S. and the rest of the world should give up all manufacturing to China and services to India,” Polarapu writes.

My reactions:

1. Trade wars are risky. If the US imposes tariffs on Chinese solar panels, the Chinese will retaliate. They have already promised to investigate US subsidies.

2. Speaking of which, it takes chutzpah (that’s a technical term in economics) for US solar manufacturers to complain about subsidies in China since they, too, benefit from government-backed loans (yes, that means Solyndra), buy-American provisions in the stimulus package and favorable state tax treatment. SolarWorld got $40 million in tax credits from Oregon, where it employs about 1,000 people. Today’s Times has an excellent story about how the government pays for worker training programs for individual companies. Until the US brings a halt to crony capitalism (which would be good), US companies are in no position to whine when they find it elsewhere.

3. Maintaining solar panel manufacturing jobs in the US may be a lost cause. Solar cells and modules are not high tech products. They’re more like a flat-screen TV or an iPod than a Boeing jetliner. Chinese PV manufacturers benefit from efficient operations and low labor costs, according to this article in the MIT Technology Review.

4. The Chinese subsidies create a positive externality–lower carbon emissions, to the degree that solar panels replace dirtier fossil fuels. So long as they continue, we all benefit. If and when they stop, there’ll be no reason why other manufacturers can’t gear up to compete.

I’m not ready to send a thank-you note to China. But I’m thinking about it.

[Disclosure: I was paid last year to moderate an event for the Carbon War Room, which Jigar leads.]

If there’s one industry that ought to be concerned about the threat of global warming, it’s the insurance industry. OK, the ski industry, too, but I digress.

Dave Jones, California’s insurance commissioner, recently put it this way: “Climate change is an obvious physical threat to us all, but increasingly it also poses a serious financial threat to the insurance industry…” When extreme weather causes damage, insurers pay.

So you’d expect insurance companies to be among the most forceful voices in corporate America calling for the regulation greenhouse gas emissions.

Uh, no. They’ve been eerily quiet.

And, at the least, you’d expect them to be proudly steering some of their massive investments to clean energy or energy efficiency projects aimed at reducing emissions of greenhouse gases.

Wrong again.

“It’s surprising, in a sense, because they have so much to lose from climate change,” says Sharlene Leurig, senior manager of the insurance program at Ceres, a nonprofit coalition of investor and environmental groups. But, she notes, insurance is a conservative business. The industry is all about risk, but it doesn’t want to take the risk of speaking out on climate change.

This is the second of two blogposts about the insurance industry and climate. Yesterday, I blogged about federal and state-backed programs that are insure risky properties from flood and storm damage, creating potential liabilities for all of us. Today, I’ll ask why U.S. insurers–in stark contrast to the big European reinsurance companies–have been missing in action during the Washington climate wars.

Consider: The U.S. Climate Action Partnership, an alliance of big companies and environmental groups calling for a cap on carbon emissions, includes 21 companies–seven utility companies, industrial giants GE and Siemens, chemical firms Dow and DuPont, Alcoa, Shell, Rio Tinto, Johnson & Johnson, PepsiCo and not a single insurer since the departure of AIG (for reasons unrelated to climate).

Business for Innovative Climate and Energy Policy, or BICEP (which is a project of Ceres), another coalition pushing hard for policies to drive a low-carbon economy, includes Nike, Starbucks, Timberland, eBay, Gap, Avon and the Aspen/Snowmass, among others. No insurers.

Now…this isn’t to suggest that insurers have been entirely absent from the climate debate but mostly they’ve focused on their parochial interests. Some companies, for example, have asked the federal government to provide wind as well as water coverage in the event of hurricane damage. Others proposed want the federal government to offer reinsurance — that’s insurance for insurance companies — to protect against a major catastrophe, or “mega-cat” in industry argot. Fireman’s Fund, a unit of the German financial services firm Allianz, has been writing “green insurance” policies for building owners. (See my blogpost, Fireman’s Fund: an insuror that isn’t dull.)

But the industry has been a non-factor on the big issues, unlike the European reinsurance firms which have repeatedly warned of climate risks. Way back in 2007, Andrew Castaldi, head of the catastrophe risk unit for Swiss Re America Corp, told a Senate committee: “We believe unequivocally that climate change presents an increasing risk to the world economy and social welfare.” In a 2009 report, Lloyd’s of London warned of climate change contributing to “resource-driven conflicts; economic damage and risk to coastal cities and infrastructure; loss of territory and resultant border disputes; environmentally induced migration; government fragility; political radicalisation; tensions over energy supplies and pressures on international governance”. Munich Re, the world’s biggest reinsurer, said last year:  “It would seem that the growing number of weather-related catastrophes can only be explained by climate change.”

When I emailed the Property Casualty Insurers Association of America to ask why the industry hasn’t been more vocal, David Kodama, senior director of research and policy analysis for PCI, replied:

Climate change is one among many of important strategic risks for insurers. Broadly speaking, insurance companies assess and monitor developments associated with climate change and, as appropriate for the individual insurer, incorporate the relevant information into their business model and practices.

However, climate change is a particularly complex issue and its causes, effects and the relevant variables that impact it are multifaceted and not well understood.

…It is prudent for the many insurers to continue to study the issue.

