You're the CEO of a large publicly traded company. Among the biggest costs at your nearly 200 retail stores, bakeries, and distribution centers is your annual electric bill. So what would happen if you held a press conference to announce your company would pay an additional $110 million on top of those energy costs in 2006, though that extra payment won't gain one extra watt of power or make your operations any more efficient?
Most CEO's would brace for a shareholder revolt and expect to be served papers by Elliott Spitzer.
In the case of upscale grocery chain Whole Foods Market, however, it's a public relations coup.
Whole Foods, the trendy Austin-based company that prides itself on its environmental consciousness, announced this week that it will make the largest ever purchase of wind energy credits in the United States. The company pledged that in purchasing more than 458,000 megawatt-hours (MWh) of renewable energy credits from wind farms, it will offset 100 percent of the cost of its annual energy use. No other Fortune 500 company has done anything like this before.
This announcement was greeted with predictable cheers from the press and the environmental movement. But what does it actually mean?
One thing it doesn't mean is that Whole Foods will now get its power from wind. Though press accounts have praised Whole Foods for "going green" with this move, it actually changes next to nothing.
Whole Foods' various facilities in the U.S., Canada, and the United Kingdom will get their energy from exactly the same sources as before -- largely coal, natural gas, and nuclear energy. A handful of the company's Mid-Atlantic stores presently receive a very small portion of their power from a West Virginia wind farm. They will continue being the only outlets powered by wind since, as the company acknowledges, "it would be physically impossible to deliver electrons from a wind farm directly" to Whole Foods sites.
The credits Whole Foods is buying instead will help subsidize other consumers' energy use around the country. Producing energy from wind, biomass, and solar energy generally costs more than from traditional sources. Whole Foods' investment will allow other large consumers around the country to buy electricity from wind farms, but at prices competitive with coal, gas, and nuclear. Basically, Whole Foods will cover the spread between profitable and unprofitable electricity generation for other organizations and individuals.
Even Whole Foods' spokeswoman did not know how much it will pay to cover that spread, saying it was proprietary information. But one can take an educated guess. The company will buy its credits from Boulder, Colorado-based Renewable Choice Energy. Renewable Choice sells credits at a cost of 24 cents per Kilowatt hour per year. Whole Foods will buy 458,000 MWh, which is the same as 458 million KWh. Do the math, and the total bill facing Whole Foods runs to just about $110 million -- or more than $550,000 per location -- all to subsidize other people's electricity usage. (For the record, though she did not to know the amount, the Whole Foods spokeswoman doubted it would be as high as $110 million.)
The company claims its decision, though costly, will help avoid more than 700 million tons of carbon dioxide pollution. It is clear that this week's announcement was designed largely to appeal to a clientele that is affluent and politically liberal. The Whole Foods business model is predicated on the idea that these customers will pay higher prices for organic food from a socially conscious company. So why wouldn't they pay higher prices to promote renewable energy?
Whole Foods is explicit about its belief that it exists not just to be a successful food retailer, but to change the world. The company's website boasts a Declaration of Interdependence spelling out a corporate philosophy rooted as much in improving the environment as in turning a profit. Whole Foods shareholders know precisely what sort of a company they invest in. Indeed, its stock went up after Tuesday's announcement.
So while Whole Foods probably doesn't have to worry about negative feedback from investors, it should keep in mind that not all self-styled environmentalists are on board with wind power. Wind has certain drawbacks. For one thing, wind farms have been known to kill migrating bats and birds. Moreover, they are not invisible. Beauty is in the eye of the beholder, and to many people massive turbines dotting the landscape are an eyesore. That explains much of the opposition to a proposed wind farm off the coast of Cape Cod, where Sen. John Kerry and the Kennedy's came out against a technology they profess to champion.
For the most part, however, the company's pledge to increase its own costs in order to subsidize green power elsewhere will go over well with shoppers. Inherent in the move is the idea that traditional fuels for power generation are evil. Coal pollutes. Gas is cleaner, but still a fossil fuel. Moreover, supplies are tight. Nuclear power, well, does anyone even have to give the reasons for objecting to that?
But most Americans don't buy those arguments. The question now is whether any other major corporations will follow Whole Foods' lead. The answer, as Bob Dylan put it, is blowin' in the wind.
Original Source: http://www.tcsdaily.com/article.aspx?id=011206C