Google is diversifying into offshore wind energy, but to whose benefit?

Google recently announced that it invested in the development of a “backbone” transmission project off the mid-Atlantic coast which will hopefully accelerate the development of offshore wind energy. Despite the stated good intentions of Google, are they really doing this to boost their image? If not, then the question instead becomes “Why is shareholder money being used for diversification and altruism?” After all, Google is a rational, public company.

Diversifying into new areas only makes sense for corporations if they can bring expertise and have a synergistic effect with their existing operations. The goal there is to improve shareholder returns over what they could normally get in the market. In this case, that would be a company that specializes in energy transmission.

While Google has invested in another wind project, this investment is not like the majority of its operations. Nor is it like its foray into phones, price indexes or content providing where their existing market share, technology and talent can uniquely provide value to shareholders. Remember: Google is an information company, not a venture capital fund or utility.

Now, before anyone accuses me of being reactionary to a positive development in the renewable energy world, let me say that I am pleased that this money is being invested. I see a bright future for offshore wind as a reliable, cost-competitive, and clean source of electricity. Nevertheless, I am trying to understand the motives of Google to see if we can expect more developments of this kind in the future.

My belief is that Google is in fact trying to boost its ‘Green’ and ‘Socially Conscious’ credibility after its spat with China earlier this year and the revelations its relationship with the government concerning its vast supply of user data. In an audio interview you can find here, Rick Needham, Google’s director of green business operations, dismisses that idea simply saying that this will provide a “solid return.”

Neither the interviewer nor Needham talk about how investors could ultimately choose where to invest their money if Google’s profits were distributed to them. Instead, we are led to believe they are looking to ‘do good’ and be profitable at the same time, even if this sort of direct investment isn’t the best value for the company’s owners.

Google and many other public companies participate in many socially conscious initiatives. These have a tendency to make them look altruistic and compassionate and put them in a positive light in the public view. Still, they are looking to benefit in the long-run by being able to sell more, attract better talent, and avoid scrutiny. If managers weren’t truly acting in the best interest of their shareholders, they would be replaced. This is what people should understand about the actions of a public corporation: they should and will only act when it makes financial sense.

With that in mind, the increased tendency to ‘greenwash’ products or entire companies has been well-noticed. We’ll see more of these types of investments and projects, as long as the public is still attuned to these issues.

Still, there is one more explanation for Google’s expansion aside from establishing ‘green’ credibility or corporate altruism: empire building. Empire building is a huge agency problem in that the interests of the managers and shareholders are at odds. The heads of Google may prefer to have a far-reaching company that is ‘changing the world’ and are looking for a new way to have a huge impact while destroying some value.

People have often accused Google of trying to take over the world. However, this project is most likely an example of greenwashing. For anyone thinking Google may be different in some way, remember: they have much to gain from those exact thoughts.

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USA Today is now on the marketing payroll of NASCAR

USA Today ran a story this weekend by Nate Ryan entitled “Nascar going green, moving to ethanol blend fuel in 2011.” On this blog, we have spent a fair amount of time talking about both the use of buzzwords such as “green” and the pitfalls of biofuels. One post from a couple of years ago debunked the debunking of several ethanol myths while we have also looked into the prospect of biofuels dragging 30 million people into poverty and increasing carbon emissions by 30-fold. Needless to say, this story feels a lot like it is out of early 2008 rather than October 2010.

NASCAR is moving towards a 15% ethanol blend fuel beginning with the 2011 Daytona 500. While this isn’t the only green initiative, it is the one NASCAR would like to be the focus of its PR campaign according to NASCAR CEO and Chairman Brian France:

“When we said we had to accelerate our green efforts, this was a centerpiece,” France says. “It’s certainly the most visible thing we can do.It’s also one of the more difficult things that we do.”

If something as environmentally and socially destructive as corn-based ethanol is the centerpiece of your green efforts, then it’s not a stretch to say you have problems with your plan. The article does make a brief mention of other initiatives such as recycling and LEED certification for new buildings, but the bulk of the text is dedicated to the marketing advantage gained by the change in image.

But the switch to ethanol might be the most important step in achieving an ancillary benefit — attracting new sponsors in the green economy to cash-strapped teams hurting for funding since the onset of the recession.

“If you make a presentation to sponsor your car or race, it’s, ‘Well, tell us what you’re doing about green concerns.’ If you don’t have an answer, that may shut the door for you. They might not have an interest. There are some companies that are going to have budgets set aside exclusively for people that are actively green. There is a smart economical benefit to this.”

