The 4 critical steps to climate leadership
Business leaders can no longer afford to look the other way on climate change. The recent National Climate Assessment revealed that regional economies and industries dependent on natural resources are increasingly vulnerable to the impacts of climate change as are energy systems. Warmer climates will increasingly disrupt international trade, prices, and supply chains, and costs could reach hundreds of billion dollars per year by the end of the century. Climate change doesn’t just threaten ecological balance, it threatens corporate balance sheets.
In light of these findings I’m encouraged by a recent survey of corporate leaders, 82 percent of whom said companies need to advocate for or take a stand on environmental, social and governance issues and that “climate and environment” was one of the three highest priorities for their organizations.
Knowing that a company should take action, however, is a long way from actually taking action on climate. While there are a growing number of cases where leading companies and major investors are ahead of the federal government on climate action, it’s simply not enough, and many more U.S. businesses need to step up.
The role that CEOs and companies play in global governance is changing. Leaders and laggards, winners and losers, will all be defined by how they respond to climate change. The leaders will surface based on their ability to take these four critical steps.
- Set big, hairy, audacious goals
From 30 years of work with companies and investors, I’ve seen firsthand that setting big goals is how innovation thrives and big things get done. My advice: Make no small plans.
Consider Walmart. Just over a year ago, Walmart committed to work with hundreds of suppliers to reduce 1 billion tons of greenhouse emissions (equal to the annual GHG emissions of Germany) from its supply chain. Or McDonald’s, the world’s largest restaurant chain and the first to announce a science-based climate target to reduce greenhouse gas pollution from its restaurants and offices 36 percent by 2030. These goals send powerful signals throughout the supply chain to cut waste and emissions.
To date nearly 500 companies have committed to science-based targets and over 150 companies have committed to 100 percent clean energy. Yet only about half of Fortune 500 companies have set a climate or clean energy target which means a lot remains to be done.
Of course, sustainability commitments aren’t just for large, multinational companies; they are essential for companies of all sizes, especially since today’s small business can transform into tomorrow’s global corporation faster than ever before.
- Collaborate for scale
Even the biggest companies can’t achieve these ambitious goals on their own. To go far, you have to go together.
Last month, Smithfield Foods, the world’s largest pork producer, pledged to install manure lagoon covers and digesters on 90 percent of its hog finishing capacity in three states. The commitment includes Smithfield’s own operations, contract farms, as well as opportunities for other integrators to join. This will help Smithfield exceed its goal of reducing supply chain greenhouse gas emissions 25 percent by 2025.
To hit its 1 gigaton goal, Walmart is calling on its global supply chain to collaborate and lead the way. So far, over 400 suppliers from 30 countries including 3M, Coca-Cola North America, Georgia Pacific, PepsiCo, Shell, and Tyson foods are on board. Cutting emissions from factories, farms, forests, fleets, and beyond.
The Beauty and Personal Care Sustainability Project is another collaboration driving transformational change, by working to put more sustainable products on retailers’ shelves. In May, CVS, Sephora, Target, Walgreens/Boots Alliance and Walmart —together accounting for about half the $86 billion U.S. beauty and personal care market — announced a common set of sustainability metrics, and a list of 5,300 problematic chemical ingredients they’ll be focusing on. Just recently, Rite-Aid and Amazon joined the group and I hope others will, as well.
- Engage proactively on environmental policy
Climate change is too big for business to tackle alone. While my organization, Environmental Defense Fund (EDF), believes strongly in markets, incentives and innovation, we also need policy to set a level playing field and drive innovation in the right direction.
That’s why one of the most important things companies and investors can do is make their voices heard and use their influence to accelerate the transition to a low carbon economy. This includes supporting smart policies, like weighing in for prices and limits on carbon pollution with the new Congress. Or following in the footsteps of Danone, Mars, Nestle, Unilever, and Apple by filing comments opposing regulations such as the Trump Administration’s Affordable Clean Energy rule, which is neither clean nor affordable.
It also includes opposing misguided rollbacks, like the Trump Administration’s attempt to eliminate common sense methane regulations and weaken our national fuel economy standards.
Companies can also show leadership by calling for and publicly supporting — policies that cut climate pollution, such as the recently introduced Energy Innovation and Carbon Dividend Act. This bill sets ambitious greenhouse gas reduction goals and harnesses the power of the market to meet them, letting businesses choose for themselves how to cut pollution. The bill is also designed to drive investment and innovation in new, better, and faster ways to cut emissions.
- Accelerate environmental innovation
Leading companies recognize that innovation is the key to connecting business and environmental goals and ensuring returns on investment. EDF surveyed 500 top executives from corporations with more than $500 million in revenue, and more than 90 percent of respondents said that emerging technologies can help improve both their bottom line and environmental impact.
Today, we are seeing the emergence of a Fourth Wave of Environmental Innovation: a revolution driven by strategic application of new technologies or creative business approaches that give people the power to scale up solutions to our most urgent environmental challenges. This includes teaming up with Google in Oakland, Houston and London to map air pollution using high-tech monitors fixed atop the cars this combination allows us to measure air pollution at a never before seen scale.
Just last week, Kickstarter announced a new feature that makes it easier for creators to evaluate and reduce environmental impacts of their products from the concept stage. The new Environmental Resource Center, created in partnership with EDF, will serve as an information hub for project creators and include case studies, best practices, and more. This new and innovative way of thinking embedding sustainability from the start will give creators a business advantage and help meet consumer demand for sustainable products.
It’s leadership from companies like Kickstarter that will encourage more businesses to make the big commitments and investments necessary to accelerate the transition to a clean energy future. The laggards will find it difficult to catch up to industry innovators.
It’s time for more corporate leaders to start seeing the world as their business.
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