Business Needs to Pay Off Its Climate Debt

Business has taken a “use now, pay later” approach to global resources — but the card is maxed out.

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Leading Sustainable Organizations

Corporate adoption of sustainable business practices is essential to a strong market environment and an enduring society. What does it mean to become a sustainable business and what steps must leaders take to integrate sustainability into their organization?
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It’s climate treaty season again.

As the Kyoto Protocol reaches its diplomatic conclusion, countries are looking to a new international accord and submitting fresh carbon reduction targets in anticipation of a United Nations Climate Conference in December 2015. The European Union, for example, just pledged to reduce greenhouse gases from 1990 levels by 40% by 2030. Even more noteworthy, the U.S. and China jointly announced big emissions cuts in late 2014.

Such global political progress is vital if we are to avoid the 2°C maximum increase that the UN has identified as the most we can allow to prevent catastrophic warming — but if we’ve learned anything from 15 years of politicking around the Kyoto accord, it’s that governments aren’t going to get this done alone.

The only other global player with the reach to take meaningful action on climate is the business community. And the potential contribution from the corporate sector is surprisingly huge. Critics normally point to countries like the U.S. and China as big polluters, but when you strip away the conventions of national boundaries and take another look, it turns out that it’s actually just as easy to point at specific companies as major contributors to global emissions. There are over 190 countries involved in the climate negotiations, but investigations show that just 90 companies account for two-thirds of all the carbon emissions since the industrial revolution.

So this time around, as governments make their climate commitments, companies need to do so as well. Auspiciously, many businesses are making these efforts — just not the ones that matter. In 2012, according to the Carbon Disclosure Project, an impressive 82% of the Global 500 had some kind of climate policy in place. Unfortunately, researchers found no evidence these activities were measurably reducing company carbon emissions.1 Corporate climate practices include things like calculating the carbon footprint or creating board-level climate committees — policies that may set the groundwork for action, but do nothing about actually lowering emissions. It’s worth emphasizing that the few companies that are making material progress on their carbon footprint are those with explicit emissions reduction commitments measured in absolute terms.

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Topics

Leading Sustainable Organizations

Corporate adoption of sustainable business practices is essential to a strong market environment and an enduring society. What does it mean to become a sustainable business and what steps must leaders take to integrate sustainability into their organization?
See All Articles in This Section

References

1. B. Doda, C. Gennaioli, A. Gouldson, D. Grover and R. Sullivan, "Are Corporate Carbon Management Practices Reducing Corporate Carbon Emissions?" Corporate Social Responsibility and Environmental Management 2015: doi: 10.1002/csr.1369. http://onlinelibrary.wiley.com.mutex.gmu.edu/doi/10.1002/csr.1369/full

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