many of which have come out in favour of a binding regulatory framework to lay out clear and strict emissions commitments for the immediate- and long-term future. An impressive group of 150 of some of the world's best known companies signed the 'Bali Communiqué on Climate Change,' calling for 'a comprehensive, legally binding United Nations agreement to tackle Climate Change' in the run up to the Bali climate negotiations in December 2007. The shift towards support for a legally binding treaty in the communiqué marks the most obvious departure from earlier business positions of hostility towards binding action. Moreover, statements contained in the communiqué about action on climate change are suggestive of the logic of climate capitalism:
The shift to a low-carbon economy will create significant business opportunities. New markets for low-carbon technologies and products worth billions of dollars will be created if the world acts on the scale required. In summary, we believe that tackling climate change is the pro-growth strategy. Ignoring it will ultimately undermine economic growth.17
Signatories to the call include Volkswagen, Shell, Nokia, Kodak, Philips, HSBC, General Electric, Nestle, Adidas, Nike, Rolls Royce, DuPont, Johnson & Johnson and Tetra Pale, among many others. Corporations, fearing an uneven playing field and continuously moving targets, want clarity, as well as decisive and early commitments.
Even amid their own financial problems, many leading players were persuaded that a low-carbon economy would create significant business opportunities. Indeed, by February 2007, none other than Lehman Brothers was warning that: 'The pace of a firm's adaptation to climate change is likely to prove to be another of the forces that will influence whether, over the next several years, any given firm survives and prospers - or withers and quite possibly dies.'18 The fact that the Lehman Brothers went bust in September 2008 was not because of lack of vision on climate change. But their warning that not acting poses a risk to the future survival of companies captures the importance of viewing climate change as an issue of risk.
17 The Bali Communiqué on Climate Change, http://www.princeofwales.gov.uk/ content/documents/Bali%20Communique.pdf, accessed 19 December 2009.
18 'FSA warms to climate change risk'. See http://www.finextra.com/fullstory. asp?id=16447, accessed 25 September 2009.
anticipating and pre-empting regulation
One risk companies face is the threat of regulation by governments. They have thus generated strategies to anticipate and pre-empt regulation. British Airways (BA) is a good example of a company from the heart of the fossil fuel industry that has moved to engage with the issue of climate change. Andrew Sentance was Head of Environmental Affairs and Chief Economist at BA and is now a member of the Bank of England Monetary Policy Committee. During his period at BA, it underwent a huge transition.19 Sentance saw the writing on the wall that regulation of carbon emissions was on the way, in one form or another. The challenge was thus to be well positioned relative to competitors in order to survive in this environment.
Like many others in business, he saw emissions trading as a vehicle to avoid less 'business-friendly solutions' such as taxes on fuel and energy use. British Airways argue on their website that 'studies have shown that green taxes have very little effect when compared with carbon trading. In order to receive the same emissions reduction as trading, taxes would have to be at least 23 times more costly than trading.'20 Engaging early with emissions trading allowed BA to help shape its rules and operations while minimising the financial costs of regulation. Strategically, an emphasis on trading also allowed big corporate players such as BA to build bridges with those elements of the environmental community that saw such market-based mechanisms as the only way of galvanizing momentum around action.
Talking with Andrew Sentance also gives a sense of the battles within corporations about how best to engage with climate change as an issue amid prevailing scepticism about whether a strong business case really exists. For BA, action on climate change was relatively easily aligned with existing business models and ideas about CSR. But BA's stance on the issue was met with hostility from other airlines that were worried that conceding the need for action opened up the possibility of other forms of less business-friendly regulation. It was the thin end of the wedge and for Lufthansa, for example, the best ploy was to fight against any policy to cut emissions. And there is a potential cost implication for leaders such as BA if others in the airline industry refuse to act.
19 Interview with Andrew Sentance, Bank of England, 6 June 2008.
20 'Carbon footprint-carbon trading.' See http://www.britishairways.com/travel/csr-carbon-trading, accessed 6 April 2008.