Could the association be any more cautious? “Climate change is a heavily politicized issue in the US,” Ceres’ Sharlene Leurig says, when I ask her why the companies have stayed on the sidelines. “Why put your neck out there and start messaging about a topic that many consumers are confused about and, in some instances, downright hostile to?” Of course, that’s exactly what bolder companies like Nike and Starbucks are doing with BICEP.

There may, however, be another reason why insurers have been loathe to speak out: They write liability coverage for corporations, including oil and coal companies, which are being sued over climate-related liability.

An aerial view of Kivalina, Alaska

Claims have been filed against fossil fuel companies that remind some people of  class-action suits against tobacco and the asbestos makers. In Comer v. Murphy Oil, plaintiffs sued corporate defendants claiming personal injury and property damages caused by the allegedly climate change-induced impacts of Hurricane Katrina. In Village of Kivalina v. ExxonMobil, a native Alaska group sued oil and gas companies and US utilities claiming that coastal erosion caused by global warming would force them to relocate their fishing village.

In a fascinating interview with an Australian newspaper, Gerald Maples, the lead attorney in the Comer case, said he’ll go after those fossil fuel companies that misled the public about the dangers of climate change, just as tobacco companies sowed doubt about the danger of smoking: “It’s pretty much accepted history that asbestos and tobacco are the role models for climate change litigation now.”

Pity the much-maligned plastic bag.

Plastic bags are being banned or taxed in cities and counties across America–just this week in Seattle, before that in San Francisco, Portland and Washington, D.C.  Beginning in January, Montgomery County, MD, where I live, will impose a five-cent charge for carryout bags at all retail stores. Like most of my neighbors (median household income in the county tops $92,000) I can afford the extra nickel.

But I’m not persuaded that plastic bag bans or taxes makes sense. Here’s why.

They’re not  based on science. Independent studies show that plastic bags are environmentally preferable to paper. Other suggest that, when they are reused, they are preferable to the reusable plastic or cloth sacks that many of us tote around.

Some of the arguments put forth for the bans don’t hold up. That plastic waste waste in the oceans you’ve probably read about? No, it’s not the size of Texas. Nor is it made of plastic bags.

Getting rid carryout bags won’t lead to a long-term solution to the problem of plastic waste. Maybe instead of banning or taxing bags, we should be recycling them. That’s the argument being put forth by a company called Hilex Poly, which will recycle tens of millions of pounds of plastic bags, sacks and wraps this year, and would like to do more.

You may disagree but after digging into this subject for a while, I’m certain about only one thing: It’s complicated.

The arguments for plastic bag bans or taxes are, by now, familiar.  The Montgomery County carryout bag law  “is designed to improve our environment by cutting down plastic bags—a significant source of litter—which pollute our streets, streams, and playgrounds, and harm property values.” Econ 101 tells you that charging 5 cents for plastic bags creates an incentive for people to use fewer of them, and carry reusable bags instead. Proceeds go to “programs that fight litter and provide stormwater pollution control.”

Bill Hickman, who leads the Rise Above Plastics campaign at the Surfrider Foundation, an advocacy group, told me by phone: “We’re trying to stop the plastic impact on the marine environment. Plastic doesn’t biodegrade in our lifetime…Anything, single use, at the end of the day has negative effects on our environment.”

All true, but…

Studies say that plastic bags have a lighter environmental footprint than paper, and in some cases are preferable to reusable bags. A thorough life cycle analysis done in the UK by the government’s environment agency in 2006 (download, PDF, here) found that HDPE (high-density polyethylene, the typical lightweight plastic bags) are superior to paper because they require less energy and far less water to make and take up less space in landfill. Comparing them to reusable non woven polypropylene (PP) bags–the typical reusable bag, made in China, and sold by grocers–the study found that their impacts depend upon the number of times that plastic bags are reused. Data on this is scarce and controversial–critics of plastic say the bags are typically  used just once, but the industry says they are frequently used, often as garbage bags, or to carry kids’ lunches to school, or pick up dog poop. (Banning plastic carryout bags means that people may have to buy bags for those purposes.) Focusing on the climate issue, the 120-page-long UK study says:

The paper, LDPE, non-woven PP and cotton bags should be reused at least 3, 4, 11 and 131 times respectively to ensure that they have lower global warming potential than conventional HDPE carrier bags that are not reused.

If I understand that correctly, it means that one reusable bag has the carbon footprint of 13 disposable bags that are used just once. If you use the disposable bag twice, you’ll need to deploy the reusable bag 26 times before you are ahead in terms of global warming. By the way, this doesn’t include the impact of washing the reusable bag in hot water, which is highly recommended because bacteria like E. coli and fecal coliform can thrive in reusable bags, according to this study, which, it must be said, was financed by the plastics industry.

A study from the University of California, Chico, funded by Keep California Beautiful, (PDF, download) analyzed the UK studies, as well as research from Scotland, Australia and a U.S. consulting firm and found that “reusable plastic bags can have lower environmental impacts than single-use polyethylene plastic grocery bags.” But it also found traces of cadmium and lead in the reusable bags. The professor who did the study has consulted for both plastic bag and reusable bag makers. Like I said, it’s complicated.

