Leadership
How CEOs Can Save the World from Global Warming

The business world is waking up to the challenge of climate change.

Apple CEO Tim Cook recently lashed out at a shareholder who pressed the company to stop investing in carbon reduction and renewable energy. In the most recent World Economic Forum Global Risk survey of CEOs and world leaders, three of the top six issues of “highest concern” were failure to tackle climate change, extreme weather, and water crises.

t’s a good thing that business is on this, because for 20 years now, annual global climate negotiations have yielded very little. And in the US, all attempts at a comprehensive climate bill have basically failed. A group of 30 US Senators got together recently to revive the issue, but any legislation of impact is very unlikely to come anytime soon.

The private sector is our best hope for addressing the carbon challenge — companies have the resources and innovative skills to develop and implement the range of technologies that we need to slash global emissions.

So are companies taking action on climate change? On many levels, yes — but not fast enough. I see three major categories of action, with varying degrees of success: on-the-ground work to become more efficient, reduce carbon, and buy renewable energy; dedication of organizational resources to innovate and create more products and services that reduce impacts; and some lobbying and political action.

First, companies are increasingly taking concrete action to reduce energy and carbon. Of the world’s largest companies, about a quarter now have targets in place, for energy efficiency or use of renewable energy, that meet science-based targets for carbon reduction (about 80 percent reductions by 2050, or as PwC has calculated, a 6 percent reduction in carbon per dollar of GDP per year). Goals like “cut carbon 30 percent by 2020” are in line with the science.

Some examples: the North American division of spirits giant Diageo cut carbon emissions by 75 percent in a few years. The company realized 50 percent of those reductions through “low or no-cost” changes — efficiency efforts that paid back immediately or in a short time. IKEA is on track to hit its goal of 100 percent renewable energy by 2020, with 600,000 solar panels on its stores — the company will generate 70 percent of its energy consumption needs by 2015. Intel buys enough renewables (mostly offsite) to offset all of its power use; and Walmart Stores is increasing its renewables use by 600 percent (Walmart is already the largest commercial buyer in the US) by 2020. Efficiency and use of renewables is on the rise. So “money” is being spent, usually with a quick or immediate payback (so it’s a no-brainer).

On the second front, dedicating organizational resources, there is progress, but again, it’s not often explicitly about climate change.

Companies in key sectors, such as electronics and IT, are focusing innovation efforts, in part, on reducing the energy use of their products. The auto industry is also raising fuel efficiency and rapidly adding hybrid and electric models. Ford Motor Co. is one of the few companies that has set product development goals based on climate science, and this has affected innovation. The company just announced that is most popular truck, the F-150, would use aluminum to lose 700 pounds, raising its fuel efficiency. That said, tackling carbon is hardly the core focus of most businesses.

The third path is policy and lobbying. The record here is mostly abysmal, with many companies (especially in particular sectors with vested interests) using lobbying to fight government action on climate. But there is a small, but growing list of leaders, led by Nike, Starbucks, Intel, Gap, and Apple, signing onto the Climate Declaration, a public statement in support of policy action. But even within this group, only a small number of these corporate leaders actually go to their representatives and directly push for, say, a price on carbon.

Action is growing, but we need much greater focus from the business community. It is in our interest to reduce carbon, save money, and build more resilient organizations that are less reliant on erratically priced fuels. This new mode of thinking is a core part of the “Big Pivot” that I believe companies now need to pursue to manage and profit from the world’s mega-challenges (climate being the largest, but also including resource constraints that drive up input prices).

If all companies were shifting faster to renewable energy, innovating so their products and services drive down customer carbon use, we’d be doing a great deal to tackle climate change without talking directly about it in the lobbying and influence arena. We’ll go faster if we do all three in an integrated way, but even without proactive policy efforts, two out of three ain’t bad.

This post first appeared on Marketwatch on April 2, 2014.

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