Many airlines were still in the 'threat' mode of response -viewing any regulation of carbon emissions as necessarily a threat to their interests which they should oppose. British Airways was an outlier in that sector. With mounting pressure on the sector to bring down its emissions, however, BA announced in 2009 that it would reduce CO2 emissions from energy use by 30% by 2020 compared with 1990 levels, despite passenger numbers growing by 130% during that time. The case of aviation highlights another important dynamic in business responses to climate change - regional differences - especially between Europe and the USA. In an address to the British Airports Authority, Andrew Sentance coyly observed that 'Global warming is rightly being identified as one of the key environmental issues which the airline industry must address in the twenty-first century. There is no dispute between the industry and policy-makers on this side of the Atlantic on that issue.'21 His counterparts in the USA took a different view.
This transatlantic difference in strategy is evident in other sectors, and broadly reflects different assumptions about regulation on each side of the Atlantic. In the USA, corporations tend to assume that regulation is to be opposed and relations with governments are often more antagonistic, while Europe has a longer history of government-industry collaboration and mutual accommodation. By the mid to late 1990s, perhaps nowhere were the divergences in corporate strategies more visible than in the oil sector. What oil and energy companies could get away with in the USA, they simply could not get away with in Europe. There was even a time when Shell in Europe accepted that there was sufficient scientific consensus to act on climate change, while Shell US was still fighting battles over whether the science was robust enough to justify action.22
The differences between the more proactive positions of European companies towards climate change when compared with their US counterparts could at least in part be accounted for by the more ambitious policy responses of European governments. But the
21 A. Sentance, 'Addressing climate change - the way ahead for aviation.' Presentation to BAA Aviation and Climate Change Seminar, 13 October 2003.
22 D. Levy and P. Newell, 'Oceans apart? Comparing business responses to the environment in Europe and North America', Environment, 42(9) (2000), 8-20.
public positions of companies clearly also reflect their different corporate strategies. For example, the difference between BP and Exxon has been described in terms of 'Beauty and the Beast'.2 3 While BP was pursuing a strategy of becoming one of the largest players in the renewables sector (a strategy it has since abandoned), Exxon was still questioning the science underpinning climate change and funding politicians and scientists opposed to action.
Such intransigence led to the company becoming a target for a vocal activist campaign. The 'Expose Exxon' (USA-based) and 'Stop Esso' (UK) campaigns aimed at drawing public attention to the oil giant's opposition to action on climate change. These coalitions claimed a membership of 500,000 in the case of the USA and 10,000 in the UK. They protested outside the company AGM, sought media publicity as an outlet for their claims (even receiving coverage on the global media channel CNN), organised petitions and set up boycotts at Esso/Exxon garages leafleting the public about the company's opposition to action on climate change. Though the campaign ended after three years, the Co-operative Bank calculated that in the UK people who boycotted petrol retailers over a six week period cost the business $742 million in 2003.24 More recently the company has also come under pressure from the Rockefeller family, a large shareholder in the company, about its stance on climate change.25 In response, Exxon points to substantial investments in research into renewables at Stanford University - the Global Climate and Energy Project -as evidence of its commitment to action on climate change. On 20 November 2002 Exxon Mobil announced it would give $100 million to a 'groundbreaking Stanford University project dedicated to researching new options for commercially viable, technological systems for energy supply and use which have the capability to substantially reduce greenhouse emissions'.26
23 I. H. Rowlands, 'Beauty and the Beast?: BP's and Exxon's Positions on Global Climate Change', Environment and Planning C: Government and Policy, 18 (2008), 39-54.
24 P. Newell, 'Civil society, corporate accountability and the politics of climate change', Global Environmental Politics, 8(3) (2008), 124-55.
25 A. Clark, 'Exxon facing shareholder revolt over approach to climate change', The Guardian, 19 May 2008. See http://www.guardian.co.uk/business/2008/may/19/ exxonmobil.oil.
26 'ExxonMobil plans $100 Million investment in Stanford University's Global Climate and Energy Project', Business Wire 20 November 2002. See http://www. encyclopedia.com/doc/1G1-94437173.html, accessed 19th December 2009.
