Climate change slowly heats America's CSR agenda

Climate change slowly heats America's CSR agenda SDI,
28 November 2006

While North America's neo-conservative federal governments in Ottawa and Washington cannot grasp that providing environmental security is a fundamental responsibility of federal government, the raison d'être of federal governments is arguably being subsequently undermined at the sub-national level, both in Canadian provinces and US states, not to mention individual cities.

The need for urgent action on climate change is beginning to be reflected in the corporate world, albeit not in a uniform pattern.

In presenting material from his work, "Winning the Oil Endgame," Amory Lovins of the Rocky Mountain Institute argued that the US can end its oil use by the 2040's. Logically, saving energy is cheaper than buying it and, as the 1970's illustrated, has no downward effect on GDP, quite the opposite in fact. According to Lovins, oil causes 42 per cent of all emissions and companies like Dupont are aiming to cut their greenhouse gas emissions by 65 per cent of 1990 levels by as early as 2010. The business case is demonstrated by BP who made a $1 billion profit by 2002 through cutting emissions by 10 per cent of 1990 levels while the Swedish power company, Vattenfall, saw profits rise 54 per cent by making electricity 78 per cent more cost efficient.

In presenting a break-out session on climate change, Sue Hall posed the question of whether climate change can make markets restructure, particularly in light of the Stern Review Report which highlighted the fact that there may well be inadequate private capital to meet the costs of climate related catastrophes. In the aftermath of Katrina, the US government need to appropriate $28 billion for flood risks. Gary Guzy of Marsh, the insurance firm, remarked that insurers are withdrawing from property insurance in coastal areas. Consequently, Florida's largest insurer is the State Fund.

Responsibility for mitigating climate change has been well received by companies such as Sun Micro and UTC. John Mandyck of Carrier Corporation, a UTC company, cited that energy produces 85 per cent of all emissions and, in the US, the average home has increased in size by 60 per cent over the past fifteen years. This is an important consideration as 30 per cent of energy usage in the US is due to air-conditioning. Therefore, they are aiming to launch new goals to achieve a 20 per cent reduction in energy usage.

Dave Douglas at Sun estimated that IT "can wipe out all the climate gains made through having platinum star green buildings" as powering all the IT systems produces a billion tonnes of CO2 worldwide. This has prompted Sun to develop Ecoservers which, if certain "market issues" were addressed, would provide a benefit to consumers in terms of offsetting the reduction of their footprint.

Moreover at Sun they have moved toward having 46 per cent of their workforce as a virtual workforce, resulting in needing less actual office space saving, as a result, 30,000 tonnes of emissions reductions through not having to commute. This represents an emissions reduction of between 5 and 8 per cent. Also, they are seeking ways to offset the carbon problem which has been consequently externalised to the individual virtual worker.

Truman Semans of the Pew Centre stated that in assessing corporate activity on climate change, many companies were not transparent on the returns their emissions reductions programmes have brought. However, in asking companies to list the most effective strategies, energy conservation always comes out on top. In terms of the highest impact on a company's NPV (net present value), these are usually perceived as regulatory. Integrating climate into a broader sweep of business strategy therefore seems to make a valuable business case, especially if extended to value-chain partnerships and biofuels.

Yet, as Sun's Douglas stated, they are "being affected by regulatory uncertainty," especially when it comes to assessing environmental and climate regulations in deciding where is best to build as new factory.

On a global scale, as Semans concluded, the US needs to move from voluntary action as other big emitters such as India and China will do nothing unless the US adopts a binding position.

While much of the Western world considers its options, including nuclear energy, Amory Lovins pointed out that low-no carbon micropower added four times the level of nuclear power in 2005. Therefore, Dr Lovins was content to conclude that by a public policy that seems determined to distort information rather than support positive action, US Federal Energy Policy is the biggest threat to energy security. If companies like Wal-Mart can set the target for their entire truck fleet to be a quarter more efficient by 2007, and twice as efficient by 2010, then "what are we waiting for?" he asked.

The answer may well be "about 800 days" unless Barbara Boxer's appointment on the US Senate's Environment Committee yields a turn in fortunes.