Push-Me, Pull-You: Is the Private Sector Climate’s Dr. Do Little?

Rex Harrison– <em>Doctor Dolittle</em>About two thirds of chief executives – 67 percent – believe that business is not doing enough to address global sustainability challenges, yet there has been a precipitous drop in the proportion of business leaders who described sustainability as very important, according to a just released survey of 1,000 CEOs by the United Nations Global Compact and Accenture.

It is clearer than ever that the private sector, in particular multinationals dominating the energy, materials and utilities industries, hold the key to addressing climate through action on sustainability. Another new report, issued by CDP and written by PwC, found that 50 of the 500 biggest listed companies in the world account for emissions of 3.6 billion metric tonnes, or 73% of total greenhouse gases (GHG). These emitters primarily operate in natural resources and energy.

In the CDP Global 500 Climate Change Report 2013, Malcolm Preston, global lead, sustainability and climate change at PwC, said the findings raise “questions for some organizations about whether they are focused on sustaining growth in the long term, or just doing enough to recover growth until the next issue arises… Corporate emissions are still rising. Either business action increases, or the risk is regulation overtakes them.”

Meanwhile, the UN Global Compact-Accenture CEO Study on Sustainability 2013: Architects of a Better World found that 78 percent of surveyed CEOs see sustainability as a route to growth and innovation, and 79 percent believe that it will lead to competitive advantage in their industry. Paradoxically, however, CEOs see the economic climate and a range of competing priorities creating obstacles to embedding sustainability at scale within their companies, and the proportion describing sustainability as very important has fallen from 54 percent to 45 percent, including only 34 percent of CEOs in economically hard-hit Europe.

So we have a situation where businesses aren’t doing enough, yet the leaders of those businesses say they want to do more.

Put another way: The road to hell is paved with good intentions.

What needs to change to narrow the gap between intent and action? This is one of the fundamental questions of our time.

The answer to that question, according to the surveyed CEOs, is that we need better policies. Forty two percent of respondents listed governments among their top three stakeholders in sustainability, a rise from 32 percent in 2007. Eighty three percent thought more efforts by governments to provide the enabling environment will be integral to the private sector’s ability to advance sustainability. Specifically, 85 percent demanded clearer policy and market signals to support green growth.

Put another way: Pay no attention to that man behind the curtain. Because business lobbying dollars control politicians, CEOs are really just blaming policy makers for a problem that the CEOs – along with their investors and consumers – are creating and prolonging.

When asked which policy tools should be prioritized, 55 percent pointed to regulation and standards and 43 percent called for governments to adjust subsidies and incentives. A further 31 percent sought intervention through taxation. Softer measures, such as information and voluntary approaches, were supported by only 21 percent of CEOs.

Polite attempts were made in the authors of the UN report to pull back the curtain and place responsibility back on business.

“Business leaders should recognize that even in today’s imperfect markets, high performing companies do manage to combine commercial and sustainable success. These companies are harnessing sustainability as an opportunity for growth, innovation and differentiation, and demonstrate that sustainable business is good business,” said Sander van‘t Noordende, Group CEO, Accenture Management Consulting.

Added Peter Lacy, the study lead from 2007 to 2013, and managing director, Accenture Sustainability and Strategy Services, Asia Pacific. “To move from incremental to large scale transformation, businesses must accept that instead of  persuading consumers about sustainability they must give them sustainable products and services they want at prices they can afford. And instead of showing investors the savings made from sustainability, the will have to demonstrate the positive business value it can generate.”

At the end of the day, with policy-makers in the clutches of business, the only meaningful change will come when CEOs, their boards, and their investors all realize that action today on climate and sustainability means long-term business success and mitigation against risk from resource constraints. And then upon that realization, use their power over policy-makers to make the changes they are asking for (not the other way around). The UN report found that although 52 percent of respondents see investor interest as an incentive for them to advance sustainability practices, only 12 percent of respondents see investor pressure as a leading motivator. Nevertheless, only a small minority of CEOs (15 percent) blame the short-termism of financial markets as a barrier, and 69 percent believe that investor interest will be increasingly important in guiding their approach.

The crucial role of business is one of the under-lying themes at next week’s fifth ClimateWeek NYC. I look forward to hearing from CEOs who are turning intent into action.

 

China’s Consumption Push: the Beginning of a Global Tilt

I got into the resource economy because it hit me about 20 years ago that China’s one billion people had just entered a period driven by a desire to accumulate. People wanted to buy stuff, and were finally able to. It was clear then that unless China was able to forge a new development path different from other industrialized countries (i.e. not on the back of conspicuous consumption), that it would soon evolve from being the world’s factory (hyperactive producer of everything) to being the world’s black hole (rabid consumer of everything). What gave me a sense of urgency then, which was amplified now with the publication of a new study from the Boston Consulting Group titled ”The Dynamics of China’s Next Consumption Engine“, was the vision of a China that literally consumed itself, and the rest of the world with it.

