The role of the Corporation in Climate Change
The corporate sector plays a significant role in anthropogenic climate change with an estimated 35% of direct greenhouse gas emissions and 45% of indirect emissions emanating from business activity, (Pachauriet al, 2014). Furthermore it is estimated that just 90 “carbon majors” are responsible for 63% of cumulative worldwide greenhouse gas (GHG) emissions between 1751 and 2010 (Heede, 2014). These entities include companies, state owned enterprises and nation states. Indeed many companies amongst the carbon majors have emissions in excess of small nation states. Fortunately this responsibility is increasingly recognised and there are a myriad of ‘for purpose’ organisations that are increasingly holding organisations to account for their emissions and other unsustainable practices. A combination of increased regulatory pressure, shareholder activism, consumer discretion and the enlightened leadership of some CEO’s and Boards has fundamentally changed the social context in which many businesses operate. Historically, traditional business models perpetuate the tragedy of the commons by focusing exclusively on only one stakeholder group and allowing the belief in shareholder primacy to justify the exclusion and marginalization of environmental concerns as an externality. Concepts like triple bottom line are designed to move environmental concerns from an externality to a core outcome of a flourishing and sustainable business.
Economic Models and Consumption
One of the critical questions in climate change mitigation is the extent to which the corporation can be both a significant cause of the emissions of GHG’s and a meaningful actor in their mitigation, (Wright & Nyberg, 2015). At the core of this debate is the question regarding the degree that capitalism depends on the destruction of nature and the environment for its own development. Given that growth (as measured by GDP) is inherent in capitalist system, the issue ultimately revolves around the extent to which growth can be decoupled form material consumption and the consequent environmental degradation. There are some positive signs that the amount of resources required for economic growth is reducing over time (McAfee, 2019) but there is currently no indication that these trends are anywhere near sufficient to reverse the multiple breaches of planetary boundaries including climate change and loss of biodiversity. A recent review of the concept of green growth which is predicated on the decoupling of economic growth and material consumption, has concluded that while some modeling scenarios can lead to a relative reduction in material footprint, there is no empirical evidence for an absolute reduction of the scale required to keep emissions and subsequent warming with safe planetary limits (Hickel & Kallis, 2020). The narrative is divided here between those who see the opportunities for capitalism to undergo a reformation into various iterations of natural, conscious and green variations (Mayer, 2018; Collier, 2018) and those who see the model as irredeemably connected to the consequential environmental degradation and self-destruction, (Wright & Nyberg, 2015; Klein, 2014).
This lack of empirical support for the concept of green growth has led to the development of alternative economic models like steady state and doughnut economics (Raworth, 2018) and circular economies that are no longer predicated on the assumption of perpetual growth. It also promotes a more indirect challenge to the primacy of GDP as the most relevant indicator of societal well-being. Given that inequality and resource degradation are the two criteria most strongly associated with societal collapse (Link Science Matters) paying attention to the converse, as indicators of a flourishing society, would seem an essential development. The evidence for the decoupling of GDP and carbon emissions is more encouraging but Irrespective of the underlying economic model it’s indisputable that corporations have a significant role to play in the modification of policy, production and product towards a more sustainable and less carbon intensive process. However not all business sectors can and will contribute in the same way.
The Business of Sustainability
Sustainability has been described as either weak which models a business as usual model moderated by a drive for eco-efficiency or strong sustainability where worldviews are challenged, interdependencies are recognized and the needs of future generations acts as a moderator of contemporary consumption, (McLean, 2017). The path to organisational deep sustainability has been operationalised by the work of Peter Senge who has outlined five potential stages of corporate sustainability. These stages map the reasons to engage in environmental management and move from non-compliance through regulatory and consumer coercion and finally to a state of purposefulness and vision that transcends shareholder primacy, (Senge, 2014). The leadership required for such a transformation remains the subject of significant deliberation. However, there is strong alignment here with the recent focus on organisational purpose that defines the contemporary mission of the corporation as, “producing profitable solution to the problems of people and planet”, (Mayer, 2018).
Business Sectors
However not all sectors have the same responsibility for emissions or the same attitude towards mitigation and adaptation. Businesses that produce carbon intensive products have been terms the carbon majors (Heede, 2014) and are responsible for approximately the vast majority of carbon emissions. Indeed the top 20 investor owned corporations are responsible for 29.5% of global emissions. These companies are frequently in opposition to other sectors like Finance and Insurance whose goal is to mitigate the risk of engagement with carbon intensive industries – be that financial, social or political. Applying the Senge criteria above it is clear that organisations vary considerably in terms of where they are in the stages of corporate sustainability with the carbon majors generally lagging other industries whose products, processes and policies have less significant and direct impact on emissions. However the relationship between sectors can be complicated with some like insurance potentially posing a moral hazard in that in allows companies to take on more risk secure in the knowledge that they can limit the downside risk of any activities that adversely impact the environment. Whilst the challenges across sectors in terms of emission mitigation are clearly different, there are some common factors to consider.
Current Initiatives in Mitigation and Adaptation
Firstly there is occurring in most sectors a recognition that radical collaboration is necessary to address the issue of climate change. Multiple collaborations have emerges in the mining oil and gas, and finance sectors. Secondly there is a recognition that increased regulatory pressure and legal challenges are inevitable and progressive corporations are wise to act before compliance with stringent environmental controls becomes mandatory. Thirdly there is a growing awareness of green HR issues and a recognition that attracting and retaining talent especially from the millennial cohort will require substantive evidence of the adherence to meaningful ESG criteria, (Renwick et al, 2016). Finally there is a developing appreciation across business and industry bodies that the future of the corporation depends on taking a proactive and definitive view on climate change. Various business organisations have modified their strategy to align with climate change mitigation, notably the Business Round table’s extension of corporate purpose to include protecting the environment and embracing sustainability and Blackrock’s public affirmation of their commitment to sustainable investing.