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Oct 26, 2015

More firms making the business case for climate change action

Walden Asset Management sees firms recognizing greater urgency in business impacts of global warming and willingness to commit to specific emissions reduction targets

Some companies are way ahead of the US Chamber of Commerce and other trade organizations purporting to represent their interests, at least where climate change is concerned. The chamber continues to oppose the Environmental Protection Agency’s Clean Power Plan, which aims to reduce carbon emissions from existing power plants across the 50 states and territories.

One conspicuous way in which some large US companies are showing their commitment to address climate change concerns is by supporting President Obama’s Climate Action Plan, the goal of which is to cut almost 6 billion tons of carbon pollution through 2030. Last week, 68 companies signed the American Business Act on Climate Pledge, launched in July by 13 of the largest US companies, including Alcoa, Coca-Cola and General Motors. Signing the pledge indicates support for a strong outcome in the UN climate negotiations that will be held in Paris in December and a commitment to reducing their own emissions, making more low-carbon investments and other sustainability-focused efforts.

While many of the pledges have been aspirational, ‘what struck me [about the 68 new pledges made this week] was that some companies were reporting on what they were doing’ – not just their aspirations – says Timothy Smith, director of ESG shareholder engagement at Walden Asset Management. ‘For me, the big picture is you now have a cross-section of companies – and it’s happening in Europe, too ‒ speaking out on the urgency of climate [change], the need for leadership, which would include government, company and citizen leadership, and some of them being quite specific about both what they would do individually and from a regulatory point of view.’

To be sure, the Volkswagen emissions test cheating scandal has made everyone more skeptical about companies’ public stances on sustainability. But ‘when they are companies that have a plan, like Google or Microsoft or Apple, which are working toward using 100 percent renewable energy for their server farms, that’s not blowing smoke at us,’ Smith says. ‘That’s an authentic plan. It may have its potholes, but [those companies] are hard at work trying to pursue that.’

One way to gauge how urgent a company believes climate change and other sustainability issues are is to look at its sustainability targets. Timeframes are a good place to start. Intel, for example, says in its pledge that it now uses 100 percent ‘green power’ in its US operations and will increase renewable energy use for its international operations and grow installations of on-site renewable energy to triple its current levels.

Coca-Cola has pledged ‘to make significant, comprehensive changes, investments and technology advancements to reduce its greenhouse gas (GHG) emissions by 25 percent by 2020.’ Kellogg says it will achieve zero net deforestation by 2020 in its supply chains for soy, palm oil, timber and fiber and increase its use of low-carbon energy by 50 percent by 2020. Privately held candy bar maker Mars has pledged to ‘reduce our dependence on fossil fuels and eliminate 100 percent of GHG emissions from our operations by 2040’, adding that it’s on track to reduce its 2015 GHG emissions by 25 percent (from a 2007 baseline).

With more and more of its members willing to speak out separately on climate change, ‘the Chamber of Commerce doesn’t speak with the same authority it used to on this issue’, especially when it comes to influencing lawmakers in Washington who don’t already agree with its stance that climate change action is harmful for business, Smith adds.

‘Whether it’s the governor of the Bank of England or global insurance companies or the companies that have been speaking out, they recognize the urgency of the science, the urgency of the impact on the environment and the impact on their business, our economy and on the markets.’

Smith cites CR Bard, a medical supply firm in New Jersey that after five years of petitioning by Walden finally published its first sustainability report on its website this year. ‘It did that only because it believed the business case was convincing,’ he says. ‘It wasn’t taken by the responsibility arguments and the morality. It saw its competitors doing it and probably saw some of the people it supplies to looking for some of that reporting as well.’

Although encouraged by the last two months of activity, ‘I don’t think any of us can be naïve that we’re moving far enough fast enough,’ Smith adds. ‘It’s just that there’s a new set of players that are active and visible and putting their reputations on the line. And there are others that are ready to come in.’

David Bogoslaw

Associate Editor and Online features producer for Corporate Secretary