Plastic pollution of the oceans probably isn’t as bad as you think. You can find dire stories of plastic pollution, as well as birds being strangled by plastic bags, on the websites of Surfrider and Save the Bay. Oprah Winfrey devoted a television program to the problem, saying:

The Great Pacific Garbage Patch stretches from the coast of California to Japan, and it’s estimated to be twice the size of Texas. “This is the most shocking thing I have seen,” Oprah says.

Whether Oprah has actually seen the garbage patch is anyone’s guess. But Angelicque “Angel” White, an assistant professor of oceanography at Oregon State, participated in one of the few expeditions solely aimed at understanding the abundance of plastic debris in the Pacific. He says the claim that the “Great Garbage Patch” between California and Japan is twice the size of Texas is flat wrong. OSU reports:

“There is no doubt that the amount of plastic in the world’s oceans is troubling, but this kind of exaggeration undermines the credibility of scientists,” White said. “We have data that allow us to make reasonable estimates; we don’t need the hyperbole.

According to NOAA and others, plastic debris in the oceans comes from many sources, including fishing lines, PET bottles, polyester clothing, detergent bottles, plumbing pipes, drinking straws and toothbrushes. The photo below comes from the website of a group called Heal the Bay, which crusades against plastic bags. Do you see a lot of plastic bags in the picture? Should we tax or ban all plastics because some end up as litter?

Why not recycle? Since we’re never going to ban all plastic bags and containers–plastics used to carry fruits and vegetables, plastic newspaper wrappers, styrofoam containers used for carryout food, etc–maybe the answer is to support and develop robust recycling streams for plastic. Like PET bottles, plastic bags are 100% recyclable. The plastic isn’t the problem; litter is the problem.

This is from my local Safeway. What's so hard about recycling?

Unfortunately, recycling rates are low, but the good news is that they are climbing. EPA recently reported (PDF, download) that in 2010  recycling was up from 12% to 15% for polyethylene bags, sacks and wraps. The more plastic bags are recycled and reused, the less their environmental impact, of course.

This argument was put to me by Mark Daniels, who is vice president of sustainability for Hilex, a leading manufacturer and recycler of plastic bags. Hilex pays about $300 to $400 a ton to supermarkets and others for used plastic bags, stretch wrap, the plastic wrap that goes around bottles, etc.  They company says it will recycled between 35 and 38 millions pounds of post-consumer plastic bags this year–a tiny fraction of all bags, but still–and it wishes it had more. Hilex does its recycling at a plant in Indiana that it opened in 2005, and doubled in size in 2010.

“It is less expensive for us to collect, purchase, transport and reprocess and redistribute that materials to all of our other plants than it is to purchase virgin material,” Mark told me. That’s true even though plastic bags are made from natural gas, which is cheap right now.

Hilex does its recycling at a plant in Indiana that it opened in 2005, and doubled in size in 2010. But a robust supply of post-consumer plastic is needed to keep the plant busy. “We can triple our capacity to nearly 100 million pounds,” Mark said. “But it’s difficult for our company and our board of directors to commit those tens of millions of dollars,” without the support of cities, towns, retailers and environmentalists for more recycling. “We should be 100% aligned with environmentalists,” Mark said.

The truth is, we don’t really have a clear answer to the age-old question of “paper or plastic,” now amended to say “paper, plastic or reusable?” Too many variables are at play.

My own answer? I carry several reusable bags in the trunk of my (hybrid) car and bring them into the grocery store when I remember. When I don’t, I take plastic and bring it back to be recycled. I don’t feel bad about that. Neither should you.

–

A personal note: Thanks for reading and commenting on my blog in 2011. This is my 188th and final post of the year. Enjoy the holidays, and see you in 2012.

Yalmaz Siddiqui is a dark-green environmentalist, who once started a business called, of all things, “eco-eco.” But in his job as the senior director for environmental strategy at Office Depot, the $11.6-billion a year office-products giant based in Boca Raton, FL, he doesn’t talk about saving the planet. Instead, he focuses on the  business benefits of sustainability, particularly those that accrue to Office Depot’s customers.

“It really is rare for me to invoke climate change or landfills or toxicity in my internal arguments,” Yalmaz says.  “We’re in Florida. We’re not in San Francisco or the Pacific Northwest. Impassioned arguments about environmental issues don’t resonate.”

Whatever his approach, it seems to be working: Office Depot has green cred. In Newsweek’s ranking of U.S. companies, they were the top retailer and No. 8 overall,  ahead of rival Staples (17), Best Buy (19),  J.C. Penny (64), Starbucks (82) and Whole Foods Market (106). While the rankings are debatable, Newsweek wrote:

Office Depot, at No. 8, is the single retailer to make it into the U.S. top 10. It’s had its share of operational successes—saving 3,000 tons of wood and up to $1.5 million a year simply by delivering goods in paper bags rather than cardboard boxes, for instance. But, as with IBM, perhaps more significant are the tools Office Depot provides to its largest customers, including cities, states, and large corporations. It shows customers the environmental and financial tradeoffs of their purchasing decisions on everything from copy paper to cleaning supplies.

This customer-centric approach helps explain what Office Depot can do, and what it can’t, when it comes to “green.” You won’t see solar on the roofs of  Office Depot stores, at least for now, because the return on the investment is insufficient.  You will see attention paid to energy efficiency because the ROI makes sense, and you will see even more attention paid to selling greener products because profits from those sales drop right to the bottom line.

