Nothing But Green Skies

Enterprise Rent-A-Car is one of the nation's top family-owned businesses, a $12 billion behemoth that dominates its industry. But CEO Andy Taylor feared it all could vanish in a puff of CO₂. It was time to get greener. And quick.

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It is a late afternoon in September at the world headquarters of Enterprise Rent-A-Car, in Clayton, Missouri, a suburb of St. Louis. For several hours, the company's senior executives have been filing in and out of the largest conference room--the one with the massive dark wood table and plush leather chairs that's reserved for truly important events--to quiz two visitors from a little San Francisco company called TerraPass. Through the wall-sized window, the assembled can see that drive time has just begun on Forest Park Parkway--traffic is moving but growing more congested. Enterprise owns 1.1 million vehicles, the largest fleet of rental cars in the world, and there's a good chance that more than a few of them are contributing to the gathering mess outside. Indeed, that's why the leaders of Enterprise, with 65,000 employees and about 6,000 offices nationwide, are meeting with TerraPass, a 14-employee San Francisco-based upstart that specializes in carbon offsets, a newfangled tool that lets eco-conscious consumers fund green energy projects to compensate for polluting behavior, like flying an airplane, heating a home--or driving a car.

Enterprise has been toying with the idea of offering carbon offsets for a couple of years. Now, with all of its questions answered, the decision has been made. Pat Farrell, the company's vice president of corporate communications (and soon to be the vice president of corporate responsibility) pulls his chair next to Alicia Seiger, vice president of business development at TerraPass. They uncap their pens. As they sign on the dotted lines, a beaming Tom Arnold, TerraPass's chief environmental officer, takes out his BlackBerry to snap a picture, which he promptly e-mails back to his office. "I have to share this with my team," he says.

The event is historic for both organizations. Enterprise has just agreed to a program that will enable its retail customers to offset the pollution created by their rentals--a program that promises to render the use of even a gigantic Cadillac Escalade (which weighs more than 5,000 pounds and gets 14 miles per gallon) "carbon neutral." What's more, in an unprecedented move, Enterprise will match its customers' offset purchases dollar for dollar (up to $1 million). When the program kicks off on January 1, 2008, it will make Enterprise the first major rental car company to offer a carbon offset option in the United States. (Avis (NYSE:CAR) offers it in the far smaller European market.) TerraPass, for its part, has just landed one of its largest clients. If it succeeds, the program promises to enlist millions of drivers and offset millions of pounds of carbon-dioxide emissions--as well as catapult a car-rental company, of all things, to the top ranks of eco-conscious companies.

The irony, of course, is rich. But Enterprise is no stranger to rewriting the rules. Most rental car companies, for example, do the bulk of their business at the airport, renting vehicles to travelers. Enterprise has grown by opening branches in cities and suburbs, mostly serving those who need a rental while their own cars are in the shop. The strategy took the industry by surprise and sent Enterprise's fortunes soaring. The company was founded by Jack Taylor with just seven vehicles in 1957. By the time his son Andy Taylor took over as the second CEO in 1991, Enterprise had about 100,000 vehicles and revenue nearing $1 billion. Since then, the company, which remains private and 100 percent owned by the Taylor family, has grown at an even more rapid pace: In 2007, just in time for its 50th birthday, Enterprise's fleet size passed the one million mark and revenue will hit $12 billion. In August 2007, the company purchased rivals Alamo and National. It now has an office within 15 miles of 90 percent of the U.S. population.

Yet several years ago, when Andy Taylor began thinking about what his company might look like 50 years down the road, he was nervous. In fact, it wasn't at all clear to him whether there would be much of a company at all.

For Enterprise to thrive, it needs cars on the road--lots of them. It also needs lots of fuel, readily available and at affordable prices. And most of all, it needs the act of driving a car itself to remain noncontroversial and socially acceptable. In a car culture like ours, it's hard to imagine that driving could become outré. But there's precedent for massive and unexpected social and economic shifts that upend entire industries. (Cigarette, anyone?)

These days, any company involved with automobiles and fossil fuels is vulnerable. Several states, including New York and Vermont, have imposed tough new emission regulations, sparking lawsuits by automakers; California recently sought billions of dollars in compensation for environmental damages already sustained. Consumers, meanwhile, are increasingly concerned about global warming. According to a January study by the Pew Research Center, more than three-quarters of Americans believe there's solid evidence that the earth is warming, up seven percentage points from June 2006. The share that believes human activity--like burning fossil fuels--is to blame increased to 47 percent from 41 percent over the same period.

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