05 Jun 2013  Op-Ed

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.

About the author

Michael Toffel is an associate professor at Harvard Business School, where he specializes in business and environment issues. Auden Schendler is vice president of sustainability at Aspen Skiing Company, author of Getting Green Done, and a board member of Protect Our Winters.

This article was first published on Grist.org under the title Corporate Sustainability is Not Sustainable.

Comments

    • Tim Gieseke
    • President, Ag Resource Strategies,LLC

    Climate change or atmospheric composition are key components of the ecology and economy. In a broader view, natural capital is what makes the world (economy and ecology) go around.

    We need to connect these two economic systems for us to prosper and leverage these strong forces. This can begin with a neo-economic concept called Symbiotic Demand; integrating the two most powerful biological forces on earth: self-interest and symbiosis. In hindsight, there really is not any other solution.

     
     
     
    • Hugh Quick
    • home, none

    I am not a Greeny, mostly because I believe that our planet was formed some 50 million years ago and Human Beings have only emerged in the last 200,000 years or so. Are we really that significant?

     
     
     
    • Walter
    • Six Sigma Quality Management, Dow

    As usual, this article avoids key pieces of data. Don't get me wrong, I'm all for reducing true Pollutants that cause harm--heavy metals, sulphur dioxide...anything not naturally occuring in the environment at substantial levels that has potential to cause harm. CO2 is NOT one of those pollutants. Estimates of C02 in our atmosphere show that we are at historic LOWS in total CO2 but at high levels from manmade C02. Why care where it comes from?? Because, the amount of man made C02 is dwarfed by the naturally occuring C02. Example: C02 released during one volcano is estimated to have entirely wiped out the last 10 and next 10 years of efforts to reduce C02. Another clue--C02 levels and climate change are NOT exclusively linked. They are related along with many other factors. Why is this important? A great many other factors have caused global temperatures to rise and fall dramatically BEFORE man made C02 came on the scene. however, there is lots of money to be made from this scare. Those who are, rely on those without knoweledge to stay that way. I'm a man of faith but also recognize data and global warming IS slowly happening. However, don't buy into the myth that reducing man made C02 will have any real impact.

     
     
     
    • Christy
    • Marketing

    The actions proposed in the article are a wonderful road map to follow if everyone in your organization is on board. However, historically, even governments have struggled to make environmentally related commitments based on the economic impacts of adhering to stringent regulation. The Kyoto Protocol is a good example. For some businesses (not all), it is NOT in the best interest for the company's survival to publicly sit on the side of the fence for climate change. Especially when such positioning is so polarizing and may conflict with the interests and beliefs of vital stakeholders. Climate change is a touchy subject. There is still much debate over whether humans, are impacting it. No individual or company wants to go down in history as the fool that fought for a cause that turned out to be a farce. This statement may upset climate change advocates, but it is a reality in business decisions. No business wants to ignore the issue either, so many choose the safe middle ground. Brand and image are everything.

     
     
     
    • Narayan
    • Vice President, Wipro

    While the five point action agenda suggested in the article is nice, it still will amount to only a 'dent' against climate change. Climate science shows that even if all our GHG emissions drop to zero today, the greenhouse gases already in the atmosphere will stay for more than a 100 years. Given the inherently complex inter-linkages between energy, GHG emissions, water, waste, biodiversity,public health and food - to name just a few - 'within the boundary' corporate sustainability programs really mean very little. It is best if the business world woke up to this fact. The statement 'we are becoming more sustainable' needs to be replaced by 'we are becoming less unsustainable'. The two are clearly not the same and organizations need to articulate this without any ambiguity to themselves as well as to their public stakeholders.