For me, the rationale behind having ethanol be the forefront of ‘green’ efforts is pretty clear. Thanks to some clever marketing and lack of real criticism of ethanol in the media, the public generally views it as a good solution. Also, it is a fairly easy and inexpensive switch for NASCAR and requires no huge switchover costs that other process changes may. Altogether this is a pretty inexpensive greenwashing campaign that allows NASCAR to get some free advertising from news sources such as Nate Ryan of USA Today.

One could make the argument that this is a relatively moot point as the prospects for NASCAR becoming a sustainable sport are bleak. I wouldn’t mind seeing some high powered electric cars race around the track, but we would also lose those roaring engines that make it so exciting at times. Like most every other sustainability effort, NASCAR is still in the ‘doing things less badly’ stage. It should get praise for the positive steps taken, but heavily scrutinized for this move.

In the end, my issue is not with NASCAR, but with Ryan. The title “Nascar going green…” is effectively advertising for NASCAR while the message of the article deals with the desired impact of the switch to ethanol on sponsorship. In fact, the author does not seem too concerned about the environmental consequences of a switch to ethanol, leaving that question unresolved:

NASCAR couldn’t provide many specifics about ethanol. France said the move would reduce the carbon footprint of a race (“we’re not exactly certain, but there is a benefit”).

If Ryan truly wanted the focus to be on NASCAR ‘going green’ then he would have investigated this aspect a little bit more to inform readers. If not, then the title should have instead been something along the lines of “NASCAR seeks to attract environmentally-conscious fans and sponsors through ethanol fuel blend.” Of course, that would be expecting a lot out of Nate Ryan and the mainstream media.

Green-tech investment falls 50%, but it’s no time to worry

The first quarter of 2009 saw a sharp decline in all forms of investment in clean-tech and energy both compared with a year ago, as well as the fourth quarter of 2008. Overall, the $13.3 billion invested was down 53% from the previous year and 44% from the last quarter. Investments in new renewable-energy projects led the decline, with venture capital investments also dropping 22% and a near evaporation of all investment in pure-play clean energy companies. However, this raw figure does not tell the entire story for the industry, nor is it necessarily indicative of a trend.

Story

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Crunching Sustainability Pt. 1: Iceland

Smash the Mirror tries to bring solid economic and rational thinking to sustainability, geopolitics, and current events. To that end, this is a pilot post for a new series on how the Credit Crunch of 08-09 will impact the environmental sustainability of human life. Posts in this series will appear under the tag “Crunching Sustainability“.

By now, the collapse of Iceland’s governing coalition has been circulating through the media for a while. To sum it up in a single phrase, the cause of the fall was the economic crisis and monetary policy. That is why, according to the Washington Post article, there is a new push by some citizens and the country’s Democratic Socialist Party to join the European Union.

Fishing Boats

Fishing boats tied up along a pier.

The Euro has rapidly cemented its reputation as a stable currency, and that appeals to the Icelanders who feel they have been betrayed by inadequate policy-making. Unfortunately, the EU also has its failures, and the fishery management policies are foremost among them. Continue reading

Food and Climate Change: Part 1

The author attended a two-part lecture series on Food and Climate Change hosted by the Sustainable Food Initiative at Brown University. This is the first of two posts recapping the main points and providing analysis of the lectures.

Cooks Diet For A Dead Planet

Cover of Diet for A Dead Planet

Christopher Cook, journalist and author, gave the first in this two-part series. He called his “Just Food Nation”. Cook, who penned the book Diet For a Dead Planet, asserted that we need “radical change” to our food system.

In addition to the growing climate crisis, Cook also linked problems such as the recent food crisis and the American obesity epidemic to a fundamentally broken food system.

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Is this type of advocacy beneficial?

Reuters

A group of skiers, including former olympians, were brought in by the WWF on Friday to the U.N. climate talks in Poland. The group handed a petition to Polish Environment Minister Macjiec Nowicki, urging the U.N. talks to consider the impact climate change is having on their sport. Along with the irony of a group responsible for environmental damage making this appeal, this plea also runs the risk marginalizing a very important issue through an overly simplistic anthropocentric viewpoint.
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The Myth of Being Too Poor for Sustainability

One myth regarding sustainability just never seems to go away: the notion that it is expensive. It came to the forefront again during this past US Presidential Campaign. Mr. Obama has expressed strong support for environment, something for which he should be commended. Instead, he was attacked for being impractical.

The American voters subsequently choose Obama in huge numbers, giving him a 365-173 electoral college victory and a mandate to follow through on his agenda. Now in seemingly every interview, the Obama team is being asked what they will sacrifice from their agenda in order to cope with the Economic Crisis, as if to say “we won’t really waste money worrying about the planet, right?”
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