I spoke to Yalmaz by phone the other day because I’m  interested in how people inside companies — intrapreneurs, they’re sometimes called — promote change. There’s a small army of these folks in corporate America, and the work they do matters. With Washington gridlocked (or worse) on environmental issues, it’s up to corporate America (as well as state and local government) to deliver the change we need.

Yalmaz, who is 41, started “eco-eco” after college to sell organic clothing, reusable organic cotton bags and other dark-green stuff. “It didn’t resonate with the marketplace,” he said. Subsequently, he got a masters in environment and development, did consulting work with PwC and IBM focusing on the forest, paper and packaging industries and then joined Office Depot in 2006.

The company divides its environmental strategy in three: Be Greener, Buy Greener and Sell Greener. Be Greener focuses on internal operations, and this is mostly about saving money. Mostly but not entirely: Office Depot, as you’d expect, buys recycled paper, for which there’s essentially no business case. (If classical economists were right about how the world works, there’s be no recycled paper. It costs more and performs no better than paper made from virgin forest.)

But, as Yalmaz notes: “It’s an iconic product, when it comes to organizational greening. It’s the everyday symbol of environmental commitment. It’s very tangible.” Through its purchasing requirements, he explained, the federal government helped create the market for recycled paper.

Office Depot also got a lot of attention for replacing cardboard boxes with lighter weight bags when delivering supplies to institutional customers. That was a double win, saving the company money and pleasing customers. “It was sold as way to satisfy customer desire to have less packaging,” Yalmaz says.

Office Depot also took a pragmatic, customer-driven approach when it set out to define greener products. The firm looked at the purchasing policies of key, leading-edge buyers like the EPA and the U.S. Green Building Council, rather than setting out on its own to measure the environmental impact of what it sells. “We’ve tried to make the definition of green products as simple and accessible as possible,” Yalmaz says. That’s a different approach from the one taken by Walmart and its partners in The Sustainability Consortium, who are setting out to do complex, science-based life cycle analyses of thousands of products.

Unlike Walmart, Office Depot hasn’t set big attention-getting goals like zero waste or being powered entirely by renewable energy. It’s ranked No. 16,  behind Staples (No. 4) and Walmart (No. 5) in EPA’s list of the top 20 retail green power partners. But, to its credit, Office Depot is unusually transparent about its environmental performance, posting a dashboard that tracks its progress or lack thereof. For example, you can see that the percentage of copy paper sold with post-consumer recycled content actually fell between 2008 and 2010.

This week, to spur sales of green products, Office Depot recognized 25 of its own customers for their “leadership in greener purchasing.” Winners from the FORTUNE 500 include Chevron, JP Morgan Chase, Google, Bechtel and Comerica. Says Yalmaz: “If I was to be asked, what is the ultimate metric of success of our environmental program, I’d say it was ‘green spend’ by customer.”

To borrow a phrase from economist and author Gernot Wagner, but will the planet notice? That’s hard to say. Clearly, if Office Depot sells a lot more greener products in place of conventional products, we’ll be better off. And if greener corporate behavior paves the way for the political action needed to have a big impact on climate change and other issues, great. “Normalization of green behavior works better than a message of environmental guilt,” Yalmaz says. On the other hand, let’s not fool ourselves into thinking that buying recycled paper or Pilot pens made out of recycled bottles (try them, they’re cool) get us where we need to go. It won’t.

So what the heck happened in Durban? Is the world closer to dealing with the problem of global warming? Or not?

If, like me, you aren’t a devotee of the UN climate negotiations, reading the headlines isn’t much help.

From the glass-half-full crowd: Progress at end of Durban Cop17 climate talks (LA Times). Reason to smile about Durban climate conference (Eugene Robinson in the WPost). Climate deal salvaged after marathon talks (The Guardian).

From the pessimists: How the world failed to address climate change–again (Michael Levi at The Atlantic.com). The Durban climate deal failed to meet the needs of the developing world (The Guardian, again). COP out (South Africa’s Cape Times).

COP out strikes me as about right. To gain some insight in what happened, and why, I called David Victor, a political scientist at the University of California, San Diego, the author of an excellent new book called Global Warming Gridlock and one of the smartest people I know when it comes to understanding global climate politics. David has followed the UN process closely since its beginnings in the early 1990s, and he has become convinced that it is the wrong way to deal with the climate threat.

David Victor

Durban didn’t change his mind.

“In terms of substance, they have not really achieved much,” David says. “They’ve agreed to have negotiations about what they might agree to in the future.”

To be sure, as the optimists argue,  this is the first time that the governments of countries that are the biggest carbon emitters — China, the United States, the EU and India — have agreed to negotiate legally binding restrictions. That’s a big change from the terms of the Kyoto protocol, which essentially excluded developing countries, among them China, the world’s biggest carbon emitter.

But, as David writes in his book:

The world is full of promises that are not kept, and the study of international institutions is about understanding when those promises are credible and have an impact on behavior, and when they are smoke.

The so-called Durban platform is a promise to negotiate a new climate deal  by 2015 to replace the Kyoto protocol and take effect in 2020. It’s a commitment to “a process to develop a protocol, another legal instrument or an outcome with legal force under the Convention applicable to all Parties.” (If this doesn’t strike you as faintly ridiculous, you’ve been spending too much time at the UN.) David, by the way, told me he read all the documents to emerge from Durban, explaining: “I was up at 4 o’clock this morning, and had nothing better to do, I guess.”

