Corporate influence on climate – and why we should care

Dylan Tanner

 

Posted in: Corporate Reputation, Environment, Governance, Guest Writers, Policy & Research, Speaking Out

Corporate influence on climate – and why we should care

October 07, 2015

Dylan Tanner outlines InfluenceMap’s approach to assessing climate hypocrisy, and how companies can move towards responsible policy engagement.

 

The history of the involvement of business in forming policy and regulations is as old as the history of organised commerce itself. Consider the history of slavery and the agricultural commodity industry’s lock on government policy on the matter. Consider then the effective crafting of British foreign policy in the 17th and 18th centuries by the likes of the East India Trading Company. Fast forward to the 21st century and one may argue that the pace and nature of policy and regulation on one of the seminal issues mankind faces, climate change, is being shaped by industry.

The influence over the discourse on climate science and ensuing policy response by the energy sector is well documented, and illustrated by the progress of Exxon’s interaction with the issue. In 1997, the year of the Kyoto Treaty, then CEO Lee Raymond questioned climate science, saying the greenhouse effect was due in part to natural sources. Four years later, Exxon was urging the US government not to join Kyoto, saying that to do so “would be unjustifiably drastic and premature”. By 2012, the new CEO Rex Tillerson had softened slightly, declaring climate change to be man-made, but saying fears were overblown and that society would adapt.

These headline statements were just the tip of a host of public and private messaging and complex interactions funded by the energy sector globally. Earlier this year, several European oil and gas firms joined together to publicly support a “price on carbon“. But I argue that this merely underscores the industry’s shift from outright opposition and denial to a subtle pretense – claiming to be part of the solution while undermining the critical details.

Not just lobbying

At InfluenceMap we attempt to map out and analyse this subtle language to separate out the obstructing companies from the uninvolved and the genuinely progressive. A key point to note about our system is that we refer to influence rather than lobbying. The latter term is commonly associated with US corporations financially supporting elected officials to drive policy to their advantage. We aim to identify a much larger set of activities, ranging from CEO conversations with heads of state, public messaging and advertising to a systematic use of trade associations to impact the regulatory process. All of these activities are perfectly legal but constitute influence over the political process, details of which investors and other interested parties want to know about.

Dylan pic

In our initial research, we studied the leading 100 non-state owned, non-financial companies in the world. We found 45% were engaging in activities obstructing climate policy, and 95% are members of trade associations doing the same.  Clearly many, if not most of these, have issued statements of support for a low carbon future and the Paris 2015 process.

Defining best practice

So what constitutes best corporate practice on climate change influencing activities (or any political influencing for that matter)?  Given that corporations are so closely involved in policy-making at all levels, globally, it would seem a theoretical exercise to state best practice is to extricate from the process altogether.  The UN’s Caring for Climate initiative makes some general demands for responsible policy engagement, which we concur with.

  1. Identify: all the activities that the company engages in which influence climate policy. Clearly this is a broad remit and allows for wide interpretation.  We would like to see a detailed framework of activities as a guide for companies to self-audit against.  This may contain many of the activities schematically illustrated below, with a strong remit to include information on activities by third party agents, such as PR firms and trade bodies.
  2. Align: Ensure these activities are in line with the stated top line message from the company on climate change.
  3. Report: Investors increasingly are linking company-specific and portfolio-wide risk with climate change, and want information on political influencing activities. The detailed self-checking framework described above should translate into disclosure, ideally with an independent party checking for thoroughness and accuracy.

The critical element in the three best practice points above is that the framework for identifying and reporting needs to be very precise. Focusing on details avoids “wiggle room” and the tendency towards general statements of good intention which mean little in practice.  For example, which trade associations engage on climate change on behalf of the company and with what financing?  What are the company’s specific positions on upcoming revisions of specific greenhouse gas standards (without conditions or resorting generalisations)?  The challenge lies with the investment community to phrase this framework and work with industry to devise a process of disclosure that is policed.

Our assessment platform currently generates three climate policy influence metrics for corporations.  The organization score measures the company’s own activities out of 100, depending on how supportive of climate policy they are.  The relationship score assess the company’s influence via trade associations.  Both of these are combined to put a company in a performance band.  And the engagement intensity measures the degree to which the company is interacting with climate policy, whether positively or negatively – 100 being fully engaged and 0 being unengaged.

The two companies at the top of our ranking represent an interesting variation.  Google leads overall but has a relatively low engagement.  It is however, highly vocal in its support of climate regulations where it sees beneficial impact to its long-term business, such as US legislation to enable the proliferation of renewable energy.  Second-ranked Unilever is far more engaged, expressing support for progressive and specific legislation across the board (in addition to top-level statements about general policy), for example calling on the EU to adopt a specific renewable target.


 

In an era where policymakers look to corporations for guidance on a range of issues, unambiguous statements of support, especially ones getting specific on the details, truly do represent best practice in this area.  In our system we do not positively score statements without specific mention of such details. In fact, we may deduct points for companies who temper general support with economic arguments and caution.

As the Paris climate summit approaches, companies must be sending an unambiguous message – the time for action is now. Policymakers listen for this and are influenced!

 

Dylan Tanner is Executive Director and Co-Founder of InfluenceMap, and CEO of Ekobai Holdings.

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