Execs Not Waiting for Climate Change Regulatory Performance

Two recent headlines in the world of SRI stirred some speculation here on the performance of business in dealing with climate change.   First, American Businesses for Clean Energy came out with a study on

business support for climate change legislation, showing 6,000 companies support energy and climate legislation, based on an analysis of membership in six  environmental business organizations.  The study indicates these 6,000 companies employ an estimated 3.5 million workers, represent more than $2.6 trillion in market capitalization, and totaled $3.5 trillion in estimated revenue in 2009.   The 6,000 include twenty-one Fortune 100 companies and 49 Fortune 500 companies.

Second, an Ernst & Young survey of 300 executives of major corporations ($1 Billion plus annual revenue)  from 16 countries and 18 industry sectors found that most “expect to make significant investments to deliver both cost savings and revenue generation opportunities relating to climate change.” 70% of the executives polled plan to increase their spend on climate change/reduced carbon performance in 2010-2012, despite regulatory uncertainty.

Putting one and two together, let's come up with five, or maybe six, in some high performance lower mathematics.  It's actually not that extraordinary for business to want regulation.  If you plan on doing something “right”, you can make sure your competitors incur the same expenses as you (or, with a little foresight,  even greater expenses), if  you can persuade a regulator that the “right” thing should be mandatory for all.  The business reaction on climate change regulation is a different story on several counts.  It's not one player in one industry looking for an edge or a level playing field – it's broad based.  It's not always typical corporate low key, either.  When climate change Neanderthals somehow captured the Chamber of Commerce, execs who normally avoid controversy like a down earnings quarter actually revolted.

Wanting to be regulated - impressive.  Spending money without  waiting for regulation – priceless?  There's nothing evil about dual motives, and some of that spend might be helping to promote a product or build a brand, but a big chunk of it will be lost (from a branding and profitability standpoint)  in a generalized effort to anticipate regulations and reduce total system greenhouse gas emissions that can't be tied very well to a specific product.  Even corporate level “do gooder” credit will be hard to claim if a large  herd is doing the same thing.

Execs usually want to do good when there is no downside, and specific execs and corporations will often make substantial commitments to specific causes, even when the only upside is favorable but very generalized and diffuse, PR.  From my angle, the executive view on climate change seems to reflect a unique breadth and depth of commitment that is hard to explain with a profit motive analysis, even a broad, long-term analysis, unless you recall that long term survival is a prerequisite to long term financial performance.  Maybe climate change is bringing a new depth to sustainability or ES&G, or maybe it's just that corporate executives have grandchildren too.

Photo Credit: bfhoyt