Insights from coalition leaders on business and government climate collaborationAnne Kelly, Vice President, Government Relations at Ceres, and Sophie Punte, Managing Director of Policy at the We Mean Business coalition
Earth Day 2021 was like no other in U.S history. Perhaps there is no better example of the new era for climate action than the 400+ businesses who united to behind the Biden administration to call for a strong 2030 Nationally Determined Contribution of at least 50% emission reductions, compared to 2005 levels. And the display of leadership in response to the calls from the private sector, investors, scientists, states, cities and citizens for climate ambition – with U.S. President Joe Biden committing to a 50-52% reduction.
Behind the business call to action was the We Mean Business coalition partners and broader network within the climate community. So, we thought it be a good idea to bring together seven CEOs of the NGOs that together form the We Mean Business coalition for a frank conversation on climate leadership. Moderated by Anne Kelly on the heels of the Climate Leaders Hour between five corporates and US Secretary of Energy, and the US Leaders Summit on Climate. Unscripted and unrehearsed. See highlights of that conversation below:
Business and government working together
“This was nothing short of a monumental and revolutionary week and let me tell you why. To have the United States back in […] is huge. And I think we have accomplished that this week. And it is having a dramatic impact on other countries around the world,” said Mindy Lubber, CEO and President of Ceres.
“America’s changing policies has been a big problem for over two decades, going back to the George W. Bush administration. That instability provides a license for laggards to do less than we need them to do. The leadership we are seeing now – if it is sustained – will create incentives for leadership. And that’s what we really need. […] People need to see that [the U.S.] will continue on this path, because business leaders need consistent signals,” said Aron Cramer, President and CEO of BSR.
“This kind of leadership matters, but it has to be sustained,” he added.
“We all felt like Americans this week,” said María Mendiluce, CEO of the We Mean Business coalition. “During this past month, we ramped up our ambition. In that letter, we worked together to convince corporate America – which had been quite silent before – to step up their game. We had more that 400 business leaders, representing over $4 trillion in annual revenue and employing over 7 million American employees, sign the letter and tell the Biden administration ‘You must be ambitious, and we will increase our ambition’. This reflects our theory of change as a coalition.”
Other countries need US leadership
At the Climate Leaders Hour, Lisa Jackson, Apple’s vice president of Environment, Policy and Social Initiatives, acclaimed “Biden’s climate policy is the wind in our sails.” But what is the appetite in the rest of the world?
“Over the last few years, we have worked with businesses and governments. There was a real sense that we could patch things together for four years, but we couldn’t do eight. So, this is a very critical moment. […] We needed to see the U.S. come in with huge leadership. The British government is doing fairly well with diplomacy around [COP26], but we also need the U.S. standing alongside. […] We have already seen some big announcements from big emitters, and that is really critical,” said Helen Clarkson, CEO of the Climate Group.
“Last year, we had over 200 signatures of businesses actively coming out and backing the EU’s own target of 55% [by 2030],” explains Eliot Whittington, Director of CLG Europe. “Now the conversation is moving from target setting into implementation. President of the European Commission Ursula Von der Leyen spoke yesterday about the Fit for 55 package – the package of legislation that will transform power, building, industry, transport and all those sectors of the economy that will need to change.” He added, “This is very much about the future of the economy”.
Investors put their money where their goals are
U.S. President and CEO of Siemens Corporation Barbara Humpton told us in the Climate Leaders Hour that investors want to put their money where their goals are. Can you elaborate on that?
“Part of the conversation yesterday was about finance and how do we finance the transition, both at the government and public policy level and with the private sector,” explained Paul Simpson, CEO of CDP. “Investors’ expectations [of companies] have been increasing. Investors want to see companies with net–zero commitments.”
“Every group of investors is now themselves seeking to become net zero. […] There are a whole range of initiatives that just send one signal to companies: ‘We expect you to measure, to disclose, to have ambitious targets in line with the science and a plan to deliver them. And for those companies that cannot live up to that, it’s where increasing risk lies,” Simpson added.
One such initiative is Climate100+ that brings together 570 investors with $54 trillion in assets under management.
It is time for mandatory disclosure
Companies say they can’t manage what they can’t measure. Mandatory disclosure – will we hear it from the Biden administration and other governments but will companies support it?
“We should really look into the economic system now. It is essential that by the time we are at [COP26], […] we make TCFD (Task Force on Climate-related Financial Disclosures) mandatory in as many countries in the world as possible, that we force companies to start disclosing,” argued Peter Bakker, CEO of the World Business Council for Sustainable Development.
“We now need to turn it into operating plans, to really see where the dollars are being spent. We need to have conversations with investors that will actually begin to distinguish companies that do have plans and make progress to get lower cost of capital. If we can lock these things in, then we will actually take this celebration (U.S. NDC) and turn it into an improved economy,” he added.