     
     
     
    • Mike Toffel
    • Associate Professor, Harvard Business School

    For those looking for thoughtful and accessible insights regarding the science of climate change, I recommend two excellent websites - Real Climate and Climate Progress (links below). Also, check out a fascinating analysis by Bill McKibben "Global Warming's Terrifying New Math" and an interesting Wall Street Journal op-ed by Richard Muller, a former climate change skeptic who explains why he is no longer skeptical. Real Climate @ http://www.realclimate.org/ Climate Progress @ http://thinkprogress.org/climate/issue/ New Math @ http://rol.st/LuRoru Richard Muller @ http://on.wsj.com/1b6pwpW

     
     
     
    • Auden Schendler
    • VP Sustainability, Aspen Skiing Company

    Hugh Quick, you make a good point. And if you don't care about people, or other species, then there's little reason to care about climate change. The earth will be fine. Were not trying to save the planet, we're trying to prevent catastrophic damage to civilization.

    Walter: your science is simply wrong, and if you are going to make assertions, please back them up with references to peer reviewed science. For example: There is an agency that measures CO2 output from volcanoes. It's called the U.S. Geological Survey. They report total global emissions of CO2 from humans are about 130 times that of volcanoes. Here's the reference http://volcanoes.usgs.gov/hazards/gas/climate.php/ By the way, volcanoes tend to COOL the planet by emitting sulfur.

    You are right that the planet has warmed and cooled before. The planet warms and cools in response to 'forcings' on the climate. What warmed and cooled earth in the past is very well understood, and has to do with orbital wobble called the Milankovich cycle. Today, also well understood, is that the new forcing--far stronger than Milankovitch, is CO2. Last, if you think there's lots of money to be made from the scare, show us. And compare that to the money to be made by NOT addressing climate change. It's frustrating that on climate, it's always science vs. opinion. You ought to cite the science behind your assertions, or be open minded enough to reassess those assertions. Certainly DOW understands the science and has acted admirably on the threat.

     
     
     
    • Daniel Presser
    • Retired CEO, Retired

    It's embarassing as an alumni to see this kind of drivel being promoted as if fact by what is supposed to be a leading educational institution.

    Despite:

    • the dubunking of most every chicken little claim;
    • the near perfect track record of predictive failure by every model concocted by the IPCC and others;
    • the undeniable history of buffoonery by climate 'pundits' sch as Henson and others;

    some just seem compelled to clamp hands over eyes, ears, and grey matter and shreek "La la la la - I can't HEAR you!" while marching blindly forward, goose stepping all the way, toward the grand scheme of wealth redistribution that is 'climate change'.

    The fact paid employees of HBS, under cover of the school's name, are tolerated within this pack of prevaricators is appalling.

     
     
     
    • Auden Schendler
    • VP Sustainability, Aspen Skiing Company

    Daniel Presser:

    Two recent studies, and one older one (By Naomi Oreskes) surveyed the scientific literature and found that of some 14,000 papers on climate, only 24 reject global warming. Citation here http://www.desmogblog.com/2012/11/15/why-climate-deniers-have-no-credibility-science-one-pie-chart

    and here

    http://iopscience.iop.org/1748-9326/8/2/024024/article

    So what, exactly, is the basis for your claims? Can you cite any science to back them up? You are right that models have been wrong--they have all underestimated the actual warming. Who here is holding their ears and saying "La La La?" Unless you have anything but your own opinion to back your statements, then it's you.

     
     
     
    • MBP
    • CEO, PVC

    Check out the great leadership being shown by Coke in the climate change area where they are already following every recommendation made by Toffel and Schendler.

     
     
     
    • Rebecca Henderson
    • Professor, Harvard University

    This conversation is fascinating. When Professor Toffel first showed me this piece - he and I are colleagues -- I thought there would surely be controversy around his suggestion that business should actively lobby for carbon regulation, but I find it discouraging that we still seem to have fundamental disagreement on the question of whether we should be concerned about the world's growing emissions of greenhouse gases. I have three thoughts on this topic.

