Why Business Won’t Save Us From Climate Change

Climate change is now the ever-present reality of human experience. In recent times we have witnessed a procession of huge hurricanes batter the US and Caribbean, record-breaking monsoons flooding Asia, and in Australia, despite the death of up to half of the Great Barrier Reef in back-to-back coral bleaching events, political support for new mega-coal mines and coal-fired power stations. While there is now clear scientific agreement that the world is on track for global temperature increases of as much as 4 degrees Celsius by century’s end (threatening the very viability of human civilization), our political and economic masters continue to double down on the fossil fuel bet, transforming perhaps the greatest threat to life on this planet into ‘business as usual’.

One response to the failure of government has been a belief that markets and corporate innovation will provide the solution to the climate crisis. As business tycoon Richard Branson has proclaimed ‘our only option to stop climate change is for industry to make money from it.’ Thus while business corporations are major contributors to escalating GHG emissions, they are also commonly presented as offering innovative ways to decarbonize our economies. But how much faith can we place in corporations to save us from climate change?

In an article in the Academy of Management Journal, Daniel Nyberg and I explore how major business corporations translate the grand challenge of climate change into strategies, policies and practices over an extended period of time. Our research involved a detailed cross- case analysis of five major corporations operating in Australia over ten years from 2005 to 2015. During this period, climate change became a central issue in political and economic debate leading to a range of regulatory, market, and physical risks and opportunities, and each of these five companies were at the leading edge of corporate engagement with this issue. However, despite different industry contexts we found a common pattern of response over time in which initial statements of climate leadership degenerated over time into the more mundane concerns of conventional business activity. A key factor in this deterioration of corporate environmental initiatives was a process of on-going criticism from shareholders, the media, governments, and other corporations and managers. This ‘market critique’ continuously revealed the underlying tensions between the demands of radical decarbonisation and more basic business imperatives of profit and shareholder value.

Our research found that the corporate translation of climate change involved three key phases. In the first framing phase, senior executives presented climate change as a strategic business issue and set out how their businesses could provide innovation and solutions. Here, managers associated climate change with specific meanings and issues such as ‘innovation’, ‘opportunity’, ‘leadership’ and ‘win-win outcomes’ while ruling out more negative or threatening understandings (e.g. ‘doom and gloom’, ‘regulation’, ‘sacrifice’). In a classic enunciation of the win-win ethos, the global sustainability manager of one of the world’s largest industrial conglomerates argued: ‘We’re eliminating the false choice between great economics and the environment. We’re looking for products that will have a positive and powerful impact on the environment and on the economy’.

While these general statements of intent served to respond to the innate tension between corporate interests and climate, convincing stakeholders of the benefits of ‘greening’ initiatives was never assured, and critiques evolved amongst stakeholders and customers who felt their organizations’ environmental efforts lacked sincerity. In a second localizing phase, managers sought to make these initial framings directly relevant by implementing practices of improved eco-efficiency, ‘green’ products and services, and promoting the need for climate action. Internal measures of corporate worth were developed to demonstrate the ‘business case’ of climate responses (e.g. savings from reduced energy consumption, measures of increased employee satisfaction and engagement, sales figures from new ‘green’ products and services, and carbon pricing mechanisms). Companies also sought to communicate the benefits of these measures both to employees internally through corporate culture change initiatives, as well as external stakeholders such as customers, clients, NGOs and political parties.

However, over time these initiatives attracted renewed criticism from other managers, shareholders, the media, and politicians and in a third normalizing stage, climate change initiatives were wound back and market concerns prioritized. In this stage, the temporary compromise between market and social/environmental discourses was broken and corporate executives sought to realign climate initiatives with the dominant corporate logic of maximizing shareholder value. Examples here included declining corporate fortunes and new CEOs who promoted a ‘back to basics’ strategy, the shifting political context which unwound climate-focused policy measures like the Clean Energy legislation, new fossil-fuel related business opportunities, and the dilution of climate initiatives within broader and less specific ‘sustainability’ and ‘resilience’ programs. As one senior manager in a major insurance company acknowledged: ‘Look, that was all a nice thing to have in good times but now we’re in hard times. We get back to core stuff’.