“There is momentum from businesses. They understand which way the wind is blowing, and they want to get there, because they understand it’s in their interest to do so. And that’s a big shift,” Cramer added.
Right now, 9,600 companies disclose emissions and other climate information through CDP. They represent 75% of the Fortune 500 companies and half of the world’s market capitalization.
“Climate disclosure has risen to the heart of the financial system discussions,” said Simpson. “New Zealand was the first country to make climate disclosure mandatory in line with the TCFD. In the UK, in 2006, it become law that companies had to start disclosing their emissions […] and late last year the government made the TCFD mandatory.”
He added, “It’s fantastic to see this dialogue happening all around the world. The EU has a non-financial reporting directive [that will be upgraded] in line with the TCFD. China is discussing a mandatory directive on environmental, social and governance disclosure. […] This is not an ‘if’, it’s a ‘when’. Climate disclosure is the foundation of climate action.”
“The U.S. Securities and Exchange Commission is required to have companies that are publicly traded to disclose their [climate] risks to investors,” Lubber added. “We need to stop looking at climate as a special environmental risk that we only worry about on some days. Climate risk is akin to trade risk, currency risk, inflation risk – and it needs to be considered as such.”
The B-Team, headed by Halla Tómasdóttir, has made the just transition a central focus in guiding businesses. U.S. Secretary of Energy Jennifer Granholm during the Climate Leaders Hour quoted a Virginian senator: “My coal workers can make the best wind turbines you have ever seen if you just give them a chance.”
How can we ensure this transition towards zero emissions is fair and inclusive?
“Often when we talk about the just transition, we focus on the downsides […] but there are also really important upsides: better connected communities with cleaner air, cleaner water, more enjoyable lives, better jobs as well,” added Eliot. “If we lean into the climate transition, we can create jobs. […] This is where government and business need to work hand in hand.”
One example of how government can help is the U.S. directive that requires 40% of benefits from federal spending energy, transport and housing to flow to disadvantaged communities.
“The recovery from Covid is critically important,” said Clarkson. “Government agencies are used to spending money a certain way, they are used to making certain decisions. We have had this classic in the UK with a proposed new coal mine to provide energy for a steel plant. […] We can help and work in partnership to figure out how money is spent and how to tie these two threads of Covid recovery and climate together.”
“Almost three years ago, BSR was asked to bring a discussion forward on just transition, but we didn’t succeed. No one wanted to touch it with a tad pole,” Cramer recalled. “We saw a major verdict this week on the murder of George Floyd with police accountability – racial justice is front and center and needs to be. We also have to think, not only of a just transition, but climate justice, climate equity. We have to make sure this is an equitable transition to net zero.”
“Vision 2050 looks at three global challenges: climate emergency, loss of nature and inequality. Only if we transform systems to deal with all these challenges at the same time will we come to a world with 9+ billion people living within planetary boundaries.” said Bakker. “We will see at the UN World Food Systems Summit later this year what this means in practical terms. How can we incentivize farmers to sink carbon into the soil, and through that stimulate biodiversity, reduce emissions and create new income? It’s a system transformation.”
From ambition to accountability through action
As a coalition we have strong initiatives to raise business ambition, like the Science-Based Targets initiative, The Climate Pledge, and specific initiatives around electric vehicles (EV100), renewable energy (RE100), built environment (EP100) and industry (Mission Possible Partnership), Mendiluce explained.
It’s the start of a new era: we need to move from commitment to accountability through action. I hope that market will reward climate action, and with that I mean suppliers, investors and consumers, she added.
“A few years ago, we couldn’t get a vehicle manufacturer to announce the end of the internal combustion engine,” said Clarkson. “Since then, we have seen a shift, that has come from different places. EV100 aggregates the demand signals [for EVs] from corporate buyers. […] By switching out the corporate fleet, we can really have an impact on the market. We can then start to push both on supply and on government policy.”
“Just in a few years, we have seen a tremendous amount of progress and the end is in sight there and that is a good cause for optimism. Part of that story is just giving governments the confidence that businesses are ready,” she added.
“No country is where it needs to be yet.” added Simpson. “We have all got to work together – it’s the whole spirit of the Paris Agreement. We have got to get into this ambition loop of getting companies, investors and governments to do more.”
And the role of businesses? “The science is clear, policy direction is getting clearer and more uniform around the world, so businesses need to move, to implement and be held accountable,” Bakker said.
“Use this moment where the spotlight is on climate change to use your voice, use your leverage, engage with your supply chain, engage with your government, call for carbon pricing. You have a megaphone, now use it,” Whittington said.
“The future is here today. Build it today. We have to turn from ambition to action,” added Cramer.