What It Means for Business to ‘Go All In’ on ClimateJulia Robinson
At the end of a breakout session at theBSR Spring Forum 2014 last week, Matthew Kilgarriff, the company secretary of Swiss luxury holding company Richemont, shared a thought: The market price for carbon is too low, he said. Companies should create internal pricing structures and charge departments for greenhouse-gas use, which would then be invested in green growth within the business. IKEA’s Chief Sustainability Officer Steve Howard chimed in, offering collaboration between the world’s largest furniture-maker and the third-largest luxury goods companies to lead on corporate carbon pricing.
This moment illustrated the tone of the Forum, which gathered representatives from companies, governments, nonprofits, and foundations in Paris to discuss how to catalyze business leadership on climate through collaboration, increased ambition on climate commitments, and the exchange of best practices in mitigation and adaptation. Leaders advocated for more ambition, now: “Go all in,” Howard said. “This is not for the fainthearted. It’s about transformational change.”
Three main themes about business engagement on climate emerged during the event:
1. Companies now understand the business case for acting on climate, but they need to do more, and do it faster.
Although companies are starting to see the business case for investing in climate strategies, they have not yet done as much, as fast, as they should. Climate disrupts business by creating volatility in supply chains, resource availability, and prices. But inaction also poses a risk because it allows smaller, forward-looking companies to surpass big businesses with new technologies and business models. “In every disruptive era, the companies that get ahead of the changes are the ones that survive,” said BSR President and CEO Aron Cramer during the opening plenary.
In the same session, Mike Barry, Marks & Spencer’s director of sustainable business, explained that companies are moving from “I cannot afford to be the first to move,” to “I cannot afford to be the last to move.” Now, Barry said, we need companies to say, “I want to be the first to move.”
During the plenary debate “Climate Action in Practice,” Generation Investment Management’s Colin le Duc pointed to the upstart Tesla Motors, which became California’s third-bestselling luxury car in 2013, pushing BMW to speed up development of its own luxury electric vehicle. (Last week, Tesla opened up all of its patents, including for its high-speed battery-charging technology.) Le Duc called this “the power of smart, disruptive innovation.”
2. Companies want climate regulations, but they need to engage more actively with government to make this happen. In the meantime, they can adopt internal climate policies to ensure they are ready.
In separate sessions, both Marks & Spencer’s Barry and IKEA’s Howard pointed out that if governments set a price on carbon, business would respond with ingenuity. Howard said companies should tell governments, “We want long, loud policy frameworks.”
This has happened in Denmark, where the government created an agreement with energy companies in 2006 to advise customers on energy reductions. In 2011, Denmark implemented policies to reduce the energy industry’s use of fossil fuels by 33 percent by 2050 through research, regulation, and incentives, such as cofinancing renewable energy projects. In the session “New Energy Partnerships Driving Innovation,” representatives from Denmark-based companies DONG Energy and Novo Nordisk highlighted how these policies prompted them to form a partnership in which DONG Energy helped Novo Nordisk improve energy efficiency in exchange for investment of energy savings into DONG’s wind farm (PDF). Novo Nordisk saved about US$12 million between 2007 and 2012. The company’s investments made the wind farm financially feasible and gave DONG Energy a case study to encourage other customers to collaborate in the same way, resulting in more than 140 partnerships.
But asking for a price on carbon is not enough. Jean-Pascal van Ypersele, the vice chair for the Intergovernmental Panel on Climate Change, said companies that develop internal carbon prices will get ahead of legislation. Microsoft is doing just that with its internal carbon-pricing system, which requires all of its business groups to pay a fee for carbon. That money is reinvested into sustainable energy.
During the Q&A for the opening plenary, Kirstie McIntyre, European director of environmental responsibility at Hewlett-Packard, called on governments to reward companies with climate-friendly practices by tendering with them. In the same session, BSR’s Director of Partnership Development and Research Edward Cameron argued that companies should be more creative in what they ask of government. In the United States, companies could ask for government investments in science education; in Europe, they could encourage governments to fulfill commitments to invest in climate R&D.
3. Climate partnerships must be challenging, and traditional competitors must work together.
As CDP CEO Paul Simpson pointed out, the strength of business coalitions lies in their ability to scale through the pooling of finances, sharing of best practices, and incubation of innovation. The European Climate Foundation, for example, was formed from a group of foundations that realized their funding would go further if they combined resources. And BSR, the B Team, CDP, Ceres, the Climate Group, the Prince of Wales’s Corporate Leaders Group, and WBCSD have formed the We Mean Business Coalition to maximize business leadership on climate.
But partnering on climate is not just about sharing. “Politeness is the poison of collaboration,” said Peder Michael Pruzan-Jorgensen, BSR’s vice president for Europe, the Middle East, and Africa. He asked those in the room to challenge each other. This might mean seeking unusual partners, as have the members of Refrigerants, Naturally!, which includes marketplace competitors like Coca-Cola and PepsiCo, and activist groups like Greenpeace.
“We must be right at the very edge of comfort zones,” said IKEA’s Howard. “If we don’t go there, we shouldn’t be able to look at ourselves in the mirror and see ourselves as leaders.”
For more information on how BSR is working with business to advance progress in a climate-constrained world, visit www.bsr.org/bccw. And read more about outcomes from the Forum in blogs on sustainable trucking in Europe and climate-compatible supply chains.