CEOs Plan for a Climate Change Future
More than ever before, corporate CEOs are publicly acknowledging the validity of climate science, and major companies are committing resources to adaptation and mitigation efforts. In an interview with the Economist this August, President Obama said:
“There aren’t any corporate CEOs that you talk to at least outside of maybe—no, I will include CEOs of the fossil-fuel industries—who are still denying that climate change is a factor. What they want is some certainty around the regulations so that they can start planning. Given the capital investments that they have to make, they’re looking at 20-, 30-year investments. They’ve got to know now, are we pricing carbon? Are we serious about this?”
As the president notes, nearly every large multi-national corporation (including big oil companies like Exxon Mobil, Shell, Chevron, and BP) accepts the mass scientific consensus on climate change.
Businesses are taking climate change seriously: Due to their size, influence, and recent plans to reduce emissions, Walmart, Unilever and General Mills are three prime examples of industry leaders taking action on climate change.
- Walmart, the world’s largest retailer, has set a goal of using 7 billion kilowatt hours of renewable energy by 2020, The company’s first on-site solar project was installed in 2005.
- Unilever, the health and wellbeing products giant, recognizes that up to 15% of global emissions come from deforestation, and is planning to source 100% of its agricultural raw materials sustainably. Recently the company made the move to exclusively source sustainable palm oil because of the palm oil industry’s role in deforestation of tropical forests.
- General Mills, one of the world’s largest food companies, recently announced its new climate program. The company stated that it was setting global targets for reductions in greenhouse gas emissions in its operations and value chain.
While these steps are ambitious and forward-looking, most companies engaging on climate change mitigation are not doing so solely to boost their environmentalist bona fides. CEOs defend climate action as good for their bottom linebecause it saves money and helps retain employees.
In addition to Walmart, Unilever and General Mills, many other companies are investing in clean energy, expanding their scientific research capacity, and taking concrete steps to cut carbon emissions and prepare for the impacts of climate change. It is important to note, however, that while the trend among many multinational companies is to advertise their plans to address climate change and embrace renewable energy, the efficacy and results of many programs are neither conclusive nor publicly disclosed. There is a wide range of commitment to climate leadership among companies in major consumer sectors. The group Climate Counts, which scores some of the world’s top companies on their initiatives to reduce global warming, has shown that companies such as Unilever, Coca-Cola, IBM, Nike, Levi Strauss & Co., and Bank of America are leaders in corporate climate change mitigation—although there remains a long list of companies with little to no publicly available information on climate or emissions guidelines.
Below is a list of major companies in three of the largest consumer sectors with public greenhouse gas emission goals and action plans.
Food Companies:
- Began implementing their climate change strategy in 2004, which focuses on renewable energy, energy conservation, and climate adaptation and mitigation efforts.
- Uses the World Resources Institute/WBCSD Greenhouse Gas Protocol to evaluate the major emissions from global retail stores and roasting operations.
- Has partnered with Climate Reality to raise public awareness of climate disruption.
Coca-Cola:
- Created a comprehensive “field-to-market” environmental program using climate-related data to quantify water use, fertilizer use, energy use, and greenhouse emissions. By 2015, Coca-Cola aims to produce half of the company’s global corn supply in this environmental program.
PepsiCo:
- Is installing a photovoltaic system that will supply 1.7 megawatts of renewable electricity for the company’s Gatorade manufacturing operations in Tolleson, Arizona. This solar array will prevent the release of 50,000 tons of carbon and other greenhouse gases into the atmosphere.
- Uses the Global Landscapes Initiative at the University of Minnesota, which openly shares data and maps that illustrate how climate change poses risks to major crops within the food system, to help create efficient, adaptable, and sustainable supply chains.
- Updated its palm oil sourcing standards following a social media campaign in early 2014.
- Invested in an enormous wind farm in Lamesa, Texas, which will offset the energy needs of its entire North American office and manufacturing footprint.
- Created the “Farmer Connect” initiative around sustainability and water stewardship practices. Nestlé scientists’ nutritional assessments cite climate data and are published in peer-reviewed scientific journals.
- Received a high grade on the Union of Concerned Scientists’ “Palm Oil Scorecard” after it began sourcing more sustainable palm oil in response to a 2010 social media campaign.
- Announced a maize-breeding trial at multiples sites (using climate data from FAO Water and The Climate Institute, two of the world’s largest research centers) to investigate how climate and water-availability changes will impact crop productivity and food security.
Technology and Software Companies:
- Uses 100% renewable energy to power all of its data centers.
