Corporate climate leadership requires aligned action and advocacy – and fails without itJen Austin, Policy Director for the We Mean Business coalition
Climate change has become a top strategic issue for the private sector. The world’s leading global companies are stepping up their climate ambition and actions in response to the ever more urgent science, coupled with the growing impacts and risks to their businesses and supply chains. As climate is integrated more fully into strategic planning, investment decisions and corporate governance, it quickly becomes clear that companies also need to back their climate ambition and actions with aligned policy advocacy.
Given the outsized influence companies have on policy, their policy advocacy – a corporate action in itself – is crucial. Importantly, this means not only their direct policy advocacy, but that of their trade bodies around the world.
Trade groups across all sectors are hugely influential in shaping government policy – and in most cases are not keeping up with the rapidly shifting risks presented by climate change and the growing opportunities of climate action. This has them trailing their leading members in recognizing the importance of ambitious climate policy, and as a result often leaves them out of step with the most important needs of the industries they intend to benefit, and out of line with the climate positions of the very companies whose interests they are designed to represent.
A growing number of leading companies recognize the strategic benefits of transitioning to net-zero emissions as rapidly as possible and are setting science-based emissions reduction targets as an important step toward getting there. The next step is ensuring a science-based policy platform, and ensuring the full weight of the company’s influence is aligned behind those two things.
Contradictions between company climate ambitions and actions and their own lobbying, or the lobbying of their trade groups, only serves to muddy the waters for policymakers and ultimately contribute to the very policy uncertainty that increases risk for investors and corporate strategic planning.
Walk the talk
The past year saw a growing number of companies raising their own voices in support of clear ambitious policies. Hundreds of companies in Europe, Japan, and the UK called for policies to include net-zero emissions by 2050, and others showed up in the US, in Germany, and in capitals around the world in support of ambitious sectoral policies needed to accelerate action.
The past year has also seen some but not enough companies taking steps to address inconsistencies in the climate policy positions of their trade bodies, through internal checks, publicly stating their differences or in some cases leaving the groups that refuse to actually represent their interests.
Unilever’s new CEO Alan Jope sent an open letter to all of the company’s trade associations and business groups, asking them to confirm whether their current lobbying position on climate policy is consistent with Unilever’s position in support of the 1.5°C ambition set out in the Paris Agreement.
Earlier this year German automaker Volkswagen threatened to leave the country’s influential sector lobby group VDA over its approach to electric vehicles.
Oil and gas major Royal Dutch Shell is quitting influential US oil lobby group – American Fuel and Petrochemical Manufacturers – because it disagrees with its policies on climate change. Shell also publicly put on notice nine other groups that it identified as having “some misalignment” with its climate policies, with plans to continue to engage with those groups and monitor their stance.
Back in 2017, multinational mining company BHP Billiton decided to leave the World Coal Association over differences on climate change. Now more than one in five shareholders of BHP have backed a resolution calling on the company to resign its membership of any industry associations whose advocacy is “inconsistent” with the Paris climate change agreement.
Ten years ago, a number of major companies left the US Chamber of Commerce over their climate change positions. In a sure sign that pressure continues to grow from members over the need to align positions on climate change, the US Chamber recently announced the formation of a task force on climate change, an insufficient but welcome step that could result in meaningful changes in the highly influential group if more Chamber members get involved and demand alignment with their own strategic goals.
In Europe, we have seen at least one group, Eurelectric – the trade association representing the power sector – change course on climate policy in recent years as members have seen increased opportunity in the zero-carbon future and the need for strong policies to enable a smooth and rapid transition. The group has switched from opposition to climate policies to backing clean technologies including renewables and electric vehicles (EVs).
And in another tell tale sign of a rapidly changing landscape, they have recently announced a partnership with ACEA, a leading European auto lobby group, in support of more ambitious EV policies, reflecting a decided shift for ACEA in line with the emerging trend of auto companies racing to keep up with EV trends.
This process of auditing company trade groups for climate alignment could prove highly effective for a whole host of businesses if it’s coupled with concrete decisions based on the findings – to either engage with the trade group to improve climate ambition or actively leave ones where there is misalignment and no sign of progress. True corporate leadership on climate means aligning policy advocacy.
Just last week, an open letter, published in the New York Times signed by the heads of a host of climate organizations including BSR, CDP, Ceres, The Climate Group, EDF, WRI and WWF, laid out a simple three step approach for companies to ensure they are taking a science-based policy approach, aligned with their corporate climate ambitions:
- Advocate for policies at the national, subnational and/or sectoral level that are consistent with achieving net-zero emissions by 2050
- Align trade associations’ climate policy advocacy to be consistent with the goal of net-zero emissions by 2050; and
- Allocate advocacy spending to advance climate policies, not obstruct them.
The letter also recommends robust disclosure of these actions to ensure transparency and to demonstrate leadership, as well as strong corporate governance to enable sustained, strategic and effective engagement in climate policy.
These expectations on corporate climate lobbying add to a growing chorus of investor voices calling on companies to ensure that corporate lobbying is aligned with the Paris Agreement. These investors see a growing risk to their own portfolios from inconsistent corporate lobbying practices in companies in which they invest. This includes 200 investors with $6.5 trillion in assets under management, and a group of investors worth $2 trillion, led by the Church of England Pensions Board and Swedish national pension fund AP7.
Shareholder support for climate-related resolutions climbed to an all-time high of 30% in 2019’s proxy season, while the Climate Action 100+, the largest-ever coalition of investors representing $33 trillion in assets under management, has successfully called for climate-related resolutions in major emitters including Shell and BP.
Taking an active approach to assessing the membership of industry groups is vital to ensure the company’s strategy is not being undermined by a third-party acting on its behalf. This is particularly the case now, ahead of 2020, which is a critical year in accelerating the transition to the zero-carbon economy.
Policy makers look to business for support in order to increase their climate policy ambition, and business needs the right policies in place to go further and faster. Clear, consistent business support for the policies needed to transition to the zero-carbon economy will help accelerate that transition and create a race to the top.
This mutual push for increased ambition is the best chance the economy has for reaching the target of limiting global warming to a maximum of 1.5°C and reaching net-zero emissions by 2050.