More interesting than parsing the texts is understanding why two decades of UN climate talks have produced so little progress. David argues that the diplomatic gridlock stems not merely from the unhappy reality that the climate problem is devilishly complicated and hard to solve–both true–but because the UN setting, the number of governments at the table and even the goal of the negotiations — currently, to set targets on emissions that would limit global warming to two degrees C — are all misguided.

“A process that involves every country on the planet focused on legally binding agreements in some ways brings out the worst in everybody,” David says. Poor countries like China and India, in particular, are understandably reluctant to pledge to limit their greenhouse gas emissions as they struggle mightily to bring hundreds of millions of their citizens out of poverty.

“Universal treaties are a very bad way to get started on serious emission controls,” David writes. Better, he argues, for smaller groups of countries to form “clubs” and negotiate flexible, evolving agreements that work more like trade deals. India and the U.S., for example, might work together on ways to burn coal more cleanly, or Russia might be encouraged by Europe to sell more natural gas to China as a substitute for coal.

What’s more, David argues, negotiations that focus on setting targets for emissions are unlikely to succeed, if only because the levels of emissions reflect forces — economic growth, fuel costs, technology breakthroughs (or their absence) — over which governments have limited control.

Instead of agreeing to numerical emissions targets, governments could pledge to adopt “greener” policies. They could, for example, set efficiency standards for buildings or cars, or impose a carbon tax.“Especially when it comes to countries that are growing rapidly, it’s much easier for them to make promises about policies and measures than about emissions outputs,” David says.

Reading Global Warming Gridlock makes the difficulties ahead depressingly clear, for many reasons. Once emitted, CO2 persists in the atmosphere for decades. Replacing fossil fuels with clean energy will take decades and cost many billlions of dollars. Countries will have to absorb costs now (for cleaner energy) to generate benefits that are abstract, uncertain and in the future. This, of course, is precisely the opposite of what governments like to do, which is deliver benefits now and pay later.

These are some of the reasons why David says: “Even a serious effort to control emissions is unlikely to stop global warming. The climate’s going to change.” The question is, how fast and by how much?

I see two takeaways here for business. First, those companies that worry about climate change need to bring their voices more forcefully to the policy arena; they can’t assume that governments are on the right track. Second,  companies ought to prepare for climate change–when they site new facilities, for example–because it’s unavoidable.

Perhaps in a future blog post, I’ll explore David’s provocative ideas about bracing for climate change, including the need for adaptation and the prospect of geoengineering. In the meantime, know this: Durban and the UN process aren’t getting us where we need to go. No way, no how.

Next April, FORTUNE will again bring together some of the smartest people we know in sustainability for Brainstorm Green, the magazine’s annual conference on business and the environment.

This is will be our 5th Brainstorm Green–hard for me to believe, since I’ve been involved since the beginning–and we’ve again got a first-rate lineup of leaders from corporate America, the  environmental movement, the investment community and government, as well as a scattering of interesting writers, thinkers and doers about “green.”

Once again, the event will be held at the spectacular Ritz Carlton in Laguna Niguel, CA. Dates are April 16-18, 2012.

Alan Mulally

New faces for 2012 from the corporate world will include Alan Mulally, the president and CEO of Ford; Rob Walton, the chairman of Walmart; Andy Taylor, the chairman and CEO of Enteprise (they buy more cars than anyone in America); C. Larry Pope, the chairman and CEO of Smithfield Foods (they make more hot dogs than anyone in America, as I wrote in Smithfield Foods: Sustainable Pork?); Vance Bell, the chairman and CEO of Shaw Industries (the world’s largest carpet manufacturer, see my blogpost, This carpet has moral fiber); John Faraci, the chairman and CEO of International Paper; Gary Hirshberg, the CE-Yo of Stonyfield Farm; Russ Ford, the executive vice president of Shell; Bea Perez, the chief sustainability officer of Coca-Cola; and Trae Vassallo of Kleiner Perkins.

Other newcomers will include former EPA chiefs William K. Reilly and Christine Todd Whitman; he’s now with private equity firm TPG, and chaired the BP oil spill commission, she’s an energy and environmental consultant and nuclear-power advocate. We’ll talk politics and climate with  John Podesta, the chair of the Center for American Progress and former chief of staff to President Clinton. John Warner — the Ph.D. chemist, not the former U.S. Senator — will explain the promise of green chemistry.  Bonnie Nixon will deliver insight into The Sustainability Consortium. And I certainly hope that Jared Diamond, the Pulitzer Prize winning author and geographer, will counsel us on how to avoid Collapse.

Frances Beinecke

Although we meet just once a year, I like to think of Brainstorm Green as a community, albeit an ephemeral one. That’s largely because many of those who came for the first Brainstorm Green, back in 2008, have come back again and again. In particular, we are joined every year by the leaders of our programming partners–the Environmental Defense Fund, the Natural Resources Defense Council, The Nature Conservancy and Conservation International. EDF’s Fred Krupp, NRDC’s Frances Beinecke, TNC’s Mark Tercek and Glenn Prickett and CI’s Peter Seligmann will all be back in 2012.