- Is sponsoring a series of efforts to use the company’s cloud computing resources to improve climate preparednessmodels, including a new Microsoft Research effort that focuses on climate-related food resilience.
IBM:
- Announced a global grid program built to expand networked supercomputing efforts to analyzing various climate change topics. Scientists studying topics like water management or staple food crops will have access to up to 100,000 years of computing time (worth $60 million in today’s dollars) under the program.
- Is expected to announce climate change research grant program that will cumulatively offer up to 50 million core hours through the company’s supercomputing resources.
Clothing and Apparel Companies:
- Is engaging with materials suppliers to reduce carbon footprint and make better design and development choices: 71% of their emissions come from raw material production.
- Announced in July 2014 that it met its emissions and renewable energy goals two years ahead of schedule. By the end of 2013, Timberland cut its GHG emissions by 50% and sourced 26% of its energy from renewable sources.
- Has been working to reduce GHG emissions since 2003. Their current goal is to cut absolute emissions 20% by 2015 in the U.S., based on 2008 levels.
- Achieved an average reduction in energy usage of 17% and cost savings of close to 30% in a model distribution center in Fresno, CA. The company plans to expand this model to distribution centers in Ohio and Tennessee.
In addition to the actions taken by individual corporations, there is a group of socially responsible investment firms and sustainable business coalitions working to pressure companies to address climate change and expand their renewable energy use.
Investment Firms:
- Oldest independent investment advisor devoted exclusively to sustainable and responsible investing.
- Joined with Ceres and other asset management firms to spur action by 118 companies – including Chevron, ConocoPhillips, Kinder Morgan, Lowes and several electric utilities – on a wide range of climate-related issues such as greenhouse gas (GHG) emissions, energy efficiency and sustainable palm oil.
- Traditional money management firm with 25 years experience in Sustainable and Responsible Investments (SRI).
- Files shareholder resolutions to divest from companies engaged in unsustainable practices.
- Takes a hybrid approach by investing in renewable energy companies and divesting from fossil fuels.
- Uses a “best-of-class” approach to avoid investing in fossil fuel companies that contribute the most to environmental problems and climate change while favoring investment in those with stronger commitments to renewable energy, energy efficiency and the transition to a sustainable economy.
- Manages investment portfolios for socially conscious investors.
- Files shareholder resolutions when corporate engagement is not successful in order to raise awareness about environmental, social and governance issues among a wider base of shareowners.
Sustainable Business Coalitions:
BSR:
- Promotes corporate responsibility in addressing global sustainability challenges.
- Helps companies address the different aspects of climate change in an integrated way, while also advancing climate solutions for their whole spectrum of stakeholders.
- Created by Ceres, the Business for Innovative Climate and Energy Policy (BICEP) Climate Declaration aims to get America’s leading businesses to work with policymakers to pass meaningful energy and climate legislation.
- Offers a new arena for business involvement in advancing climate and energy policies to address the far-reaching risks and challenges posed by global climate change.
- Provides the only global system for companies and cities to measure, disclose, manage and share vital environmental information.
- Has helped move climate change and energy efficiency onto the business radar and into mainstream business thinking. Companies are better able to understand how to protect themselves from the impacts of climate change and become more energy efficient.
- Works with corporate and government partners to develop climate finance mechanisms, business models for promoting innovation, and supportive policy frameworks.
- Mission is to inspire and convince leaders in government, business and society to reduce carbon emissions now and accelerate the transition to a low carbon economy.
Cumulatively, these steps taken by businesses may indicate a greater trend towards corporate planning for future climate policy. As the science underpinning our understanding of climate change becomes more certain, more and more businesses are developing adaptation and mitigation strategies. These tactics include investment in low-carbon energy, agricultural innovation, and increased energy efficiency.
While substantial progress has been made due to voluntary corporate action and grassroots pressure, businesses remain most responsive to changing market forces like the introduction of a price on carbon Many large multinationals are already incorporating a price on carbon into their long-term financial plans. The list of companies is extensive, and includes ExxonMobil, Walmart, American Electric Power, Microsoft, General Electric, Walt Disney, ConAgra Foods, Wells Fargo, DuPont, Duke Energy, Google, and Delta Air Lines. Some of these companies use a “shadow price” of anywhere between $8 and $60 per ton of CO2; some are projecting that a carbon price will take effect by 2020. Several companies are even calling on governments to act in order to minimize pricing uncertainty.
By responding to grassroots pressure, anticipating climate policy, and preparing for the disrupting effects of climate change, each of these businesses is making a prudent financial decision. CEOs and shareholders see that their current bottom line and future profitability depend on their ability to cut emissions, increase renewable energy use, and adapt to new climate policies.