How do large corporations positioning themselves as leaders in environmental sustainability handle differences with their Washington trade associations’ opposition to climate and energy policies to cut carbon emissions?
LAGUNA NIGUEL, CALIF. – In 2009 the U.S. Chamber of Commerce saw some big name departures. Apple and Mohawk Paper resigned their memberships because they were at odds with the Chamber’s position against reducing U.S. greenhouse gas emissions. Utility companies Pacific Gas & Electric, PNM Resources, and Exelon also quit, and Nike resigned from the Chamber’s board, but not from its membership.
These were big names, but it wasn’t a mass departure. Many folks stayed. Despite adopting environmental sustainability practices to reduce their climate footprints, limit water use, and improve energy efficiency, large corporate leaders in sustainability continue to be affiliated with organizations such as the U.S. Chamber of Commerce and the American Legislative Exchange Council, both of which oppose climate policies and renewable energy standards. How do business sustainability leaders tolerate such core differences?
Much has changed since 2009. Many business leaders no longer question climate change as an economic imperative. That debate is over, and so too is much of the science debate. Look no further than the recent “FORTUNE Brainstorm Green” conference for evidence: CEOs and senior executives from General Motors, Procter & Gamble, General Mills, and other Fortune 500 companies participated in a three-day session focusing on innovative approaches to corporate sustainability, energy, and investments in the future economy. Additionally, GM is among 40 companies now calling for the White House and Congress to act on global warming. GM’s bold gesture signing the Climate Declaration, an initiative of a business coalition group at Ceres, prompted much discussion among senior executives attending the “Brainstorm Green” conference.
|CERES President Lubber: Costs from storm damages a wakeup call for business interests.|
Mindy Lubber, president of Ceres, says the financial burden from climate and related storm damage is a wakeup call for the business sector.
“Whether it was a $34 billion hit in 2011 to the property and casualty insurance sector from climate-related storm damage, or in 2012 a $40 billion hit to the property and casualty sector, or a $50 billion bailout from the U.S. government, then there is this insurance company otherwise known as you and me, because the federal government has picked up flood insurance and crop insurance,” Lubber recently said in a Yale Forum phone interview. “Companies are seeing these issues of loss due to increasing storm damage as fundamental economic issues.”
Even so, the dynamics of the climate conversation still need to change, added Lubber. She said business leaders now must “make the argument that it is not only our greatest crisis now and in the future,” but also that climate change poses “order of magnitude” economic risks. While companies integrate sustainability throughout their business and their supply chains, Lubber said, they also “ought to be consistent on policies” they support.
Ritter: Care about Energy Policy? Then Care about Energy Politics
|Former Colorado Governor Bill Ritter, Jr.|
When Apple, Nike and the utilities voiced their differences with the U.S Chamber in 2009, the Chamber’s main argument against climate policy involved economics. Now mainstream leading companies are addressing climate change and their carbon footprint as an economic imperative, an on-balance sheet risk — not an off-balance sheet risk — and that has been a major pivot point.
Bill Ritter, Jr., governor of Colorado from 2007 to 2011, is director of the Center for the New Energy Economy at Colorado State University. A Democrat, he served as governor when climate change legislation stalled out in Congress in 2010. In an interview with The Yale Forum, Ritter said that although a number of corporations talk about favoring clean energy policies, some still are involved in trade associations actively working against clean energy, in effect supporting opponents of clean energy policies.
“If you care about energy policy, you have to care about energy politics,” Ritter said. “Corporations deeply interested in sustainability need to ensure that their trade associations and political giving don’t run contrary to their interest in sustainability.”
Alcoa Exec: Bring on Cap-and-Trade … but not Regulation
Alcoa, one of the world’s largest producers of aluminum in the world with $24 billion in revenues, supports national legislation on climate change. But despite its differences on climate policy, Alcoa has remained a member of the U.S. Chamber of Commerce, and Alcoa Chairman and CEO Klaus Kleinfeld sits on the Chamber’s board.
A founding member of the U.S. Climate Action Partnership, Alcoa has been actively reducing greenhouse gas emissions in its global operations over the past five years. It has a target of reducing its greenhouse gas emissions by 30 percent from 2005 levels by 2020, an aggressive goal. The company says in its sustainability report that it has reduced its greenhouse gas emissions by 23 percent over 2005 levels.
In an interview, Kevin Anton, chief sustainability officer at Alcoa, told The Yale Forum his company supports putting a price on carbon emissions, and now operates in several places around the world with such prices, including Australia and Europe. He thinks putting a dollar figure on carbon emissions is important in reducing the uncertainties businesses face. “Bring on cap-and-trade. Do not bring on regulation,” Anton said. “We think cap-and-trade spurs innovation, and we don’t think you get anywhere near that with regulations.”
Giant consumer products company Procter & Gamble is among those wanting to be seen as a leader in sustainability. For instance, the company considers its customers’ hot-water energy use with its laundry products as part of its own carbon footprint. It is now designing an array of products aimed at being more sustainable, such as laundry soaps effective in cold water, in order to reach its 2020 goal that 70 percent of washing machine loads use cold water.
But P&G Vice President of Global Sustainability Len Sauers says the company has little reason to disassociate with trade groups like the Chamber. “We are not an energy-intensive business, so there’s little value in us expressing our opinion to trade groups,” he said. “Energy policy is not a focus of our relationship to those groups. It’s hard to be in an association where we agree with absolutely everything.”
Uniting Energy and Manufacturing Sectors for National Policy
In the absence of positive steps by trade industries, the business group BICEP (Business for Innovation Climate and Energy Policy) at Ceres has brought together a growing coalition. On May 1 General Motors was the first auto maker to sign the Climate Declaration, which calls for Congress and the White House to implement a national strategy for climate change. The company says it has transformed its market strategy over the past years, from building gas-hogging SUVs to producing fuel-efficient cars and the plug-in Chevy Volt.
|GM CEO Akerson seeks integrated national energy policy. Photo Credit: Fortune Live Media.|
Speaking at the Brainstorm Green conference on April 30, GM CEO Daniel Akerson commented on the need for energy policy. “Our energy industry is built around oil,” he said. “It’s going to have to transform and there has to be an integrated, national policy where there’s political leadership that brings the manufacturing and the energy industry together.” Akerson said natural gas and electric vehicles will play a growing role in the future economy, and he said energy policies should spur those developments. “We have this moment,” he continued. “It has to be grasped.”
Word on May 1 of GM’s signing of the declaration drew attention of business leaders. Hannah Jones, head of sustainability and innovation at Nike, tweeted “Huge!” upon reading the report:
Other backers of the Ceres Climate Declaration include Nike, Starbucks, Intel, eBay, Nestle, Levi’s, and Ben & Jerry’s.
Bill Ritter is among those welcoming GM’s move to push for policy action on climate and clean energy. The policy move to improve fuel economy standards was done with industry’s backing, he said, adding that GM is now building on those earlier successes.
“We need to move forward on clean energy, but we need to do so with the private sector realizing there’s a social benefit and a long-term economic benefit.”