Unsustainability

Where environmental diplomacy has led, firms should follow, argues Miranda Johnson

Leaders

Enough countries ratified the deal on global warming reached in Paris in December 2015—aiming to keep the increase on pre-industrial temperatures to “well below” 2°C —for it formally to come into effect in November 2016. The world’s governments are starting to act on their pollution-cutting pledges. But two big questions loom large in 2017.

One is the fate of the Paris Agreement under Donald Trump. The president-elect has claimed that global warming is a hoax intended to frustrate American businesses. He will seek to thwart the Clean Power Plan, which sets national standards to limit carbon-dioxide emissions from power plants, and withdraw from the Paris deal itself. However, none of his options is easy. Now that the agreement has entered into force, the country is bound to it for four years. A Trump administration could stymie related environmental efforts, but that would alienate China, among others. The plummeting price of solar and wind power may anyway test Mr Trump’s love of coal. And powerful states, such as California, will lead green endeavours where federal ones fall short.

The second question is whether businesses get serious about curbing their emissions. To stand a chance of limiting the world to warming of less than 2°C, net zero emissions must be reached around the middle of the century. Yet, when totted up, national pledges to curb pollution under the Paris deal will only keep warming to around 3°C. Firms must help bridge the gap.

In many cases they can make money from going greener. Over the decade to 2015 Walmart, the world’s biggest retailer, saved as much as $1 billion annually by changing the routes of its American vehicle fleet, which doubled its efficiency. And their reputations are at risk. In recent years Lego, a maker of toy bricks, has been lambasted for its relationship with the oil industry, and snack giants such as Nestlé have come under attack for the deforestation caused by palm-oil plantations.

Bad company

But how serious will businesses’ efforts be? In Mr Trump’s America, the pressure may be off. And in the wider corporate world “sustainability” has too often been jargon for activities designed to fob off environmentalists.

Confusion over measurement has not helped: firms lack an agreed means of reporting their impact on the planet. Many ways exist to quantify water use, chemical use and emissions from buildings, products and supply chains. Comparing companies using differing standards is tricky enough. Doing so when firms hide key information can be a joke. The Dow Jones Sustainability Index deemed Volkswagen the world’s most sustainable carmaker in 2015; weeks later, news broke that 11m of the firm’s diesel vehicles had been fitted with software to cheat emissions tests.

In 2017 there should at least be fewer excuses. A taskforce on carbon disclosure will deliver recommendations to the G20 and the Financial Stability Board, a global regulators’ forum. The plan is to create a voluntary framework that will allow companies to report their exposure to climate risks consistently. Once they do so the market can go green more efficiently, armed with more information.

A new carbon-disclosure framework for firms could therefore spur progress on national pledges to curb emissions. Other trends could help cut waste. Talk of the “circular economy”, predicated on recycling and reusing products, is in vogue. Leasing models, for everything from cars to light bulbs, can save resources.

The Paris Agreement includes mechanisms to crank up national pledges. Fresh talks will be held in 2018 to take stock of progress; countries will then decide on new goals for themselves in 2020. Even if America has fallen back by then, dreadful air pollution in India and China means their governments cannot ignore emissions. Tree-hugging Europeans will demand further action. So, despite the temptation, in America at least, to shelter behind the new climate-change denier-in-chief in the White House, the best long-term strategy firms can pursue is one that lowers their own impact on the planet.

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