Many other Brainstorm Green “alums” will return, too. In no particularly order: David Crane, the CEO of NRG Energy; Fisk Johnson, the chairman and CEO of S.C. Johnson; Jim Rogers, CEO of Duke Energy; Mike Brune, executive director of the Sierra Club; Scott Griffith, the chairman and CEO of Zipcar; David Neeleman, the founder and CEO of Brazil’s Azul airline; Ted Roosevelt IV of Barclay’s; Dara O’Rourke of Good Guide; and water expert Will Sarni of Deloitte.

[I'm also hoping that the incomparable Chuck Leavell -- keyboardist with the Rolling Stones, award-winning tree farmer and all-around good guy -- will return in 2012. My FORTUNE colleague Brian Dumaine, who is co-chair with me of Brainstorm Green, also functions as our musical impresario, and he tells me he's doing his best to persuade Chuck to come back.]

As always, there will be plenty to talk about–the shale gas boom, the future of renewable energy, the continuing “greening” of corporate America, the 2012 election, consumer behavior around green, corporate water strategies, electric cars, etc. The theme of the conference is, how can business help profitably solve the world’s big environmental problems?

The program remains in flux, so if you want to propose a speaker or call our attention to a new topic, please do so here at the Brainstorm Green website. You can also request a delegate invitation on the registration page. I hope to see many of you in Laguna Niguel in April.

Led by Unilever, Astra Zeneca and Nike, consumer brands are taking climate change more seriously than ever, says a new report from Climate Counts, a nonprofit that rates some of the world’s largest companies on their climate impact.

Big companies are reporting emissions, committing to targets and becoming more vocal in the policy arena, according to the report.

“There’s evidence to suggest we have reached a remarkable tipping point,” says Mike Bellamente, project director of Climate Counts. “Global corporations are increasingly acknowledging climate change as reality and are adopting measures to reduce their emissions and environmental impact.”

This is the fifth report from Climate Counts, which is the brainchild of Stonyfield Farms CE-Yo Gary Hirshberg. The ratings are intended to make consumers more aware of leaders and laggards on climate — the term of art for this is “rank ‘em and spank ‘em — as well as to spur companies to do better. or whatever reason, companies are improving: Bellamente told me over the phone the other day that the average score for the 136 companies rated this year is up by an impressive 54% from the initial set of ratings.

This is nice to hear but the news comes with a big caveat. If there’s one thing we’ve learned from this past decade of growth in both “green” talk and carbon emissions,  it’s this: Voluntary corporate behavior won’t produce an adequate response to the climate crisis. Indeed, it has not: Greenhouse gas emissions rose by record levels last year. “We haven’t made (climate) progress as a society,” Mike acknowledges. Only climate policy will bring meaningful progress.

The trouble is, even companies that have adopted their own sustainability programs are not as active as they need to be in the policy and political arena. Climate Counts reports that 30 of the big companies it ranks expressed  strong support for federal level climate policy, but 82 companies (or 60%) remained silent or in opposition of such efforts. The companies in the survey don’t include stalwart opponents of climate regulation–the coal, utility and oil companies–and so it actually overestimates the degree to which business supports climate action.

Still, as more companies  acknowledge the reality of climate change and reduce their own emissions, this will help set the stage for better policy.

“Many companies are performing well,” Mike told me. “Sustainability is integrated as a philosophy across their business.” Prominent examples include Unilever, this year’s No. 1 company with a score of 88 out of 100, and Nike, with a score of 85, which topped the list last year. (See my blogposts, Unilever CEO: Don’t stay on the sidelines and Nike: Running towards sustainable consumption.)

Other companies that led their industry sectors, with scores in parentheses, include Southwest Airlines (55), Anheuser-Busch/InBev (57), Bank of America (82), UPS (83), Starbucks (70), Herman Miller and Masco (63), Marriott (73), L’Oreal (78), AB Electrolux (80), Microsoft (68), GE (77), AstraZeneca (86) and Hasbro (52).

Some other highlights:

Amazon and Apple are among the laggards in the Climate Counts ratings. That may surprise you because both are innovative companies, and tech companies generally score well on green behavior, but it shouldn’t. Amazon is all but invisible on the climate  issue, scoring a meager 11. “There is little evidence to suggest that Amazon has a management plan in place to account for emissions, reduce their overall environmental impact or report on their progress,” Mike told me. (Not coincidentally, my friends in Seattle tell me that the company plays a minimal role in the sustainability conversations and civil life of the city, in contrast to Microsoft, Starbucks, Costco, REI, etc.) I emailed Amazon for a reaction, and haven’t heard back.

Apple does far better, scoring 60 out of 100, but it still places last in the electronics sector, behind leaders Siemens, HP, IBM, Nokia and Sony. “Unlike corporations of similar size, they fail to disclose a formal company-wide emissions reduction target,” Mike says. Nor does Apply publish a sustainability report.

Rising up the charts were Wyndham Hotels and Resorts, Amgen and VF Corp. Wyndham Hotels surged 30 points  to 57 by launching a green initiative, topping Starwood (48), Hyatt (36) and Hilton (22). Pharmaceutical company Amgen rose 29 points to achieve a score of 57, and VF Corporation, which owns such brands as Nautica and Wrangler, gained 13 points to lift its score to 34.