Our analysis thus highlights the policy limitations of relying solely on market responses to the climate crisis. We need to imagine a future that goes beyond the comfortable assumptions of corporate self-regulation and ‘market solutions’. In an era in which neoliberalism still dominates political imaginations around the world, our research thus highlights ‘an inconvenient truth’ for political and business elites; the folly of over-dependence on corporations and markets in addressing one of the gravest threats to our collective future.

5 thoughts on “Why Business Won’t Save Us From Climate Change”

  1. How do you think corporations should approach this problem? My company is currently developing a sustainability policy and we are sincere and want to do it properly. We are lucky that our product is an online software service and our main carbon footprint is the data centre. We don’t make any physical products and we all work from home and most of us don’t have to travel anywhere.

    I don’t doubt that there are more corporations doing a poor job of this than not but to be fair, you only followed five corporations and it’s not surprising that all showed lacklustre performance, especially if they were Australian firms. Australia has so far shown it’s not a leader in tackling climate change and its efforts so far have been feeble, and that’s probably being complimentary.

    1. Thanks for the comment. Yes agreed the Australian climate context is diabolical! However, the 5 firms we analysed were at the cutting edge of corporate sustainability (one had topped global corporate sustainability rankings, and another is a very well known global industrial conglomerate widely praised for its ‘green’ products). These were not typical Australian companies but (at the beginning of their ‘sustainability journey’) true proselytizers of the corporate environmentalism message.

      Our argument is that the nature of corporate capitalism leads to an inevitable compromise of environmental concerns in favour of profit. More generally, to meaningfully respond to the climate crisis requires systemic regulation of carbon emissions, the prohibition of new carbon frontiers, and a mandated shift to renewable energy by government. Leaving decarbonisation to the corporate sector is magical thinking – and yet that is precisely the dominant policy message under neoliberalism.

      So it would be great if companies embraced radical decarbonisation strategies but the reality is that their commitment to short-term shareholder value and compound growth prevents such a shift and this is reinforced by governments that have been captured by corporate interests and serve to lock in corporate self-regulation and the smoke and mirrors of ‘green’ business.

      1. Wow, it’s depressing to hear that these 5 firms were leaders in sustainability. I agree that government regulation is necessary but in the absence of this do you have any suggestions for corporations trying to follow a sustainable path? I know the obvious is to work towards carbon neutrality but is it as simple as that? Do you have any objections to carbon offsetting?

  2. Well the problem with carbon offsetting is that it doesn’t really address the carbon that has been released into the atmosphere (merely creates the appearance of an offset that may or may not be realised 10-20 years down the track): https://www.theguardian.com/environment/2011/sep/16/carbon-offset-projects-carbon-emissions

    Don’t get me wrong – it would be great if more businesses had a prioritised strategy of decarbonization of all direct emissions and also Scope 2 and 3 emissions. The more organisations that do this the more the urgency of the climate crisis would be communicated.

    The reality unfortunately is that the fossil fuel sector and its enablers have succeeded in spreading climate denial to a mainstream audience and the current problems in even building on the Paris Agreement suggest that it is now very unlikely we will avoid greater than 2C (and very likely 4C) warming this century. IMO we are at the stage now of deciding on a grim versus a catastrophic future for life on this planet.

    These points are spelled out in great detail in our book: https://www.bookdepository.com/Climate-Change-Capitalism-Corporations-Daniel-Nyberg/9781107078222

  3. The problem with people who say “the market will fix it”, as well as the people who say “look, the market has failed”, is that both camps tend to ignore the primary driver of the market — consumer demand. Thus, they also tend to ignore or downplay the other side of the coin in “the market”. The consumer.

    You wonder why markets dont change that much? Well, look at 99% of people’e shopping carts. They are the same despite whatever they may say about sustainability. If consumer demand (what people buy) doesnt change, markets wont change that much. You cant fault business without faulting the consumer — they are two sides of the same coin.

    A failure of markets is both a failure of business and consumers.

    Everyone wants “the market” to solve things but hardly anybody wants to go out and buy mostly sustainably oriented brands that cost a little more. The other effect of this is that any business people looking at the market signals for sustainably oriented products will see that they arent growing that much… because people arent buying them. So — even less change.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s