Corporate Leaders Need to Step Up on Climate Change
Despite perceptions that sustainable business efforts are progressing, the environment reminds us we're failing to deal with the problem sufficiently. Here's what business leaders must do next, according to Michael Toffel and Auden Schendler.
Green initiatives are ubiquitous these days, implemented with zeal at companies like Dupont, IBM, Walmart, and Walt Disney. The programs being rolled out—lighting retrofits, zero-waste factories, and carpool incentives—save money and provide a green glow. Most large companies are working to reduce energy use and waste, and many have integrated sustainability into strategic planning. What's not to like?
Well, for starters, these actions don't meaningfully address the primary barrier to sustainability, climate change. According to the International Energy Agency, without action, global temperatures will likely increase 6 degrees C by 2100, "which would have devastating consequences for the planet." This means more super droughts, floods, storms, fires, crop failures, sea-level rise, and other major disruptions. "Sustainability" simply isn't possible in the face of such a problem, as Superstorm Sandy demonstrated.
So despite perceptions that "sustainable business" is up and running, the environment reminds us we're failing to deal with the problem at anywhere near sufficient scale. Because climate change requires a systemic solution, which only governments can provide, firms serious about addressing it have a critical role well beyond greening their own operations. They must spur government action. But few are.
"Green business" as currently practiced focuses on limited operational efficiencies—cutting carbon footprint and waste reduction—and declares victory. But these measures fail to even dent the climate problem. And the proof is easy: Greenhouse gas emissions continue to rise. Last month, we hit 400 parts per million atmospheric CO2 for the first time in 3 million years. Worse, though, such small-ball initiatives are a distraction: We fiddle around the edges thinking we're making a real difference (and getting accolades), while the planet inexorably warms.
The reality is that even if one company eliminates its carbon footprint entirely—as Microsoft admirably pledged to do—global warming roars on. That's because the problem is too vast for any single business: Solving climate change means we must switch to mostly carbon-free energy sources by 2050 or find a way to affordably capture carbon dioxide emissions, both monumental tasks.
"Green business as currently practiced focuses on limited operational efficiencies"
Even several very large companies cannot, on their own, get us there. In fact, historically, no big environmental problem, from air and water pollution to acid rain or ozone depletion, has ever been solved by businesses volunteering to do the right thing. We ought not presume that voluntary measures will solve this one.
But nobody seems to have noticed. Most green scorecards, corporate strategies, media, and shareholder analyses of businesses focus almost entirely on operational greening activities and policies, but not on whether companies can continue on their current course in a climate-changed world. In other words, such analyses don't actually measure sustainability.
So what does a meaningful corporate sustainability program look like in the era of climate change?
First, corporate leaders need to directly lobby state and national politicians to introduce sweeping, aggressive bipartisan climate legislation such as a carbon fee-and-dividend program. Strong policy in G8 nations is all the more important because it removes excuses for inaction by China, India, and other countries with rapidly growing carbon footprints.
Second, CEOs should insist that trade groups prioritize climate policy activism and withdraw from associations that refuse to do so, like when Pacific Gas & Electric, Apple, and Nike left the US Chamber of Commerce over its opposition to regulating greenhouse gas emissions.
Third, businesses should market their climate activism so that customers and suppliers appreciate their leadership, understand what matters, and follow suit. Such marketing is also education on one of the key issues of our time.
Fourth, companies should partner with effective non-governmental organizations such as the Coalition for Environmentally Responsible Economies, the Natural Resources Defense Council, 350.org, Protect Our Winters, and Citizen's Climate Lobby to support their work, become educated on climate science and policy solutions, and understand effective lobbying.
Fifth, managers should demand that suppliers assess their climate impact and set public targets to reduce greenhouse gas emissions. But companies that are multiplying their influence in supply chains, like Dell and Walmart, must not miss the larger and more important opportunity to change the rules of the game through activism.
Even in the United States, a climate laggard, some companies are already responding to climate change in the appropriate way.
Nike, for example, moved beyond operational greening by helping to create BICEP (Business for Innovative Climate and Energy Policy), which brings its members to Washington, D.C., to lobby for aggressive energy and climate legislation.
Starbucks has also taken out full-page ads in major newspapers to raise public awareness about the importance of climate action and has lobbied the US Congress and the Obama administration to explain the threat climate poses to coffee.
These companies are the exception. Unfortunately, even businesses that are sustainability leaders—like clothing manufacturer Patagonia, a business we admire—don't recognize the primacy of climate change. Instead, it includes climate in a basket of equally weighted issues, like protecting oceans, forests, or fisheries. But that's misguided: Climate vastly trumps (and often includes) those other environmental concerns.
Businesses that claim to be green but aren't loudly making their voices heard on the need for government action on climate change are missing the point. They are not just dodging the key challenge of sustainability; they are distracting us from what really matters.