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 November 03, 2009
Corporate leaders stake out new position on climate

 A weekly look at the business perspective on climate change from the London-based ’think’ and ’do’ tank Tomorrow’s Company

By David Vigar, Climate Change Adviser, Tomorrow’s Company

GLOBE-Net - Anyone who thinks that the business world is generally opposed to regulation on climate change only has to look at the Copenhagen Communiqué to find more than 700 reasons to think again.   At the time of writing, 732 companies from all around the world have signed the communiqué, calling for an "ambitious, robust and equitable deal" at the Copenhagen conference in December.  

The initiative has been co-ordinated by the UK-based Prince of Wales’s Corporate Leaders Group on Climate Change (CLG), which also organised communiqués issued before the Bali and Poznan climate talks in 2007 and 2008. CLP co-director Craig Bennett calls the programme "a clear and sustained effort by leading businesses to address top level politicians" and points out that the Copenhagen statement goes further than previous interventions in several ways.  

First, it’s on a larger scale. Previous calls for action have tended to be signed by dozens rather than hundreds of companies.  Second, the statement draws support from leading players and major brands all over the world, from the US’s GE to India’s Infosys, the UK’s BT to Russia’s Lukoil. 

Third, the statement commits signatories to measures that will bite. It supports the target to cut global emissions by 50-85% by 2050 that the Intergovernmental Panel on Climate Change says is needed to prevent temperatures rising more than 2°C above pre-industrial levels.  In supporting global carbon pricing, it accepts the idea of a fundamental change in the energy market that will impose costs on everyone whose activities cause greenhouse gas emissions. It also calls for a framework to provide financial and technological assistance to developing countries. 

Agreement to these goals is far from a done deal among governments. The communiqué is therefore setting out an ambitious programme and doing so at a time when global warming has slipped down the agenda in many companies. The proportion of CEOs citing climate change as a concern in the annual PricewaterhouseCoopers Global CEO Survey has fallen from 40% in 2007 to 34% in 2008 and 26% in 2009. 

Unsurprisingly, many companies have declined to sign the communiqué. Several major US auto-makers, for example, are notable by their absence.  Those who are signing are making a conscious stand, differentiating themselves from their peers and, to a degree, swimming against the tide. 

These are decisions that require senior managements to endorse a pro-regulation position when it isn’t the corporate norm. So why are they taking that course?  Craig Bennett says that companies sign up to the Communiqué for one of five reasons. 

  • Some support action simply because they will make more money from a low-carbon economy, companies that make such products as hydrogen fuel cells, energy efficient motors or wind turbines.

     
  • Others have large workforces, large customer bases and big brands. For a Tesco or a Coca Cola, being green is part of being a modern, friendly, forward-looking business which is sensitive to stakeholders’ concerns. 

     
  • Others take a calculated, big-picture view, some insurance companies and banks for example. They think long term and buy the case, put forward by the UK’s Lord Stern and others, that it will cost their business less to help avert climate change now than to deal with its impacts in the future. 

     
  • Others face direct impacts in the foreseeable future - for example water suppliers who could be materially affected by changes in rainfall patterns. 

     
  • Finally, there are those whose businesses are carbon-intensive, but who simply understand the way the wind is blowing - including oil producers, power generators, steel-makers and chemical companies. They realise governments are eventually going to embrace carbon pricing and regulation and they’d rather it took place in a strategic, planned manner than a hasty and unpredictable one. They need predictability in order to make the right decisions over investment in long-term assets. If they invest in high-carbon plant, they risk facing decades of extra costs once climate regulation kicks in. But if they invest in low-carbon plant, they incur higher costs until the regulation is implemented. For such companies, it is logical to demand change sooner rather than later.

In a broader sense, that position is logical for all companies. Action to reduce emissions will be like moving from a flat race to a hurdle event. But if it is the same for everyone, then efficiency will be rewarded and all of society will benefit.  

Critics of course argue that it won’t be the same for all - that regulation will harm economic growth, inhibit job creation and damage competitiveness. This ’anti-competitiveness’ argument has been very influential over the past two decades, particularly in the US where it is still advanced by the US Chamber of Commerce. However it is only valid if you take it as read that today’s economy matters more than tomorrow’s environment and if you refuse to believe that increased energy efficiency and low-carbon technologies can increase, rather than damage, competitiveness. 

Some businesses are now rejecting the anti-competitiveness argument with their feet. In recent months, companies such as Apple, Pacific Gas & Electric (PG&E) and Exelon have quit the US Chamber because of its position. The chairman of PG&E, Peter Darbee, said global warming was a threat that couldn’t be ignored and accused the Chamber of forfeiting the chance to play a constructive leadership role.   

The companies who’ve signed the Copenhagen communiqué and those who have walked out of the US Chamber are staking out a new and distinctive position in the business world. The big questions now are how many more will join them, how much impact they will have at Copenhagen, and what more they can do to influence policy-makers in 2010 and beyond. 

David Vigar authored Tomorrow’s Company’s report on global warming and business, Tomorrow’s Climate: Beyond Peak Carbon. It is available at forceforgood.com hereTo find out more about Tomorrow’s Company please visit their corporate site, http://www.tomorrowscompany.com/, or their interactive web platform, http://www.forceforgood.com/.