Warm Relationship Between GM, Green Group Hits Pothole 

JEFFREY BALL / Wall Street Journal 30jul02

In the early 1990s, the world's biggest auto maker and a then-obscure environmental group tried something new: talking.

The unlikely relationship between General Motors Corp. and the Coalition for Environmentally Responsible Economies, or Ceres [ http://www.ceres.org ], resulted in GM decreasing pollution at some of its factories -- a step that the company says is saving money by cutting energy bills and precluding expensive government-mandated cleanups. The tie also sheltered the auto giant from some criticism of its environmental record. Along the way, the collaboration became a high-profile example of a growing trend within the environmental movement: using quiet negotiation rather than noisy protest to change boardroom behavior.

Some environmentalists, however, warned from the outset that GM was taking advantage of Ceres (pronounced: see-reez) and never would accept changes that cut into profits. The skeptics felt vindicated this spring, when GM, along with other auto makers, successfully fought off a Senate proposal to raise federal fuel-economy standards.

Now, under pressure from some environmentalists to stop "greenwashing" GM, the group is threatening to end its detente with the auto maker. Ceres leaders say they will revive an earlier strategy: appealing to investors as a means to pressure corporations to pay more heed to the environment.

The cloud over the Ceres-GM relationship could damp enthusiasm for the broader movement that coalesced in the 1990s: environmentalists, dissatisfied with the pace of government regulation, increasingly working directly with big corporations. Two Ceres members, the World Wildlife Fund and Environmental Defense, run their own separate programs, in which International Business Machines Corp., DuPont Co. and other companies have begun to reduce emissions of carbon dioxide, one of the "greenhouse gases" thought by many scientists to contribute to global warming.

Symbolic Importance

The Ceres-GM association has had unusual symbolic importance because of the company's size and the Boston-based organization's membership, which includes such prominent environmental groups as the Sierra Club, Friends of the Earth and Union of Concerned Scientists. Founded in 1988 by investor activists who had pressured many U.S. corporations to pull out of apartheid-era South Africa, Ceres also has as members investment firms, such as Trillium Asset Management Corp. in Boston, that steer clients' money toward companies they deem "socially responsible."

In addition to GM and Ford Motor Co., more than 70 companies, including AMR Corp.'s American Airlines, Bank of America Corp. and Nike Inc., are "endorsers" of 10 Ceres "principles," such as making "continual progress toward eliminating the release of any substance that may cause environmental damage." The companies pay annual dues of as much as $35,000 each and disclose their pollution-cutting efforts in annual reports.

But GM says it always made clear to Ceres that there were limits to any alliance. "We all had our eyes wide open," says Elizabeth Lowery, the company's vice president for environment and energy. "We make cars and trucks, and we made it quite clear: We run a business."

Ceres -- an acronym crafted to spell the Roman goddess of agriculture -- struggled for attention in its early years. Joan Bavaria, 58 years old, the group's main founder and Trillium's chief executive, recalls mailing letters to more than 300 large companies, asking them to endorse the 10 principles. "Not a single company wanted to sign," she says. The group landed only "the usual suspects" -- a few relatively small corporate allies already known for environmentalism, such as cosmetics maker Aveda, now a unit of Estee Lauder Cos., she adds.

Ceres turned to organizing shareholder resolutions to try to pressure big companies to endorse its principles. Some resolutions received modest support, but they never carried a majority at a big company. GM urged its shareholders to vote down such resolutions in the early 1990s. But in 1992, after a Ceres measure received nearly 11%, the auto maker called up the group, saying it would like to talk.

The olive branch came at a time when GM was especially worried about its image and was undergoing internal turmoil. Many of GM's top executives were being replaced by a younger generation. Losing market share to Japanese rivals, the company was trying to improve its competitiveness and public profile by reaching out to unions, suppliers and even environmentalists who had criticized GM.

Ceres organizers were pleased -- but a little overwhelmed -- to hear from GM. "You're really happy you got this fish, and you pull in your line and realize it's a great white shark," recalls Denis Hayes, who organized Earth Day in 1970 and was one of the original Ceres participants.

Tension emerged in 1993, as Ceres repeatedly demanded that GM commit to specific improvements in fuel economy. Environmentalists care about fuel economy not only because of concerns about oil consumption, but because a gallon of gasoline burned by an auto engine produces about 20 pounds of carbon dioxide. Cars and "light trucks" -- including sport-utility vehicles, pickup trucks and minivans -- on the road in the U.S. account for about 20% of total carbon-dioxide emissions in the U.S. and about 5% of the world-wide total. The vehicles that burn the most fuel and produce the most carbon dioxide are SUVs and pickups, which have become the industry's most-lucrative products.

Protective of its mounting SUV and pickup profits, GM resisted any numerical obligations. A December 1993 meeting at the GM Building in New York nearly broke down over the issue. "I'm just not going to revisit some of this stuff," Dennis Minano, then the company's environmental vice president, recalls saying.

A Ceres representative tried to ease the strain by reading a poem he had written about respect and vision. Mr. Minano says he got teary. When the meeting was over, though, it was Ceres that had agreed to a relationship largely on GM's terms: shared "principles" and a promise of "continuous improvement," but no hard targets.

