The corporate sustainability paradox
Poverty, resource scarcity, geopolitical unrest and unprecedented climate disruption apart, global forces have the responsibility to write a crucial chapter in the future of our planet. In the concluding part of this article, the writer says the timeline to tackle the 2oC temperature increase is at our doorstep and businesses need to play an integral part in it.
Nowadays corporations are as big and powerful as nations. Of the 100 world’s largest economic entities, 69 are corporations whilst only 31 are countries (GJN, 2015). The World Bank noted that Walmart was world’s 10th biggest economic entity (the US, China and Germany are the top three) beating Australia, South Korea and India in 2016.
The 10 world’s biggest corporations make more money than the bottom 180 countries (counting Ireland, Indonesia, South Africa, Iraq and Vietnam, etc. all together): $285tn vs $280tn (GJN, 2015).
As such, the corporate climate-change accountability issue is greater than ever. While corporate power permeates every aspect of our lives, corporations operate across borders within a nation-based climate regulatory environment.
The question is: Who shall coordinate, regulate, monitor-measure-and-verify measurement report and verification (MRV) corporate efforts? Where do inter- national organizations and industry associations stand in the challenge? Can corporations be aside global talks or nations left alone? The answer is no. Therefore, corporations should be treated as nation- al entities equally bound to accountable and transparent action.
BUSINESS OF CLIMATE CHANGE
Overall, businesses act on climate change to improve image, align to stakeholders’ interests, reduce cost and increase ROI, whilst pursuing efficiency, innovation and opportunities. International organizations targeting corporate pledges are mushroom- ing based on the recognition that climate change poses risks to profitability and great PR opportunities.
The not-for-profit Carbon Disclosure Project (CDP) runs the most comprehensive global disclosure system of self-reported environmental data, including 2,400 corporations, cities, states and regions. Thomson Reuters recently revealed the latest green- house gas (GHG) data from the Global 100 largest publicly traded companies, accounting 25 per cent global emissions. Currently, over 50 per cent report emissions from operations, energy purchase and value chain, and 266 global entities (including Coca-Cola, Tetrapack, Ikea, Dell, etc.) commit to science-based targets in line with Paris Agreement. However, 53 per cent have equalled or exceeded their 2014 levels, with India Coal leading the way followed by Gazprom and ExxonMobil.
The CDP and the Climate Group, within the We Mean Business coalition, created two corporate pledges initiatives: RE100 − for commitments to 100 per cent renewables- generated electricity and EP100 − to double energy productivity (among its members H&M, Mahindra and Ikea).
Created at conference of the parties 22 (COP22), Non-State Actor Zone for Climate Action (NAZCA) by the Global Climate Action captures 2,138 companies, 2,508 cities, 209 regions, 479 investors and 238 CSOs commitments. Linked to the World Bank and IMF, the Carbon Pricing Leader- ship Coalition is a voluntary partnership of governments, businesses and CSOs. Their 2016-17 report presents various case studies, but the progress and road map are unclear. Moreover, let us mention the Busi- ness Council for Sustainable Energy, Ceres, C2ES, Environmental Defense fund, Environmental Entrepreneurs, World Wildlife fund and other informal CEO-led initiatives such as the Alliance of CEO Climate Leaders and the World Business Council for Sustainable Development.
Overall, corporations oscillate commitments selecting the most suitable plat- forms. Notwithstanding this trend, climate change denial in favour of economic interest is more concrete than ever, especially after President Donald Trump’s disengagement from Paris. The most effective motivation, in fact, is emissions trading or carbon taxation. Carbon offsetting is simple: a company offsets emissions to become carbon neutral by funding green initiatives, normally in developing nations.
Since 2005, the EU’ Emissions Trading System (ETS) is the world’s first and biggest system, based on a ‘cap and trade’ principle. A cap (reduced over time) is set on the GHGs emitted by the organizations covered; companies receive/buy emission allowances, tradeable within the cap. Additionally, they can buy limited international credits from CO2-saving projects around the world. Each year, they must surrender enough allowances to cover all their emissions, or else are imposed heavy fines (spare allowances are either kept or sold). As a result, 2015 emissions from the scheme fell 22 per cent below 1990 levels. However, there are serious concerns on the emission trading principle ‘pay as you go’ format and its ability to produce factual reductions.
Beyond this, what about industry organizations, the major authority in a headless global environment?
- Of the 100 largest economic entities in the world, 69 are corporations whilst only 31 are countries.
- Conoco Philips is bigger than Pakistan.
- General Motors is bigger than Bangladesh.
- ExxonMobil id bigger than Thailand.
- Set up in 20015
- Operates in 31 countries
- Participation is mandatory in high energy- using sectors.
Aviation accounts 3-8 per cent of world’ total emissions: it would rank among the top 10 country emitters − more than South Korea! A passenger flying from London to New York generates the same emissions as an EU citizen heating home for a year (EU, 2017). With air travel growing by 4-5 per cent per year, by 2020, emissions could be 70 per cent higher than in 2005.
Europe’s ETS includes aviation emissions since 2012. However, passengers, rather than airlines, pay the UNITAID solidarity levy, ranging from $1-4 (economy) to $10-40 (business/first class), to fund green initiatives in the developing world.
September 2017 will see the finalisation of a global emissions-offset scheme: the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) by the International Civil Aviation Organization (ICAO) will require airlines to monitor and offset the growth of their emissions after 2020. flight management, biofuel, super- efficient engines promising to reduce fuel consumption by 20-30 per cent (e.g. Boeing Dreamliner) and new CO2 certification standards applied from 2020 (Edie, 2016) are the future of international aviation.
