Why Business ‘Leading’ on Climate Change is a Problem

So it has come to this. Despite a mountain of scientific evidence emphasising the catastrophic implications of human-induced climate change, governments seem unable to take any significant steps to break humanity’s addiction to fossil fuels. As Chris Hayes recently noted, having been confronted with the fact of our addiction we now are in the full throws of denial; ‘it’s not that bad’, ‘we need fossil fuels to prosper and grow’, ‘one more fossil fuel development won’t matter’, ‘how bad can it be?’ etc.  For governments and politicians long inculcated in the interests of the market and short-term corporate profit, the maintenance of a habitable atmosphere now appears something we are willing to forgo.

An increasingly common response to government inaction has been to focus on business, and specifically large multinational companies, to ‘save us’ from the worst effects of climate change. For instance a recent New York Times story entitled ‘Industry Awakens to Threat of Climate Change‘ highlighted how global companies like Coca-Cola and Nike were increasingly seeing climate change as a strategic risk. According to the report, these companies were reducing their use of natural resources and analysing supply chains to avoid the impacts of increasingly extreme weather events. Of course, ‘green business’ has been a familiar refrain for some time. Many large businesses have introduced practices of corporate environmentalism which include focusing not only on the physical risks of climate change for business operations, but also market, reputational and regulatory risks.

When I began researching business responses to climate change some years ago, the idea of market capitalism reinventing itself around new technologies that would wean us off our fossil fuel addiction (perhaps even force us to go ‘cold turkey’!) was seductive. However, with the continuation of ‘business as usual’ there appear a number of fundamental shortcomings in placing our hopes on business and corporate environmentalism as our best hope in avoiding the dire implications of climate change.

First, there is the important point that businesses really only engage in pro-environmental activities where there is a ‘business case’ to justify such action; that is, to increase shareholder value. Sustainability proponents will argue that there is no necessary zero-sum gain between the needs of the market and environment and that ‘shared value’ can often be created. However, the question must be asked, what happens when the interests of the environment conflict with those of the market? Based on our research of large Australian companies, these conflicts almost inevitably mean that the interests of the market will prevail. Indeed, as Peter Dauvergne has cogently demonstrated in his book Eco-Business, much of the the recent focus of corporate environmentalism has been aimed primarily at improving productivity and supply chain efficiencies in order to expand production and markets and ultimately be less environmentally sustainable.

A second critical problem with relying on multinational companies to ‘save us’ from climate change, is that as a strategy it is simply incapable of providing the sort of systemic and fundamental changes that are required (a radical reduction in global greenhouse gas emissions). For all the potentially worthy efforts of individual companies (or specific business units within larger corporate structures) in reducing their carbon emissions, as John Ehrenfeld has emphasised this simply equates to being a ‘little less unsustainable’. This is very different from the idea of sustainability as a way of maintaining economic and social activities over time in harmony with the environment. Indeed, a reliance on individual corporate environmental initiatives simply reinforces a reliance on an atomistic response to a  systemic problem. As Dirk Matten highlighted at a recent University of Sydney symposium on ‘creating shared value’, this has resulted in ‘islands of pet projects in a sea of corporate irresponsibility’.

Third, placing our faith in business further distracts us from advocating for what is actually required; meaningful government regulation of greenhouse gas emissions. The only way we as a species can deal with climate change is to dramatically reduce our use of fossil fuels and this will require regulation, technological innovation and, most likely, mandatory restrictions on fossil fuel use. For many on the political Right, the idea of increased government regulation  and restrictions on the use of fossil fuels is heresy. However government regulation has always been critical to the efficient functioning of capitalist economies and in prior situations of social crisis government regulation has been critical to societal resilience and response. Witness for instance the role of governments in liberal democracies during the Second World War where most economic activities came under government control as part of war-time mobilisation. Interestingly, some have sought to explore what such a ‘mobilisation’ on climate change might look like; it ain’t pretty but then the alternative of muddling along as we have looks much worse.

Of course, from the perspective of where we are today in 2014, such political scenarios are seen as outlandish and ridiculous. Mainstream political parties have basically given up on taking any meaningful action to reduce GHG emissions. And so we are left with the hope, and that is all it is, that somehow business corporations and the market will save us. This is beyond wishful thinking. In fact Daniel Nyberg and I have recently argued that this belief in corporate environmentalism forms one of three political myths that reinforce our suicidal trajectory as a species in the face of climate change.

I strongly support companies that take meaningful action to reduce their carbon footprint, cut their waste and use of natural resources, and even give back to the environment and society. However, this ‘win-win’ outcome is a rare circumstance. Indeed, as one senior sustainability adviser confessed in one of our research interviews:

‘…the best thing a business could do for the environment would be to shut down, but that’s clearly not a viable option!’

Interesting work is being conducted around the type of response needed to avoid catastrophic climate change. It is vastly different from the ‘business as usual’ mantra of the mainstream media and the soothing discourse of the ‘green business’ industry. To get some idea of the difficult task at hand, Professor Kevin Anderson‘s presentation below gives us some idea of what we need to do in order to potentially limit global warming to 2 degrees Celsius. Businesses will clearly be key actors in this social and economic change, but the scale of change required demands government regulation. We cannot afford to simply leave it to business to ‘save us’ from climate change.

You can find an edited version of this post in The Conversation

9 thoughts on “Why Business ‘Leading’ on Climate Change is a Problem”

  1. I’m no economist, so I may not explain myself as clearly as I would like, but it seems to me that there is pressure from some quarters – as you seem to be indicating – to rely on market forces to solve this problem. I can see how a carbon tax might help, but it seems naive to think that that alone would be the solution. It also seems that almost all major initiatives (space race, nuclear power, large hadron collider, …) have all been at least initially publicly funded and the private sector has then benefited from the spin-offs and also taken things forward once public funding was no longer optimal. Is there any real evidence that a market only approach has actually independently and successfully solve something as complex and serious as what we potentially face from climate change?