Small Change

"I don't think they snowed us," says Mindy Lubber, then a Ceres organizer who went on to head the New England office of the Environmental Protection Agency during the end of Clinton administration. "Changing GM even in a small way was a big deal."

With encouragement from Ceres, GM did clean up some of its factories. Mr. Minano says doing so appealed to GM management at least in part because it would save money in the long run by preventing expensive government-mandated cleanups. One example: In the mid-1990s, Ceres received complaints about lead contamination around a supplier's lead-recycling factory in Texas. A company that at the time was a GM unit was buying the recycled lead to make auto batteries. Ceres notified GM, which pressured the supplier to pay more attention to the environment.

GM ultimately even agreed to certain numerical targets for cleaning up its plants. The company told Ceres that between 1997 and 2002 it would reduce by 30% a catch-all pollution measure, including emissions into the air and water as well as solid waste, from all of its North American facilities. Many plants switched to cleaner natural gas from coal as an energy source. When GM realized it would meet the 30% target two years early, it increased the goal to 50%, which it says it will meet.

GM also promised Ceres it would cut energy use by its North American factories by 20% between 1995 and 2002 -- a goal that a GM spokesman says the company will achieve by such steps as installing more-efficient lighting. Reduced energy costs will save the company $32 million this year, the spokesman says.

The tie to Ceres did something else for GM: It smoothed the company's environmental dealings with the Clinton administration, says Mr. Minano, who retired at the end of last year. "Our relationship with Ceres opened doors that I think would have taken years to open," he says.

GM continued to refuse to promise any specific improvements in the fuel economy of its vehicles. Carbon-dioxide emissions from cars and trucks dwarf those from factories. The average amount of carbon dioxide produced per mile by GM cars and light trucks from 1990 through 2001 has remained essentially flat, according to company statistics.

Louder Demands

Soaring SUV and pickup sales in recent years have prompted louder environmentalist demands for tougher government fuel-economy standards, while auto makers have intensified their lobbying to keep existing rules in place. GM told Ceres it wouldn't back off its opposition to changes in the so-called Corporate Average Fuel Economy, or CAFE, standards.

Still, Ceres didn't give up on the point. In June 2001, Robert K. Massie, the group's executive director, flew to Detroit to discuss fuel economy with GM.

Mr. Massie, a 45-year-old ordained Episcopal minister, has a broad background in liberal activism. He ran unsuccessfully as a Democrat in 1994 for lieutenant governor of Massachusetts. Four years later, after teaching at Harvard Divinity School, he published an 896-page book on U.S.-South African relations during the years of apartheid.

He emerged from the meeting with GM persuaded that dialogue with the company would continue. Within days, however, GM publicly threatened that tougher CAFE standards would force it to stop building some of its most-profitable vehicles and lay off thousands of employees. Mr. Massie was outraged. "Without any nuance at all, [GM] simply opposed CAFE," rather than, for example, offering to improve fuel efficiency voluntarily, he says. "It was a very superficial and very politicized response to a very complicated question."

GM officials defend their contention that meeting the tougher CAFE standards would have essentially required them to cease production of some profitable SUVs. The officials add that they told Ceres, and politicians in Washington, that the company is working on improving fuel efficiency but that it wants flexibility on when to roll out newly designed vehicles.

Early this year, the Senate began considering a bill backed by environmentalists that would have toughened the CAFE standards by nearly 50% over 13 years. The Alliance of Automobile Manufacturers, an industry trade group, responded with ads suggesting that the legislation would force Americans out of their SUVs and pickups and into tiny, unsafe econo-boxes. In March, with the Bush administration backing the industry, the Senate defeated the CAFE bill.

Again, Mr. Massie says he felt betrayed. The industry had engaged in "massive, relentless carpet-bombing," he says, "without any concern about what it would do to the truth, to the trust that had been built up, to the future of our relationship."

For some environmental groups belonging to Ceres, the episode confirmed a longstanding suspicion that the coalition had become too close to its corporate partners. GM and some other big companies affiliated with the coalition "are trying to use Ceres as a shield to hide behind, to say, 'No, we really are environmentally sound,' " says Dan Becker, a Sierra Club official in Washington. Mr. Becker and others in the Sierra Club have urged Ceres to kick out GM, as well as Ford, which signed onto the 10 Ceres principles in 2000.

GM and the rest of the auto industry defend their ads on CAFE as accurate. GM and Ford reject the accusation that they are using Ceres primarily for public relations.

Mr. Massie says the CAFE fight crystallized the need for a more-aggressive strategy, focusing on the issue of global warming rather than the narrower question of fuel economy. Ceres members are thinking of renewing their strategy of filing shareholder resolutions demanding stronger environmental action from GM and Ford. A report expected to be released Tuesday by member group Environmental Defense will provide more ammunition; the report ranks major auto makers according to the amount of carbon dioxide their vehicles emit, with GM at the top of the list.

Ceres also is going global. It is helping establish an Amsterdam-based group, the Global Reporting Initiative, which will use the sort of annual reporting Ceres pioneered to let investors around the world compare the environmental performance of more companies.

The major corporate backer of the new project: GM. The auto maker has contributed $1 million.