According to Organization for Economic Co-operation and Development (OECD), shipping has increased by 400 per cent in the last 45 years, covering 90 per cent of the world trade. International ship- ping produces nearly three per cent of total CO2 emissions—more than countries like Indonesia, France or the UK, and slightly less than Japan, the world’s fifth highest emitter.
Once again, the EU is the pioneer. from January 2018, a MRV system will apply to large ships. The deadline is August 31 for companies to submit ship-specific monitor- ing plans to appointed verifiers (IMO, 2017). With emissions trading not applicable to the peculiar market, the aim is to gather data for future initiatives.
In September, the International Maritime Organisation’s “Ballast Water Management Convention” will enter into force, setting a global 0.5 per cent cap on the Sulphur (SO2) content of marine fuel from January 1, 2020. This move is interesting considering that low-SO2 fuel costs 50 per cent more than the residual one. But how will SO2 level or the control system be monitored in the middle of the oceans?
Prepared for innovation—and accustomed to scandals—automotive industry leads the production of alternatively fuelled and energy-efficient cars, while city car-sharing sector is mounting.
EU 2016’s mobility strategy targets 60 per cent CO2 reduction over 1990 levels and a zero-emissions future. Key areas are trans- port efficiency, low/zero emissions vehicles and alternative energy. Conversely, the US has weakened the Corporate Average fuel Economy (CAfE) standards behind the growth in fuel-efficient vehicles.
Innovation in the automotive industry also leads to significant cost-savings, demonstrated by initiatives such as the Green freight Action Plan joined by HP, Ikea and Volvo alongside 24 nations (e.g. Bangladesh and Vietnam) and the 65-countries’ Global fuel Economy Initiative committing to doubling government fleets’ fuel efficiency by 2050.
THE BAD GUYS
Through an insipid bullet in statement, the Organization of Petroleum Exporting Countries (OPEC) welcomed the Paris Agreement in 2016. Very thoughtful of an organization rather focused on its ability to thrive within low-prices than on being environmental savvy, apart from individual companies’ pledges and the Oil and Gas Climate Initiative (OGCI), committed to fund GHG reduction technologies. Similarly, mining, cement and steel industries are the highest energy consumers and emitters. A London-based group of 23 CEOs, the International Council on Mining and Metals issued a business- as-usual pledge on Paris. When the UN Global Compact chief has a packed fossil- fuels industry CV, ExxonMobil’s Rex Wayne Tillerson is the US Secretary of State, the US withdraws from Paris and global geo- politics is evidently hydrocarbons-driven; a more substantial commitment is simply unlikely.
Thankfully, Total CEO shook—without shocking—the industry. According to Pat- rick Pouyanné, within an evolving energy mix, green business is strategic (CNBC 2017). The sector transformation shall thus entail a switch from coal/oil to less impactful natural gas, a renewable energy mix, but also less carbon-intensive extraction and production.
NO BUSINESS CAN DO IT ALONE
The agriculture sector, utterly affected by climate change, recognises the need for timely solutions. Mars has committed to 100 per cent renewable. In 2015, it cut emissions by 25 per cent, looking forward to 40 per cent by 2020 and zero-CO2 by 2040, while sourcing all US operations electricity from renewables. Similarly, Uni- lever pledged carbon positive operations by 2030, 100 per cent renewable electricity, uses carbon pricing and joined RE100. Kellogg and other global producers target recycling, supply chain responsibility, responsible sourcing, products certifications and sustainable agriculture, along with efforts against deforestation.
The Sustainable Apparel Coalition’s Higg Index could help apparel industry’s consumers evaluate their favourite brand’s environmental performance. However, do customers really care about climate or human rights when picking up clothes? Systemic sustainability solutions are thus unlikely in the absence of an economic/ consumer reward (Hable, 2017).
The construction sector has progressed resources efficiency, as indicated by the Prince of Wales’ Corporate Leaders Group, World Green Building Council and the Global Alliance for Buildings and Con- struction. Although the green building trend is widespread, corporate pledges remain individual, whilst focus shall be on the developing world.
According to Forbes and Corporate Knights, most sustainable brands are captained by technology (Siemens, Cisco and Philips). The Breakthrough Energy Coalition, including Alibaba, Gates foundation, LinkedIn, Virgin, Bloomberg, Reliance, Amazon and other heavyweights, is committedtofundresearch and reduce footprint.
Even the finance sector is moving away from fossil fuels through pledges across Divest-Invest, 350.org, gofossilfree.com, and the May 2017’s Global Divestment Mobilization: investors, cities, regions and institutions pledge to invest in clean energy and climate solutions. This aligns with the
Renewable Energy Buyers’ Principles by World Resources Institute, World Wildlife fund and the Task force on Climate-related financial Disclosures.
MAKING SOCIETY BETTER
The world has agreed to tackle climate change, although global practical solutions remain nation-based, fluctuant to the mood and interests of the world’s bigwigs. On the other hand, corporate pledges and participation in think tanks draw public attention without guaranteeing any commitment or safety-in-the-numbers. Without MRVs, enforcement, carrots and sticks, who is regulating corporate pledges?
According to Unilever CEO Paul Polman, sustainability is a core management principle. “The real purpose of business has al- ways been to come up with solutions that are relevant to society, to make society better.” Thus, the same profit orientation shall drive corporations to realize that poverty, resources scarcity and climate-change are another face of the same coin. Climate sustainability is in the interest of businesses, which as global climate actors either shall voluntarily stand at the frontline of the fight or be made globally accountable for their actions. In our capacity as citizens, employees and consumers, how are we willing to contribute?
The writer is a CSR and communication consultant. (views expressed are personal)