Corporations and climate change

March 29, 2008

Global warming, General Motors' vice-chairperson of global product development Robert A. Lutz told reporters in a closed-door meeting in January, is "a total crock of shit". Within hours the remark was reported on the internet, and spread, as Lutz subsequently lamented, "like ragweed".

Lutz's declaration was no isolated outburst. A March 4 Inter Press Service article reported that a blog entry by the GM executive had earlier derided efforts to force car companies to build smaller, more fuel-efficient vehicles. Such attempts, he wrote, were "like trying to address the obesity problem ... by forcing clothing manufacturers to sell smaller, tighter sizes".

According to the March 5 Wall Street Journal, Lutz is "sometimes referred to in Detroit as Mr Horsepower for his love of big, powerful cars". His firm's latest creations include the Sportwagon, 40,000 of which are to be built in South Australia by GM's Holden subsidiary, mostly for export to the US. Top-of-the-range models of the Sportwagon feature a monstrous six-litre V8 motor.

The US Environmental Protection Agency has noted that 2006 car models in the US were the fastest and heaviest in 31 years. Their average fuel economy was about 5% below the peak reached in 1987-88.

Lutz, it appears, does not see such facts as cause for self-criticism, either personal or corporate. "My beliefs are mine and I have a right to them", he wrote in a blog entry during February, "but among my strongest beliefs is that my job is to do what makes the most business sense for GM".

Lutz the klutz

The reason why this executive dinosaur has aroused such consternation is because it is now almost unheard of for senior corporate executives to express themselves so crudely on climate change issues — whatever their private views might be. Since about the turn of the century, the orthodoxy has changed.

The new line is trumpeted by the London-based oil major BP. Years ago, the initials stood for "British Petroleum"; in 2000, the corporation adopted the slogan "beyond petroleum".

BP was not always so virtuous. In 1989, soon after the United Nations began addressing the question of global warming in a concerted way, the firm joined several dozen other resource, vehicle and chemical corporations to form the Global Climate Coalition (GCC). Other members included ExxonMobil, Ford, GM, BHP Minerals and the United States Chamber of Commerce.

The GCC directed its blows not against climate change, but against moves to regulate greenhouse gas emissions. For its lobbying and advertising campaigns it relied largely on public relations and advertising firms that had earlier served the tobacco industry.

But by 1997, BP had undergone an epiphany. It left the GCC and began "greening" its image, acquiring a distinctive new "exploding sunflower" logo. Chiefly through purchasing Solarex, the world's largest manufacturer of solar panels, it set up a renewable energy arm.

"Beyond petroleum is a summation of our brand promise and values", a BP website declares. "It is both our philosophical ideal and a practical description of our work."

However early in December last year, the company announced that it would invest nearly £1.5 billion in a joint venture with a Calgary firm to produce oil from the Athabasca tar sands in northern Canada. Occurring in the form of bitumen mixed with sand and clay, the tar sands are extracted using high-temperature steam. While producing a barrel of oil conventionally involves releasing about 29 kilograms of CO2, the figure for tar sands oil can be as much as 125kg.

"By jumping into tar sands extraction", Greenpeace Canada campaigner Mike Hudema told the December 10 British Independent, "[BP] is taking part in the biggest global warming crime ever seen ..."

Science prevails

GM and BP are conspicuous for their brazenness, but even the most discreet and image-savvy corporations are not fundamentally different. Ultimately, their actions are determined not by ethics, or even a desire to appear consistent, but by the need to maximise profits and "shareholder value".

With their resource or energy-use focus, the corporations that set up the GCC recognised that efforts to limit greenhouse emissions would cost them money. Their period of belligerent denial, during which scores of millions of dollars were spent on deriding climate change as "unproven science" lasted in some cases well past the turn of the century.

In the end, the science prevailed. Particularly after the 2001 presentation of the United Nations Intergovernmental Panel on Climate Change's Third Assessment Report, most of the corporate leaders involved in the GCC began to accept that global warming was genuine and that efforts to deny and conceal it would be counter-productive.

Accordingly, corporate funding to "denialist" think-tanks was cut back. The GCC closed down in 2002. Money began instead to flow to consultants who promised a "greening" of corporate images. Firms were established that offered to render corporate clients "carbon neutral". A small but rapidly expanding cohort of renewable energy companies began attracting attention from investors.

Meanwhile, executives across the broad spread of corporations showed only limited interest in global warming — reflecting, no doubt, the skeptical and sometimes derisive coverage given to the issue by the conservative press. As late as May 2007, British writer George Monbiot noted: "A YouGov survey revealed that climate change is pretty much at the bottom of the 'priority list' for the FTSE 350 companies in the UK. Only 14 percent of the 73 companies interviewed had any kind of serious strategy for tackling climate change."

By the beginning of 2008, this broader mood was changing. Soon after the new year a McKinsey Quarterly survey of 2687 global senior executives recorded 87% as saying they were "personally somewhat or very worried about global warming".

Respondents expected that the environment would attract more public and political attention and affect shareholder value far more than any other societal issue. Sixty per cent viewed climate change as an important consideration in determining overall strategy, and nearly 70% thought it important for managing corporate reputation and brands.

Some of this shift in corporate thinking is probably due to reports of the December 2007 United Nations Climate Conference in Bali. But more crucial, one suspects, have been survey results showing that consumers are now widely concerned about climate change — and that many say they will vote with their wallets to have it stopped.


In October 2007, Accenture surveyed more than 7500 consumers in 17 countries in North America, Europe and Asia. Eighty-five per cent of respondents said they were either "extremely" or "somewhat" concerned about climate change, and 81% said they believed it would directly affect their lives. Eighty-nine per cent indicated they would switch to energy providers offering products that emitted less carbon. Sixty-four per cent said they would be willing to pay a higher price — 11% higher, on average — for products and services with lower greenhouse impacts.