In terms of political representation, Shell broke with the likes of Exxon and the Global Climate Coalition in the late 1990s. Not only were senior figures within companies such as Shell expressing concern about the aggressive tactics adopted by groups such as GCC, they even joined business coalitions promoting renewable energy such as the Wind Energy Association with the aim of capturing the 5-10% share of the market for wind energy by 2010. By the year 2000, no major industry federation in Europe was formally opposed to the Kyoto Protocol. Shell and BP both parted company with the GCC. It was a marriage of convenience that served a purpose at a particular stage in the climate change debate. But things had moved on and new opportunities were on the horizon. Shell and BP were then joined by other leading companies - Ford, DuPont, and the like - who similarly started to see climate change as a risk to be managed, rather than a threat to their interests.
The differences between the responses of BP and Shell and those of Exxon were due to the different regulatory systems that the companies are subject to, the distinct structures of lobbying that are available to them and divergent corporate strategies. Exxon is a company with a particular mid-west view of the world, whereas BP's strategy reflects its origins as a European-based company with a more global orientation. This perhaps reflects the key role of the company in British foreign policy adventures going back at least to the overthrow of Mossadeq in Iran in 1953. Individuals at the head of companies also have their own sense of which way the wind is blowing, so while Lee Raymond of Exxon was willing to take the flack for an oppositional stance, his successor Rex Tillerson has pursued a more conciliatory line.
We shouldn't necessarily only look to oil majors as a gauge of whether industry is capable of moving towards a low-carbon future. However, it is worth recalling that Shell, BP and Exxon-Mobil are collectively responsible for 8% of man-made emissions of GHGs.27 Six out of ten of the world's richest companies are oil companies. It is shifts among business leaders in these companies that give people like Geoff Lye of the consultants SustainAbility such hope. Invoking a popular phrase in climate debates, he argues that we have reached a 'tipping point' in terms of corporate engagement. Climate change is being mainstreamed into the business strategies of leading companies as part of a broader shift from what he calls a 'compliance model' to an
27 G. Lye, SustainAbility, Linacre lecture, 'MNCs and the changing landscape of climate accountability', Oxford University, 24 January 2008.
'accountable business' model, where the court of public opinion is as decisive as the court of law once was in driving business responses.28
everyone's a winner: corporate social responsibility and climate change
It is in the court of public opinion that approaching climate change as a CSR issue makes most sense. A large part of the strategy of some corporations results from their being targeted by activists, who dubbed Exxon 'climate criminals' for example, and the need to avoid such bad publicity by engaging proactively with the issue.
The shift of climate change to centre stage as an issue for corporations has to be understood as part of the rise of CSR. Companies increasingly accept that they have both environmental and social responsibilities to their employees, to the communities that host them and to society more broadly. Indeed a veritable CSR industry has grown up over the last decade as a response to a legitimacy crisis about the ability of corporations to deliver benefits to all.
The business case for CSR was put most strongly by the World Business Council for Sustainable Development, which claimed at the time of the Rio summit in 1992 to have 'changed course'.29 This case suggests that companies could gain a great deal by addressing environmental issues. There were resource savings to be made, better employees to be attracted, new customers to be wooed. It was no longer enough to do the minimum needed to meet government regulatory requirements. Environmental management, eco-efficiency and life-cycle analysis were the new buzzwords.
For some big corporations, climate change has proved to be an opportunity to challenge their reputations as laggards on environmental issues. Wal-Mart, for example, a company that has come under considerable fire for its social and environmental performance, has made climate change a flagship issue, putting pressure on suppliers to reduce their carbon footprint. The company has been fined repeatedly in recent years by various agencies for environmental negligence. For example, in 2005, Wal-Mart paid $1.15 million in fines to the state of Connecticut for the improper storage of pesticides and other toxins that polluted streams near its stores there.30 The CEO Lee Scott
28 G. Lye, 'MNCs and the changing landscape of climate accountability'.
29 S. Schmidheiny, Changing Course: A Global Business Perspective on Development and the Environment (Cambridge, MA: MIT Press, 1992).
30 See http://www.WakeUpWalMart.com.
Everyone's a winner: CSR and climate change
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