For many businesses, the once far-off impacts of climate change are beginning to affect the bottom line. Drought, pollution, declining natural resources and migrating populations are increasingly disrupting global business practices. These new dynamics are forcing those in charge to rethink what constitutes savvy business. Increasingly, companies are conducting — and shareholders and investors are demanding — sustainability assessments that not only protect a company’s profit margin, but proactively protect the Earth.
By foregoing a top-down response and focusing on lateral solutions from businesses, cities and citizens, the ability to effectively respond and adapt to climate change is strengthened. For example, in their new book Climate of Hope, business and governmental leader Michael Bloomberg and environmental policy leader Carl Pope promote the belief that cities, businesses and citizens share a responsibility to work within their respective spheres to simultaneously promote their own interests and lead on climate change. They recommend moving from partisan squabbling to pragmatic solution making, concentrating on benefits instead of costs, focusing on today instead of tomorrow and working from a place of hope instead of fear.
One way businesses are being pushed to proactively address climate change is through shareholder initiatives. “Proxy Monitor,” a database launched in 2011 by the Manhattan Institute, reported a 27 percent rise in social and environmental board proposals in 2017, even in industries not typically thought to be environmentally minded. Many successful shareholder proposals urge companies to meet the provisions of the 21st Conference of the Parties to the U.N. Framework Convention on Climate Change, otherwise known as the Paris Climate Agreement. Popular proposals asked companies — including ExxonMobil, Occidental Petroleum and PPL — to “publish an annual assessment of the long-term portfolio impacts of technological advances and global climate change policies, at reasonable cost and omitting proprietary information … consistent with” government policies “to limit global average temperature rise to well below 2 degrees Celsius.”
Shareholders also asked companies to report on greenhouse gas emissions, methane emissions, product packaging carbon-asset risk, environmental and human rights risks and “sustainability.” These shareholder proposals also face challenges as federal proxy rules may soon change. Currently, shareholders must hold at least $2,000 in company shares for at least a year to propose a ballot item. Proposed legislation known as the “Financial Choice Act of 2017” would require investors to own at least 1 percent of a company’s stock to file a resolution. Under this change, even for a small company, shareholders may need to hold millions of dollars in shares in order to bring new company directives. In America’s largest companies, shareholders would need to hold billions of dollars in stock to essentially buy a voice. The act recently passed the U.S. House and is now in the Senate. Regardless of this federal uncertainty, companies should take note of increased shareholder attention to and demand for corporate policies that address climate change.
Investors and lenders are also demanding corporate accountability regarding climate change. For example, the largest lender in the U.S. agricultural sector recently awarded a $300,000 grant to THRIVE, a global accelerator program investing in companies that innovate technology solutions for the agricultural sector. These startups focus on clean technology that support growers in smarter pesticide use, increase their yield and promote soil health and food safety using improved robotics and more efficient infrastructure. With programs like Wells Fargo’s “Clean Tech and Innovation Philanthropy,” major banks and lenders are not only getting behind climate solutions but are also trailblazing.
As awareness grows, the competitive advantage of publicly incorporating climate change and natural resource assessments in business planning and risk analysis is becoming increasingly clear. A high profile example of this is the “We Are Still In” campaign created in the wake of the United States’ withdrawal from the Paris Climate Agreement. This campaign is an open letter signed by hundreds of companies, investors, mayors and governors published to the international community and parties to the Paris Agreement proclaiming “We are still in” and agreeing to abide by the provisions of the Paris Climate Agreement.
On the local level, businesses are aligning to mobilize industry support for specific climate initiatives, like pricing carbon emissions. For example, the Oregon Business Alliance for Climate (OBAC) is a 27-member group including homebuilders, banks, retailers and grocers working to establish a “framework for Oregon industry leaders to collaborate in policy and business engagements aimed at promoting investment, job creation, competitiveness, and economic growth towards Oregon’s low carbon economy.”
While healthy discourse about OBAC’s proposed legislation continues, membership is rapidly growing and those involved share a common understanding that business can be a strong agent of social change. Steve Clem, vice president of Skanska USA, a large-scale project development and construction group and founding member of OBAC, also recognizes that fueling innovation results in cost savings.
Corporate recognition of climate change is here and growing daily. Is your business prepared to meet this challenge? Are your practices responsive to shareholder or investor demands for environmental stewardship? For example, here in the arid West, do you properly understand how climate change might affect the availability and price of water needed for your business? Have you considered where your energy comes from and are you fully participating in the low-carbon sources that are available to you? Are there partners you could be working with to better assess and meet your climate goals?
A changing climate requires developing the tools to navigate a new reality. Accordingly, the future of corporate leadership requires adapting to the climate complexities of today. Are you ready?
Reagan L.B. Desmond and Emily E. Lewis are attorneys at Clyde Snow & Sessions in Salt Lake City, where they help clients identify and resolve complex water law and natural resources issues.