The executive summary of the BCG report sounds inspiring:

Within the next three years China is projected to overtake Japan and become the world’s second-largest consumer market. The affluent class is central to this rapid rise and will drive nearly half of this growth. As the incomes of today’s middle-class consumers increase, many will join the affluent class, which will grow to be an even more powerful force of 280 million people, or 20 percent of China’s population, by 2020. The spending of the affluent will grow fivefold to $3.1 trillion. This will be equivalent to approximately 35 percent of China’s total consumption and more than 5 percent of global consumption. It will also be nearly as much as Japan’s total consumption, 28 percent greater than that of Germany, and three times more than South Korea’s total consumption.

And that’s just with one-fifth of China achieving affluence. With China’s economic growth slowing because of weaker exports, the country’s new leadership has already said clearly that the solution will be priming domestic consumption. For a country that is already suffering from toxic waterways, coal-choked air and a looming public health crisis, monetary affluence clearly spells adject poverty when it comes to the future of China, and therefore the world’s future. I must confess, I am only consumed with two things: the thought that we have hit a global tilting point, and the following question: how do we get out of this mess?

$1 trillion… a solution to climate change?

My 10 year old son and I were talking the other night and he asked me: “Dad, what would you do with $1 billion?”. What followed was a conversation about how we’d try to invest the money in ways that had social impact (climate, child poverty, cancer were high on his list), while also saving just enough for our family to be secure. But then he asked me, “What about $1 trillion?” That’s a big number. Only two countries – China and the United States – each have a gross domestic product (GDP) of more than $7 trillion.  Add Japan and Germany if you’re talking over $3 trillion, with just 15 countries in total with more than $1 trillion in GDP.

And then we stumbled upon an idea. Could we address one of his concerns – climate change – if we bought up oil companies and then figured out a way to shut them down without major social, economic and political disruption? A little bit of back of the envelope calculation and we figured out that $1 trillion could buy you ExxonMobil ($400 billion market cap and world’s 4th largest oil company) and #6 BP ($130 billion), $210 billion for #7 Royal Dutch Shell and #8 Chevron ($200 billion), with room to spare. If half of the world’s 7 billion people could invest $200 to a general fund that would get you most of the way. If one-fifth of the world’s population invested $700 that would be more than enough.

But what would the climate impact be to take four of the top 10 oil producers in the world offline? Not totally precise (but close enough), let’s assume daily oil production of the four companies of 2.5 million barrels per day, or a total of 10 million per day, or 3.65 billion barrels per year. Assuming 430 kilograms of CO2 per barrel of oil burned, that’s about 1.6 trillion kg of CO2, or 1.6 billion tonnes. Total CO2 emissions in 2011 were 34 billion tonnes. So the net result would be a 4% decrease in CO2 emissions if the four oil companies stopped producing oil tomorrow.

Worth a $1 trillion? Not sure, but an interesting exercise in the power of crowdsourced impact investment. And given the current international talks on climate, perhaps no less feasible in achieving emission reduction goals.

 

It’s time for the gloves to come off on climate change

The people who accept climate change as a real threat need to accept that they have failed to get other people to accept climate change as a real threat. One climate scientist, Peter Gleick, was so desperate to expose skeptics that he lied to obtain internal documents from The Heartland Institute, a libertarian group that questions the reality of climate change and has done well in discrediting Gleick and his peers.

But stealing documents is not the way that climate policy will see meaningful change here in the United States. Stealing some of the skeptics’ playbook, however, might make a difference.

Liberal foundations (there are several prominent ones) that fund efforts here in the United States to make sure climate change is properly reported, and to have rapid response in place to rebut arguments from climate skeptics — they all live in their heads. Their approach is rational. They underappreciate the fact that the issue at hand is emotional and visceral.

Conservative attack dogs understand this. They have no hesitation going for the jugular, or playing to our most primordial instincts and fears. The liberal elite, meanwhile, continue to try to influence policy and public opinion by citing science, by correcting factual mistakes and by engaging in “substantive debate.”

They will never win, because they are not only playing by the wrong rules, they are playing the wrong game.

Prompting action on climate change requires open warfare. Gloves off. If there are rules, they are street rules, i.e. logic is out the window. On the street, it is all about protecting your people.

The idea that accurate reporting will change the way anyone thinks or acts on Capitol Hill is ridiculous. It’s like planting a seed in Death Valley and expecting it to miraculously sprout into a beautiful carbon-mitigating flower. Not going to happen.

Recently, executives at many renewable energy companies have been discussing an opinion piece by Severin Borenstein, a professor of business and public policy at the University of California at Berkeley, who argues (largely correctly) that the Obama administration’s linkage of clean energy to jobs and innovation is placing focus on the wrong issue.