    First, the scientists here on campus are quite convinced that the climate is changing, that this change is driven by human activity, and that there is a risk it may change significantly in ways that we cannot predict. As it happens I spent yesterday at MIT's annual Global Change Forum, listening to some of their leading scientists talk about the current science of climate change, and it was a very sobering day. You can learn more about the group and download many of their (excellent) papers here: http://cgcs.mit.edu/

    Second, as Co-director of HBS's center for business and environment initiative I'm also very much aware that many of the world's largest companies - from Exxon to Du Pont to Unilever to Wal-Mart -- are now making multibillion dollar investments to prepare for a world where environmental issues in general and energy/climate issues in particular are central to the business agenda. We've written over 80 cases in the last three years about companies that are making investments in this area. You can get a sense for them here: http://www.hbs.edu/environment/cases-and-publications/Pages/default.aspx

    Third, and perhaps most importantly, I think that one can sidestep much of emotional heat surrounding this controversy by thinking of the issue from a classically business inspired perspective and focusing on the risks involved. It seems clear that no-one can know exactly what's going to happen - the climate is a hugely complex system and there's a lot going on. But as business people we should be aware that the vast majority of the world's scientists who study the relevant science from a wide range of perspectives believe that continuing to emit large quantities of CO2 significantly increases the risk of a range of bad outcomes. They may be wrong. But it seems to me foolish to bet that they are certainly wrong. If over half of the doctors I consulted told me that my behavior was greatly increasing the risk of my incurring cancer, I like to think I would change my behavior. Many serious and thoughtful scientists tell us there is a real risk here and surely, as a business comm unity we should respond. Mike and Auden have opened a very thoughtful conversation as to what we might do.

     
     
     
    • Christy
    • Marketing

    Professor Henderson: You have provided links to some wonderful resources! Thank you.

    I have a question to add to your second comment. The large companies you have mentioned generally market to consumers. The relevancy here for projecting good environmental stewardship is obvious. Consumers (especially younger generations) prefer to buy products from companies that do good things, especially if they are extremely large companies with vast financial resources. With that said, my questions are regarding smaller companies. Many smaller companies sell B2B. Their customers care about many of the same things that consumers care about, but in a different hierarchy. Unfortunately, the environmental considerations are often not at the top. Smaller companies have less money for sustainability and environmental initiatives beyond low hanging fruit. Even if the majority of decision makers have good intentions, it is difficult to convince all necessary stakeholders to invest in such efforts.

    So, how do you take these companies with limited resources of money, manpower and time, and convince them to shift their business model so that being an environmental steward is a priority?

     
     
     
    • Katrina Stanislaw
    • Masters Graduate, The Fletcher School

    Corporate sustainability initiatives are right and necessary actions. Toffel and Schendler are correct that as stand-alone measures they are insufficient. The global cocoa industry is an example of the limitations of corporate action. Cacao crops are delicate; manifestations of climate change in unpredictable weather patterns and increased spread of diseases are threatening supplies. Market competitors like Hershey and Mars have aligned on this shared problem and work in partnerships networks with NGOs and governments to build resilient supply chains. However, absent governmental action on climate change the root environmental problems will only increase. Irrespective of the industry, this holds true. Companies working on sustainability are often wary of public and government attention for fear of being held to standards that impact profits. This misses the power of government to spur industry-wide shifts to a greener "busines s as usual". Collaboration is imperative. Only through collaboration can corporations effectively meet their sustainability goals; this includes pushing lawmakers to do their job and growing public demand for action.

     
     
     
    • Raj Williams
    • CEO, Green Sensitive Design

    The issue is that most voluntary programs are based on Corporate in-house policies that may shift and change with changes in leadership. Hence, the safe bet to make Corporate Sustainability work is to require mandatory sustainability programs. How legislation can be crafted and have it get past a divided Congress is a true test of the environmental groups looking to achieve true sustainability on a regional scale. Good luck....... a lot of GOOD LUCK on making this real!!!!!!!!