Corporate Environmental Leadership: The Courage to Innovate

Environmental regulations today have cleaned up everything from fish in mountain streams to fumes from urban smokestacks--and the air, land and water in between. In contrast to this diversity, the companies faced with the prospect of being regulated have essentially two options: they can embrace the challenges and opportunities of innovation or they can dig in their heels and resist change.

During my 32 years at the Environmental Protection Agency, I saw firsthand the many benefits of proactive corporate leadership. For example, our national greenhouse gas emission standards for cars and trucks were developed in close partnership with the auto industry. The result? By 2025, the average new car will average 54.5 mpg, an improvement that will massively reduce petroleum usage, save consumers more than a trillion dollars and cut greenhouse gas emissions in half.

The rules themselves are far-reaching and bold, but the greatest benefits of these standards are a result of positive corporate leadership. Today, forward-looking car companies are investing heavily in the development of much more efficient vehicles. This year, consumers got a glimpse of the future with breakthroughs like the Chevy Bolt, an affordable all-electric vehicle that can drive over 200 miles before it needs to be recharged. Last week, Tesla also announced the Tesla 3 model, with comparable pricing and range. Within the first 24 hrs, Tesla received over 170,000 pre-orders, a demonstration of how quickly consumer excitement for electric vehicles is growing.

Corporate leadership has also led to environmental breakthroughs for the largest vehicles on our nation's highway. Today, a tractor-trailer gets an average of about 7 miles to the gallon. But, working in conjunction with the U.S. Department of Energy, Freightliner has developed a freight truck capable of getting 12.2 MPG. As part of the same SuperTruck program, Peterbilt and Cummins teamed up to produce a truck capable of getting 10.7 MPG. The program is voluntary, but these companies' commitment has produced vehicles with up to 70% improvements in fuel efficiency.

These innovations are in fact behind the proposed new rules that will further reduce greenhouse gases and improve fuel economy of big trucks by 24%. These new standards have the potential to save the average household up to $150 per year and truck fleets some $170 billion per year by 2030, while providing significant climate protections.

It is not just vehicle manufacturers who are thinking about environmental innovation. In a Wall Street Journal commentary, the heads of PepsiCo and Environmental Defense Fund pointed to how the fuel efficiency and greenhouse gas regulations for trucks create new incentives for truck manufacturers to innovate, which then helps fleets become more efficient, ultimately benefitting the consumer on many fronts.

Unfortunately, not everyone has jumped on the innovation bus. There are some companies that, despite their own corporate sustainability goals like "taking urgent action to combat climate change and its impact," are actively working to decrease the effectiveness of a new EPA and DOT greenhouse gas truck proposal. These companies insist that the new rules will be economically devastating. Such claims fly in the face of mountains of evidence, including the achievements of their industry competitors. These companies would rather tweak the rules of game to gain a temporary advantage than develop a long-term strategy to out-compete their rivals in the marketplace.

Some companies have already discovered the dire consequences of resisting innovation. Last fall, for example, Volkswagen admitted to systematically cheating on U.S. auto emission tests. The revelations played out in a very messy and public manner, significantly driving down the brand's U.S. sales for the first time in a decade. Denying communities healthy air and a safe climate is a poor business value.

Unfortunately, Volkswagen is far from the only company with weak corporate leadership when it comes to environmental innovation. But as long as regulators and corporate leaders continue to work together constructively, we will still see breakthroughs at an accelerating pace. Smartly designed, technology-forcing standards are critical to move these solutions from the test track to the highway. As Tom Linebarger, CEO of Cummins, noted in an interview for my book Driving the Future, EPA regulations can push the industry forward by "helping us innovate and be ahead of the competition, and grow overseas markets."

An impressive group of manufacturers is already doing their part, calling on the EPA and Department of Transportation to increase the stringency of the agencies' next round of rules. This group included established manufacturers like Cummins and suppliers, such as Honeywell, and smaller firms, such as Achates Power, that are bringing fundamentally different engine and truck designs to market. Instead of dragging their feet, these companies understand that well-designed performance standards are effective at driving innovation and investment.

Proactive corporate leadership by courageous innovators can actually help the EPA finalize the kind of stringent standards that will drive American innovation forward, while protecting the well being of future generations. Let us celebrate the innovators.

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