Climate Change: The Ball Is In Our Court
Companies only do what we as consumers and investors reward them for doing
Public attitudes regarding the scientific certainty of climate change have undergone an enormous shift since the mid-aughts, when former Vice President Al Gore’s movie An Inconvenient Truth first hit the theaters.
The increasingly hard to ignore climate-related crises (e.g., Houston flooding, destruction of the Florida panhandle, the back-to-back leveling of Puerto Rico, deadly fires in the Western US, etc., etc.) have added momentum to the shift.
Whereas 15 years ago, climate change was considered a niche political issue, earlier this year The Atlantic posted a poll showing that American voters considered climate change the second most important topic to them for the 2020 elections.
Considering this big shift in attitudes, the gentle reader would be forgiven for thinking that we as a civilization must be making progress at reducing atmospheric carbon dioxide levels.
Allow your correspondent to humbly submit exhibit A as proof that this progress is not happening.
How can the Keeling Curve continue its upward trajectory when the largest per capita emitter, the U.S., is consistently reducing its greenhouse gas (GHG) emissions?
From my perspective, the reduction in emissions simultaneous to the Keeling Curve’s inexorable upslope is due in large part to a shift towards the offshoring of manufacturing to low-income countries in the developing world.
A few months ago, I asked a corporate sustainability officer how his Fortune 500 company tracked GHG emissions associated with the raw materials and manufactured inputs in his company’s products.
The executive was flustered and seemed shocked I would ask such an “unfair” question. He found it unfair for one simple reason: a lot of firms, including his, have very little awareness of the carbon footprint associated with their supply chains.
Corporate press releases might talk optimistically about reducing packaging waste, for instance, while one of their suppliers is clear-cutting old growth forests, strip mining the earth beneath, and dumping arsenic into the nearest available river system.
The low level of corporate awareness (which the cynical might see as an act of willful avoidance of reality) leaves us where we are today — steadily-rising GHG emissions despite widespread public agreement that reductions are vital.
A perfect recent example of a company promising good and doing badly is that of The Retailer Who Must Not Be Named. Amazon reported at the end of last month that its GHG emissions had risen by 15% compared to the previous year’s, despite its highly-publicized Climate Pledge.
Dr. Rajat Panwar, an associate professor of Sustainable Business Management at Appalachian State University, recently published an interesting research paper on supply chain-related emissions, and commented on Amazon’s announcement.
“The Amazon situation is just an example of the bigger problem surrounding corporate claims of environmental responsibility. Most global corporations now make such claims, but the reality is that half of the carbon emissions since the industrial revolution have happened within the last 30 to 35 years. It seems that corporate environmental disclosures hide more than they reveal.”
Panwar says one problem is that corporations often outsource much of their work, which not only reduces their control over the environmental impact they have, but also their very knowledge of that impact.
One study Panwar cites revealed 80 percent of 1,300 firms submitting data to the SEC could not even determine the country of origin of their products, let alone any information about their carbon footprint.
Panwar’s research found that companies that build vertically integrated supply chains are measurably more socially and environmentally responsible than those who outsource to third-party vendors.
In the words of the old business adage, if you want to manage it, you have to measure it. A vertically integrated supply chain forces a company to measure their production process carefully; armed with these measurements, they can decide how best to manage and reduce GHG emissions.
Managing one’s supply chain seems to make perfect sense, so why don’t more corporations do it? The answer is simple: Consumer Demand.
If you as a manager know there is a significant subset of your consumer base that will literally trample old ladies and babies for a chance to buy a flat-screen TV at a deep discount, you are going to look for every opportunity to cut costs. As long as a supplier can deliver a component for a few dollars less, you’re not likely to look that gift horse in the mouth.
This is why I thought the advice ex-Economic Hit Man, John Perkins, offered in my last article — to act as a conscious consumer and write letters to the CEOs of companies that make your favorite products — was so powerful and important. The same advice holds true for investors — hence, the recent talk of divesting from oil companies in some circles.
Companies only do what we as consumers and investors reward them for doing. If we reward them for systematically making our planet unlivable, they’ll do it — they are legally bound to do it, in fact!
The ball — gentle reader — is in our court. The fate of our civilization hinges on how we return it.
Originally published at https://www.forbes.com.