For corporations, the benefits of acquiring at least a green sheen are now beyond question. But while PR messages have mostly been revamped, this does not mean that company practices have changed.

On the whole, the record of corporations in taking practical steps to address global warming remains lacklustre. A Clifford Chance survey of major world firms in January 2008 records that all but 26% had considered launching a product related to climate change. But the survey recorded climate change as being "emphasised" at only 29% of firms. Some 44% of the McKinsey respondents said that climate change was not a significant item on their agendas.

More than 60% of respondents working for companies that considered environmental management at least somewhat important said that their firms had not set greenhouse gas emissions targets. In time, environmentally conscious customers are bound to recognise corporate "greenwash" for what it is.

Taking more than token action against global warming costs real money, often enough to threaten the competitiveness of firms that venture it. As they contemplate a nuts-and-bolts "greening" of their operations, corporations are a little like penguins massing on the edge of an ice floe. Who will jump first, and risk being eaten?

The demand is thus going out for clear government regulations that apply to everyone. A survey of British-based firms reported by the Financial Times in July 2007 showed that a "large majority" thought the best way to reduce emissions would be through more state regulation. The Accenture survey found that four out of five companies wanted governments to take a central role in tackling climate change.

Reporting this finding, the Independent in January observed: "The [Accenture] survey demolishes George Bush's insistence that global warming is best addressed through voluntary measures undertaken by business."

When leading corporations accept state regulation of aspects of their activity, they do not surrender control altogether. In capitalist society, big business routinely exercises extraordinary influence over government decision-making. This has applied particularly to climate change policy in Australia and the US.

Greenhouse mafia

Citing doctoral thesis research by Guy Pearse, formerly an adviser to Liberal Environment Minister Robert Hill, Clive Hamilton in his book Scorcher explains how a cabal of fossil fuel, electricity, mining and refining industry association chiefs — the self-described "greenhouse mafia" — largely monopolised policy-making in the climate change area in Australia under the former Howard government. In the US, the oil industry links of President George Bush, Vice-President Cheney and Secretary of State Condoleezza Rice are notorious.

John Howard, of course, is now out of office, and Bush is soon to follow. The climate policies of Howard and Bush in their classic form — a mix of outright denialism, tokenism and obstruction — are now mostly viewed as electorally unsalable. In Australia, the Rudd Labor government acknowledges the dangers of climate change, and has called in economist Professor Ross Garnaut to help set emissions reduction targets.

Strong corporate input into the policy-making process, however, will continue both in Australia and the US. Garnaut himself is a director of two mining companies. The Australian "greenhouse mafia" will continue to function. Almost all of its members were formerly senior federal bureaucrats, and Labor government ministries are familiar territory for them. One prominent "mafia" figure, the Australian Coal Association's Mark O'Neill, was earlier a senior adviser to Labor PM Paul Keating.

Under Prime Minister Kevin Rudd, and whoever succeeds Bush, the obstruction of environmental initiatives will remain; the continuing domination of the ministries by pro-business bureaucrats will guarantee that. The denialism and tokenism will endure too, though in modified form. Under the new conditions, the corporations will not dispute the reality of climate change. But the scope of the dangers, and the extent and timing of the measures needed to deal with them, will be fiercely contested.

A pointer to the new corporate strategies is provided by the World Business Council for Sustainable Development, which groups some 200 multinational companies. This body calls on governments to agree on global targets, and urges cuts in emissions of 60-80% from current levels by 2050.

This ambitious-sounding target, however, is less demanding even than Australian Labor's "60 by 2050\" goal. The latter proposes its cuts not in relation to current emissions levels, but to the markedly lower levels of 1990.

Meanwhile, Labor's target is itself gravely inadequate. It corresponds to global warming of about 3̊C, far into the zone where further, runaway warming would be almost certain.

Hamilton, like Pearse before him, stresses the quasi-religious zealotry with which the members of the "greenhouse mafia" combat the environmentalist cause. By contrast, it could be argued, most corporate executives simply want to do business and make money in a straightforward regulatory setting.

The future, however, is most unlikely to allow such relatively easy, painless solutions. Among climate scientists, the emerging consensus now holds that there is no level of net carbon emissions that can be considered "safe". With vital years lost to corporate recklessness, the only way to be reasonably hopeful of avoiding climate disaster is to move swiftly to a zero-emissions world economy. In rich countries like Australia, this future economy will actually have to be emissions negative.

None of this will come cheaply, and the profit rates of most companies will suffer. With worldwide economic conditions unpromising in any case, the additional burden of stringent anti-greenhouse action will put the survival of many enterprises in peril. Rather than accept the loss of their wealth, many of the corporate rich who until now have been relatively indifferent to climate change will join with the zealots of the energy and resources industries.

As Hamilton explains, the triad of anti-environmentalist industry leaders, pro-business bureaucrats and denialist politicians has until now had striking success in beating off environmentalist lobbying. Mere cajolery, and even tightly reasoned scientific argument, simply will not work against people who are superbly connected and who take pride in their closed-minded ruthlessness.

Faced with this wall of greed and prejudice, the only hope for environmentalists is to take their message to the majority of Australians who want more for their grandchildren than a primitive, insecure life in the southernmost corners of the continent.

Instead of an environmental movement that focuses on submissions to government departments, what is needed is a movement that works to involve the broadest possible layers of the population in active campaigning.

It must also be a movement that is not scared of the implications of what it demands. If the only way to force major corporations to halt their emissions is to take them into public ownership, that is what the movement must deliberately pursue.

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