The “footprint” graphic below reflects the fact that Climate Counts divides companies into three groups. Those that score 50-100 are “striding” towards a low carbon future and identified in green, those that score 13 to 49 are “starting” to address their climate impact and marked in yellow, and those that score 12 or less are “stuck” and colored red.

In 2006, I wrote a cover story for FORTUNE with the headline: Wal-Mart Saves the Planet. Since then, I’ve written dozens of stories about the retail giant. I’ve reported on Walmart’s impact on the gold mining industry (Green Gold in FORTUNE), its efforts to protect child laborers in Uzbekistan and salmon fisherman in Alaska (Walmart: A bully benefactor on Fortune.com), the launch of a path-breaking sustainability index (Inside Walmart’s sustainability index at GreenBiz), LED lights in Walmart parking lots, the company’s CSR reports, etc. I’ve been critical at times–pointing to Walmart’s BIG problem: climate change and writing that Walmart CEO (Mike Duke) has a problem with gays–but most of my coverage of the company’s sustainability effort has been laundatory.

Now here comes Stacy Mitchell, a smart reporter, with a six-part series in Grist called Walmart’s Greenwash: Why the retail giant is still unsustainable. She assails Walmart for promoting suburban sprawl, making only token efforts to buy renewable energy and selling cheap throwaway stuff. She also faults mainstream environmental groups for focusing “on the small bits of good that Walmart could do—reduce PVC in packaging, for example—while ignoring the much larger consequences of its ever-expanding business model.” She also says that she has been “shocked by just how much of a public relations boost the media have given the company and how little public accountability they have demanded in return.”

These are serious criticisms that deserve a responses. Stacy highlights some important points. Fundamentally, though, we disagree about Walmart, and this post (it’s necessarily longer than most) is an attempt to explain why. Some of our differences are probably a result of what psychologists called confirmation bias, which describes the way all of us seek out, sift through and read evidence in ways that confirm our preconceptions. Confirmation bias is a problem in journalism, politics, economics and even in the so-called hard sciences.

Stacy Mitchell

I’m sure that my experience with Walmart has left me vulnerable to confirmation bias. I’ve visited Bentonville, gotten to know executives at the firm, and the company has participated in Fortune’s Brainstorm Green conference, which I co-chair;  my career and reputation have been helped by my reporting on the company. I suspect the same is true of Stacy, who wrote a book in 2008 called Big-Box Swindle: The True Cost of Mega-Retailers and the Fight for America’s Independent Businesses. She has “advised numerous communities on strategies and policies to limit chain store proliferation and strengthen locally owned businesses,” according to her bio.

So read on (skeptically) as I try to sort through some of the issues she’s raised.

Renewable energy: In an article headlined Think Walmart Uses 100% clean energy? Try 2%, Stacy notes that Walmart has been slow to adopt renewable energy. The company has several big, ambitious, stretch goals –  one  of them is to be powered by 100% renewable energy — and she writes, accurately, that  ”journalists often repeat these goals verbatim, so they function like stealth marketing slogans that infiltrate media coverage.” Stacy did her own calculation and found that a mere 2% of Walmart’s operations are powered by renewable energy.

That doesn’t even make Walmart No. 1 among retailers, let alone when it is compared to other big companies and government agencies. Walmart ranks No. 15 in EPA’s top 50 green power purchasers, and ranks No. 5 among retailers, behind Kohl’s, Whole Foods Markets, Starbucks and Staples–smaller companies that buy more renewable energy than the Bentonville behemoth.

I asked David Ozment, Walmart’s energy guy, about this, and he told me that the company expects to move up the list next year. Progress in such a big company takes time. “We’ve got to plant this forest, one tree at a time,” he said. Recently, Walmart struck a deal with Solar City to add solar photovoltaics to another 61 sites. Walmart is also one of the largest, if not the largest, customers of Bloom Energy, having installed Bloom’s fuel cells at 26 sites. It’s also  experimenting with on-site wind turbines at a couple of stores. So all the movement is in the right direction.

But the numbers remain small. Walmart and Sam’s Club have about 4,400 stores in the U.S.  The trouble is, as I wrote in GreenBiz last spring, that “buying renewable energy would drive up (Walmart’s) costs, with no tangible benefits to customers, and put the company at a competitive disadvantage.” Walmart’s not willing to do that.

Cheap stuff: In a story headlined Is Your Stuff Falling Apart? Thank Walmart, Stacy writes about a $6 toaster (!) and $10 jeans. Americans are not only buying more stuff, we’re throwing away more than ever, she reports–an average of 83 pounds of textiles per person, mostly discarded apparel, each year, four times as much as we did in the 1980s. She writes:

Where once we measured value when we shopped, Walmart trained us to see only price. Its hard bargaining pushed manufacturers offshore and drove them, year after year, to cut more corners and make shoddier products….

While there are certainly factors beyond Walmart that have contributed to this ever-expanding avalanche of consumption, the company has been a major driver of the trend. Its growth and profitability rest on fueling an ever-faster churn of products, from factory to shelf to house to landfill.

This, too, is an important point. If Walmart and its suppliers make things more efficiently, but the company sells more and more and more things, the planet probably will be worse off. (I say “probably” because if goods sold by Walmart merely  displace goods made more inefficiently  by others, the planet could actually be better off.) But the bigger question here is, who’s responsible for what Stacy describes as “this ever-expanding avalanche of consumption?”

