November 7, 2006
Goldman Sachs VP Says Corporate Responsibility Part of Strategic Plan
By Andrea Ferdinand

With businesses placing an increasing emphasis on corporate social responsibility, many wonder if a company’s social and environmental values really can help drive profits.

Sonal Shah, a vice president at Goldman Sachs and founder of Indicorps, believes they can. “We will make money off of it,” Shah said during her presentation for the Sustainability and Business Speaker Series Nov. 3. “We will be a better partner to our clients, but we will also create a better business.”

In 2005, Goldman Sachs implemented a strategic plan to improve the company’s environmental responsibility while keeping an eye on the bottom line.

“We looked at our peers and competitors and found that in the past, thinking about the environment had been a defensive exercise,” Shah said. “We wanted to look at it from a business perspective.”

The plan consists of four steps: analyzing the direct impact of their operations on the environment; investing in alternative energy; researching environmental responsibility; and discussing environmentally responsible investment banking operations with their clients.

Building an Energy Efficient Company

Goldman Sachs hopes to reduce its emissions by 12 percent by 2007. A project that will have a significant effect on this goal is the construction of their new world headquarters in New York, which Shah calls a ‘green building’ because it uses only energy efficient materials.

“A big obstacle with this is trying to convince our suppliers to find all these products,” said Shah, adding that the supply is low because the demand is relatively low. “If we can create a market for it, it makes it cheaper for others in the future.”

In addition to focusing on its own operations, Goldman Sachs promised to invest $1 billion in alternative energy. To date, they have spent $1.5 billion on energy sources, such as geothermal, biofuel and solar energy.

“We feel the economic factors of these types of energy make it a viable investment,” Shah said.

Raising Awareness

Shah said a major challenge for corporations trying to practice social and environmental responsibility is the lack of relevant data about the issues. “The information is constantly changing and it is almost impossible to find consistent data.”

To fix this problem, Goldman Sachs invested in a research company to help normalize the data.

Another challenge for Goldman Sachs is training their clients to be environmentally responsible. “We have a lot of bankers who say, ‘My company has an environmental policy on its Web site, so what’s the problem?’”

The problem, said Shah, is that the environmental statement is a ‘check-the-box’ formula—it gives them the false impression that simply having an environmental policy will safeguard them against future problems. “We feel we can be a better advisor to our clients if we can help them avoid the bad environmental issues.”

While Goldman Sachs has invested time and money in creating an environmentally sound business, it has not forgotten the bottom line. “At the end of the day, we have to have a bottom line—if you don’t make money off of it you must toss it out the door.”