Date
28 April 2017
Walmart derives about 25 perdent of its global energy consumption from renewable sources. The ultimate target is 100 percent. Photo: Walmart
Walmart derives about 25 perdent of its global energy consumption from renewable sources. The ultimate target is 100 percent. Photo: Walmart

Why business is greener than Trump

The relationship between business, politics and the environment is about to become more complicated. As US President Donald Trump’s administration threatens to dismantle vital environmental protections, some of which have existed for decades, business leaders are increasingly recognizing — and acting upon — the need for environmentally sustainable policies.

Trump, who once called climate change a Chinese hoax intended to weaken the US economy, has already repealed the Stream Protection Rule, which bars coal producers from dumping waste into waterways.

Next on the chopping block may be the Clean Power Plan, which limits greenhouse-gas emissions from generating plants – by far the country’s largest source of CO2 emissions – with the goal of cutting carbon pollution from the power sector to 32 percent below 2005 levels by 2030.

The Trump administration has even threatened to back out of the Paris climate agreement, to which the world’s governments committed in 2015.

A decade ago, business leaders would have largely welcomed such regressive environmental policies, which can lower costs and expand opportunities, by reducing constraints on their companies’ behavior.

But today, even as markets respond bullishly to Trump’s “business-friendly” pledges – not just deregulation and tax cuts, but also a trillion-dollar infrastructure plan that would include reviving coal – business leaders have remained cautious.

In particular, they have strong reservations about a potential withdrawal from the Paris climate agreement. Whatever benefits could be derived from a low-regulation economy would not offset the harm of reneging on environmental commitments that are viewed as vital to American business success.

Some are already making their voices heard on the matter. Since Trump’s election, nearly 900 companies and investors, many of them American, have signed an open letter, “Business Backs Low Carbon”, calling on the administration not to withdraw the US from the Paris agreement.

These companies, which include large multinationals, believe that failure to build a low-carbon economy would jeopardize America’s prosperity.

There is compelling recent research to support this view. Last month, a study by Energy Innovation showed that elimination of the Clean Power Plan alone could cost the US US$600 billion and cause 120,000 premature deaths by 2050.

By contrast, efforts to build a more sustainable economy would bring far-reaching benefits. A December 2016 report by the Risky Business Project, led by American CEOs and former municipal and federal leaders, shows that savings in fuel costs from an 80 percent reduction in CO2 emissions by 2050 could exceed the required capital investment by US$150 billion.

Last January, the Business & Sustainable Development Commission, which I chair, estimated in its flagship report that companies could unlock $12 trillion globally in revenue and savings by pursuing sustainable business models. Such models can also create up to 380 million jobs by 2030 in key economic sectors, including food and agriculture, energy, transport, health, and municipal government. In the energy sector alone, the opportunities are valued at $4.3 trillion.

Corporate strategies are increasingly falling into line with these findings. In 2005, on the heels of Hurricane Katrina, which devastated the US Gulf Coast and affected a significant regional consumer base for Walmart, the company’s then-CEO Lee Scott delivered a telling speech, entitled “Twenty-First Century Leadership,” to all company employees.

Scott set significant environmental goals, as part of a broader vision for Walmart to become a more responsible corporate citizen.

Today, Walmart is a leading commercial solar and on-site renewable-energy user, deriving about 25 percent of its global energy consumption from renewable sources. (The company’s goal, set by Scott, is to rely entirely on renewables.)

By increasing the efficiency of its US fleet of trucks, Walmart avoided the emission of nearly 650,000 metric tons of CO2 from 2005 to 2015, and saved nearly US$1 billion in 2016 alone.

Another US company, Mars, Inc., is on a similar path. A signatory of the Business Backs Low Carbon letter, Mars is working to eliminate its greenhouse-gas emissions entirely by 2040, through greater efficiency and investment in renewable energy projects like wind turbines. The company’s CEO, Grant Reid, is also a member of the Business & Sustainable Development Commission.

But, while business leadership and collective action are needed to create a sustainable and inclusive economy (a central message of our commission’s report), the private sector cannot do it alone.

Government must be an active partner, helping to scale sustainable activities by creating market conditions that spur a “race to the top” and unlock the finance needed to keep America competitive and innovative.

So it is not enough simply to oppose Trump’s environmentally damaging policies; businesses need to get his administration on their side, so that the US authorities create an environment that encourages sustainable practices and green innovation.

Such an environment could include carbon pricing, which a growing number of businesses are pursuing internally and tax credits for carbon efficiency.

Trump’s own businesses have benefited from such government interventions. As the New York Times recently revealed, in 2012, Trump secured nearly US$1 million in energy-efficiency incentives and low-interest loans from New York State.

A groundswell of support from CEOs, on a nonpartisan basis, could be the key to spurring the needed action. Before the Paris climate conference, politicians knew that environmental activists wanted a deal to limit climate change; arguably, what ultimately drove them to act, however, was finding out that CEOs and boards felt the same way.

Business leaders need to show Trump that they are not cheerleaders for coal, pollution, and global warming. They are determined champions of an enlightened environmentalism that is in the interest of all their stakeholders – customers, shareholders, employees, and the communities in which they operate.

Copyright: Project Syndicate

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RT/RA

Chair of the Business and Sustainable Development Commission

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