His argument is simple: the dirty energy industry can just as easily claim that it is creating jobs and innovating, and they wouldn’t be lying. Borenstein suggests that the true issue must be global warming. Nor is this incorrect. But — no offense to Borenstein — while he is no doubt a great academic, he is not an influence peddler. And that’s what is required in this situation.

New research from the National Survey of American Public Opinion on Climate Change backs that up: Almost 4 in 10 Americans still don’t believe in man-made climate change (and that’s actually an improvement from 50 percent in 2010). Additional research by Third Way, a moderate Washington think tank, unveils an alternative to focusing messaging on global warming, and this alternative is rooted in the idea of talking about the benefits of arresting climate change.

As any good marketer knows, when you’re selling something, you’re selling the personal benefits, not the product itself. In the same sense with climate change, we need to sell the benefits of stopping man-made climate change.

Recent focus groups conducted in Ohio and North Carolina by Third Way confirm this approach. Besides concluding that “voters in traditional energy states want to get America running on clean energy,” their findings – Moving Clean Energy to the Center: Insights from Swing Voters in the Midwest and South – reached three other important conclusions:

  • Focusing on long-term economic growth potential and the consequences of inaction works. Selling near-term job creation doesn’t.
  • Tapping into concerns about pollution and the strong desire to eliminate coal works. Focusing simply on climate change doesn’t.
  • Describing a vision of government as a facilitator for the private sector works. Direct spending by government doesn’t.

As the California campaign against Proposition 23 last year proved, concern about public health because of pollution made a huge difference in defeating the proposition, which aimed to cancel the state’s nation-leading and progressive climate policy. The involvement of the American Lung Association gave the pollution message credibility and linked it in a very visceral way to personal benefit.

If Obama ever grows a backbone on the climate issue (he’s shown he has courage when it comes to terrorism, and what is global climate change but the ultimate terrorist?), here are some suggestions for talking points that are tied back to the notion of protecting your people and personal benefit.

It’s an approach that might make a difference to the people who can really matter in this discussion — not the liberal elite, not the conservative skeptics, but the 4 in 10 everyday people going about their business and just trying to get by.

 

Climate Change Deniers Climate Change Hawks
The EPA is a job-killer and must be shuttered. Conservatives want to poison your water supply and make sure that your children are exposed to toxic chemicals and asthma-causing pollution.
Carbon regulation is an additional tax and an economy-buster. The Extreme Weather Party (aka the Republicans) is actively preventing steps that would help communities from being destroyed by the increasing occurrence of deadly tornados, hurricanes, flooding and drought.
Clean energy jobs are a myth. Clean energies like solar have a multiplier effect in economic development compared to dirty energy.*
The White House climate hoax is to blame for high gas prices. $5 a gallon is a small cost compared to sending your neighbor to die in Iraq and Afghanistan to maintain stability of our oil supply, and the $1 trillion price tag for two wars that the U.S. taxpayers didn’t want.

 

We need to reach 10 out of 10 to achieve meaningful action. Reframing the conversation can help get us there. And as the American Lung Association showed in California, so can engaging messengers that are all about protecting your people.

Another such messenger is the insurance industry — not traditionally seen as a bastion of consumer advocacy. Yet they see a severe threat from climate change, and are starting to get very nervous that their business model is in jeopardy. Last week, on the heels of the devastating tornados that ripped through the United States killing dozens and destroying whole communities, representatives of the industry went to Congress to implore them to not only believe, but to take firmer action on climate.

“From our industry’s perspective, the footprints of climate change are around us and the trend of increasing damage to property and threat to lives is clear,” Franklin Nutter, president of the Reinsurance Association of America, said during a press conference that also included representatives from Swiss ReWillis Re and the nonprofit Ceres, which leads a number of industry efforts focused on sustainability.

Cynthia McHale, Ceres’ insurance program director, took the gloves off a bit more and focused on personal benefit, saying that unless we end political paralysis on climate change, “extreme weather is certain to cause more homes and businesses to be uninsurable in the private insurance market, leaving the costs to taxpayers or individuals.”

In the United States last year, we experienced a record 14 natural disasters causing more than $1 billion in damage each. Property and casualty insurers lost an estimated $44 billion in 2011, a year in which natural disasters were more severe, more frequent, less predictable and longer than in the past. The average weather-related insurance industry loss in the U.S. is now $20 billion a year, a more than six-fold increase from about $3 billion a year in the 1980s, according to Swiss Re.

*(This is where I slightly differ with Borenstein, whose Berkeley colleague Dan Kammen has shown that solar installation creates five times or more the number of jobs than does investment in a natural gas plant of comparable capacity).

This article also appeared on Greenbiz.com