It doesn’t please me to say so but people who buy cheap, throwaway stuff do so because they want cheap, throwaway stuff, or because they can’t afford to buy more expensive, durable stuff, like a Patagonia jacket or the $249 All-Clad Deluxe Slow Cooker that I was eyeing the other day at Williams-Sonoma. The Hamilton Beach slow cooker  at right sells for $14.88 at Walmart.

Markets are far from perfect, goodness knows, but retail markets are more competitive and transparent than most. People get what they want, for the most part. Saying that Walmart “trained us” to see only price reminds me of the argument that big-box stories destroyed Main Street, or Amazon and Barnes & Noble put the independent bookseller out of business. No, they didn’t–their customers did.

The sustainability index: At Grist, Stacy’s story is headlined:  Walmart’s promised green product rankings fall off the radar. She writes: “Was the index just a PR ploy from the start?”

Oh, come now. If this was a PR ploy, the index has been an even bigger flop than the critics would say.  After all, the green product rankings have fallen off the radar, as the Grist headline notes.

One reason you haven’t heard much about the index is that it takes an enormous amount of work to do science-based, life-cycle analyses for tens of thousands of consumer products–that’s the goal of the project. This is going to take time, and it is going to be controversial, but the fact is that the undertaking has won broad-based support not just from Walmart suppliers who, arguably, could be muscled into joining, but from competitors including Best Buy, Kroger, Marks & Spencer and Safeway. Seventh Generation, Stonyfield Yogurt and NGOs including Environmental Defense Fund, NRDC and the World Wildlife Fund are also working with the university-based Sustainability Consortium. This is a big deal.

“So far this has done little to alter business as usual,” Stacy writes. Uh, no. People I respect–I’m thinking here about Hunter Lovins, Catherine Greener and others–who spend their lives working with companies to improve environmental performance tell me that Walmart’s efforts to green its supply chain, including the index, have already had a big impact on the entire consumer products industry.

Suppliers in China are taking note, too. For a nuanced look at Walmart’s impact there, read How Walmart is Changing China, a terrific piece by Orville Schell in The Atlantic. He writes admiringly of the work being done by Walmart but ends on a somber note:

However smart, prescient, and successful Walmart’s sustainability efforts actually turn out to be, just how “sustainable” is the whole bloody global-retail proposition that lies at the heart of the company’s amazing progress? Maybe Walmart’s new initiatives will pencil out in a business sense for the company and, within the terms of the current retail game, even serve as a model of good environmental stewardship. But will the hyperactive retail-consumption model that it has pioneered for global consumers pencil out for the world?

…The bitter reality is that even if unrestrained consumerism becomes less environmentally destructive per unit of production than it was in the past, it is still unsustainable in the long run. So even as this most innovative of corporate and statist green strategies may represent an environmental breakthrough and good business for Walmart, and good politics for the Chinese government, it may nonetheless end up being very bad business for humankind.

What Walmart can’t do: If you pay attention to Walmart, you can’t help but be impressed by its size and power. Schell, a veteran journalist, describes it  “as a corporate entity larger in scope and logistical complexity than any other in human history.” He writes: “Compare Walmart’s annual revenue with the GDP of sovereign nations, and it ranks in the top quartile.”

But it’s easy to overestimate Walmart’s power. This, I think, gets to the heart of the differences between those of us (like me) who believe that Walmart is part of the solution to the world’s environmental problems and those (like Stacy) who believe it is the cause of those problems.

Imagine, for a moment, that Walmart shut down tomorrow. Would the world become less globalized? Would people buy and shop less? What would take its place–locally-owned, small-scale merchants or other big-box stores like Costco or Target? Would Walmart’s 2.1 million workers be better off? How about its 200 million customers?

Walmart didn’t just spring, fully-formed, from the mind of Sam Walton. It grew into the world’s biggest company because it served people’s needs. Maybe not mine–I’ve spent less than $100 in my life at Walmart. Certainly not Stacy’s. But hundreds of millions of  people, not just in the U.S. but around the world, shop at Walmart, in large part because the company has enabled them to buy things that were once beyond their reach. Walmart isn’t a bunch of conniving businessmen in Bentonville, Arkansas. Walmart is us.

It should go withouit saying that Walmart didn’t create consumption or globalization. Nor can it stop them. All it can do is try to make consumption and globalization more sustainable and humane.

As Elizabeth Sturcken of the Environmntal Defense Fund, who works with the company, put it:

Is Walmart still unsustainable? Yes? Probably 95% of our consumer goods, and retail and supply chain system is. But does anyone have more power to change that system than Walmart? No.

It’s not all good or all evil. As usual, the reality is more complex.

So, by all means, let’s hold Walmart accountable.

Let’s ask its top executives–notably, Mike Duke–to speak more publicly and forcefully about sustainability, so that everyone in the organization understands that it matters.

Let’s ask Walmart to build sustainability metrics into its compensation system. There’s no more powerful signal to employees that a company cares about going green.

Let’s ask Walmart to set near-term targets for buying renewable energy or reducing waste to put more teeth into those long-term aspirational goals.

Let’s ask Walmart to begin a conversation with its consumers about what to buy and what they can afford.

And by all means let’s ask Walmart to be a louder voice in public policy debates about energy and climate change.

But there’s no point asking Walmart to stop being Walmart.