  2. Yes this is a really good point. The way in which we respond to climate change has been framed in various ways by different actors and interest groups. One of these framings (which for a brief time in the mid-late 2000s seemed to enjoy bipartisan political support) has been via conventional economics. The best examples of this include the Stern Report in the UK (2006) and the Garnaut inquiry in Australia (2007). Both individuals are prominent conventional economists who view climate change through the lens of market economics (climate change as ‘the greatest market failure the world has seen’). So, not surprisingly, progressives in politics, business and NGOs who have advocated for a policy response to climate change have promoted the idea of ‘pricing carbon’ (i.e. pricing the externality of GHG pollution) and allowing market forces to drive changes in economic behaviour. For many businesses this can also be an opportunity to create value, e.g. new financial products in a new market, new products etc. In establishing such new markets government intervention is necessary, so in Australia the former Labor Government (pushed by the Greens) introduced a fixed price on the carbon emissions of the 300 largest polluters (the so-called ‘carbon tax’) – now about to be repealed by conservative federal government.

    I strongly support the idea of pricing carbon emissions because it is a clear way to change behaviour and I think a carbon tax is a good idea as policy to start the shift away from fossil fuels and towards renewables. However, to undertake the sort of shift we need to have any hope of avoiding the plus 2 degrees (politically agreed) limit will require much, much more.

    Unfortunately, this is the discussion that is being avoided and which needs to be had. We can get serious about doing something to radically reduce our global emissions or just keep pretending everything will be fine as we continue with business as usual. There are some worthy examples of corporations changing their operations and becoming less environmentally unsustainable, but this is window-dressing compared with what is actually required. This will also need to go beyond a simple market approach to economic and social change.

    1. Thanks. Something else I’ve noticed is that it almost seems as though there’s been a recent change in rhetoric. There seem to be a number of articles (Mike Hulme in the Conversation and recent Die Klimazwiebel post Reiner Grundmann) who seem to be arguing that all those who are are arguing about the science (consensus project types, for example) are now preventing things from happening. I find it almost like a strawman argument. As far as I’m aware, those who push the consensus project (for example) are trying to get the message across that much of the science is settled and therefore we should start doing something. Those who are arguing against this almost seem to be saying “those who keep telling us that the science is largely settled and we should start acting, are stopping us from acting”.

      1. Yes I saw and commented on Mike Hulme’s Conversation piece. I interpreted his argument as – the ‘debate’ is not really about the science (which is settled) but about the politics and how we respond. I haven’t picked up the latter theme you point out – but will look out for it – it seems a bizarre stance! Those who dispute the science (the climate denial blogosphere) strike me as rarely qualified to do so – I prefer to leave the science to those who are experts in their fields and then work on the policy and social implications based on what that science is telling us.

  3. I just got around to watching Kevin Anderson’s presentation and it was really good although some of the graphs were quite depressing. But if he can be optimistic about the future then so can I.

    I agree with all of what you say, and feel that the only way to tackle this problem is with a heavy hand from all quarters: carbon tax, government regulation, technological innovation and perhaps also a shift in the way we live: from how we travel to the food we eat. I think there’s also a place for the private sector though provided it is more than just smoke and mirrors. What do you think of initiatives like Richard Branson’s Carbon War Room?

  4. Rachel,

    Yes initiatives such as the Carbon War Room are potentially useful in developing and diffusing ‘green’ innovations. The problem though is that it frames climate change impacts as soluble through private sector know-how and innovation. This reinforces the idea that private sector corporations freed of government regulation will ‘solve this’ and ‘save us’. This political myth simply reinforces the social and economic conditions which have generated anthropogenic climate change – the expansion of fossil fuels underpinning global capitalist consumption and ever increasing economic growth (https://climatepeopleorg.files.wordpress.com/2013/02/ep14011.pdf ). Ironically, we will reach a stage (not too far away I think) when climate events will become so severe that governments will intervene in full authoritarian mode – exactly what conservatives rail against now and precisely because conservatives and nay-sayers have encouraged a lack of response since the 1980s!

  5. Of course business can’t change the trajectory that economics gives us. Kinda obvious. However we must take care extrapolating this into an antimarket antigrowth argument, hence eliminating the space where we can imagine and implement radical transformation in capitalism and its associated paradigms. Carbon tax is a flimsy reductionist economic tool, that would have been relevant as a starting point had it been done globally 20 years ago. Think whole economy, as a start. http://blindspot.org.uk/projects/#climaterescue
    BTW 2C targets are not radical. We know that climate impacts are already intolerable at current levels so can the convo pls move on to cutting concentrations not just emissions?

    1. James,

      Many thanks for the comment and link (will read this with interest). I agree the 2 degree target is courting catastrophic impacts (as James Hansen has recently argued). However it is seen as ‘radical’ by those who would continue business as usual. As Kevin Anderson outlines, to have a chance of keeping under 2 degrees will require dramatic reductions beyond the sorts of figures being bandied about politicians at the moment (which we show no sign of meeting BTW!). In Australia we are simply talking about a 5% reduction by 2020 on 2000 levels and this ignores the massive GHG emissions we are producing via our escalating coal exports to China and India.

  6. Yes the political response doesn’t budge the needle on the scale of what’s needed. More on this… http://blindspot.org.uk/climate-summits/

    Proponents of more radical responses are perhaps missing a trick. Antigrowth just says to politicians, ‘please ignore us’. Even if they listened you still need to weigh up the possible power of trying to shut down markets with the potential of markets redesigned to solve the problems they previously caused. http://blindspot.org.uk/third-policy-switch/

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