Most Fortune 500 companies today have made public pledges and statements to promote social responsibility and environmental sustainability. However, few have turned their efforts into real, transformational change.
A 2013 survey by Accenture identified the problem as a “cycle of ‘pilot paralysis’—individual, small-scale projects, programs and business units with an incremental impact of sustainability metrics.”
So in this year of the United Nations’ Sustainable Development Goals (SDGs) and the long-awaited “COP-21” climate change conference in Paris, where new ambition to tackle climate change is expected, it’s time for corporations to get serious.
What can the corporate world do to truly make a difference?
Breaking free of “pilot paralysis,” Accenture tells us, requires “innovation and collaborative initiatives right across the enterprise—from strategy to operations to the supply chain.” The scope of the action needs to be vast to meet the scale of the challenge.
Unilever CEO Paul Polman says that a massive mobilization by global corporations is needed – $90 trillion in investments over 15 years. Polman says, “Businesses make up 60 percent of the global economy. If they don’t play an active part, how can we solve this crisis?”
There are various approaches to sustainability but let’s walk through one of them that captures the need for ambition and impact. The experts at CDP, a corporate sustainability-focused nonprofit based in the UK, have proposed the following commitments that corporations can make to address climate change in particular:
- Adopt a science-based emissions reduction target. Nothing shows a commitment like adopting a target. The Intergovernmental Panel on Climate Change, says that to stay below 2º Centigrade warming, the world needs to cut emissions drastically. Industrialized countries need to reduce greenhouse gas emissions 80 to 95 percent below 2010 levels by 2050. Corporations need to do their part by getting carbon – and other waste – out of their operations, and the Coca-Cola Company, PepsiCo, Red Bull and Unilever have also initiated efforts.
- Commit to having a strategy in place to procure 100% of electricity from renewable sources. The first and most important way to reduce emissions is to start using renewable energy sources. This might sound hard, but Unilever, Mars, Nestle, H&M, and IKEA have all made this commitment.
- Commit to removing commodity-driven deforestation from supply chains. This is really hard because corporations have to meticulously track where all of their supplies come from and only buy from sustainable producers, but corporations are doing it. Through the Tropical Forest Alliance 2020, hundreds of companies (via a group called the Consumer Goods Forum) have committed to stopping deforestation caused by soy, beef, palm oil and pulp, and paper.
- Commit to give climate change information in mainstream reports as a fiduciary duty. In 2010, the U.S. Securities & Exchange Commission required companies to disclose material climate change-related risks as part of corporate reporting. But in 2013, only 27% of publicly traded companies’ required reports even mentioned the words “climate change.” A much deeper examination of operations and disclosures is needed for investors and stakeholders to be able to assess companies’ actions and vulnerabilities to climate change.
- Commit to responsible corporate engagement on climate policy. For example, companies can sign on to the corporate climate declaration organized by Ceres; support U.S. government regulation on carbon emissions in the power sector – known as the Clean Power Plan – as over 200 companies did in a public letter in December; or join a pro-climate action such as Business for Innovative Climate and Energy Policy, or BICEP.
- Commit to put a price on carbon. Conservative and liberal economists agree: If you don’t make people pay to emit, there’s no incentive to stop. This common-sense idea is the most straightforward way to encourage better energy practices. At the UN Climate Summit last September, more than a thousand companies supported a tax or fee on carbon.
It’s up to every company to figure out how to reach these and other important sustainability and corporate responsibility goals. But the first step is making a commitment. It is never too soon to act.