Paul Polman, CEO of Unilever and a board member of the B Team, has just posted an important blog on The Huffington Post, framing his thoughts on this week's COP19 climate conference in Warsaw.
In the blog Polman calls for a step change in the way business responds to climate change. He points to the huge risks to business and society from not urgently responding to the findings being announced in Warsaw. And he points to the critical role progressive business can and must play in supporting governments to regulate and incentivize the urgent shift to a sub 2c, low-carbon economy.
Echoing this, Christiana Figueres, head of the UNFCCC, has said this week that "Warsaw is the first opportunity for companies to show that they want clear, consistent policies in place." Figueres said this during the launch of an important new UN report and set of guidelines on "Responsible Engagement," which I had the honor to collaborate on with eight international organizations. She went on to say of the guidelines, "Using this framework, companies should start engaging proactively on the international climate agreement."
This report, which will be featured at the Caring for Climate Business Forum in Warsaw during COP19, breaks new ground as it is the first time the collective might of the UN, along with numerous NGOs, has set out guidance on how companies should manage and report on their influences on climate policy. The guidelines were developed in detailed consultation with leading companies and they are backed by a coalition of not one, but three UN agencies, the UNFCCC, UNGC and UNEP as well as the WWF, the World Resources Institute, The Climate Group, CDP and the CERES progressive business alliance.
The subject of the guidelines, corporate lobbying, and particularly climate policy lobbying, is an issue that has risen up the CSR agenda over recent years. According to Greenpeace, corporate lobbying often has a chilling effect on climate negotiations. A WWF review I wrote on corporate lobbying practices on social and environmental challenges noted companies tend to "strike an overwhelmingly defensive tone." And the Union of Concerned Scientists point out in a report on corporate climate lobbying that some business voices are misinforming policymakers and effectively obstructing progress on climate change policy.
But its not just NGOs that highlight these concerns. Both Harvard Business School and the United Nations Framework Convention on Climate Change (UNFCCC), have identified corporate influence on climate policy as presenting a major stumbling block to progress on global climate change initiatives.
Whilst there are also many examples of progressive and responsible corporate engagement with public policy, many progressive companies would agree with this analysis and some have commented on a catch-22 situation where "Governments tend to feel limited in their ability to introduce new policies for reducing [greenhouse gas] emissions because they fear business resistance, while companies are unable to take their investments in low carbon solutions to scale because of lack of long-term policies."
And the UN has recently thrown down the gauntlet saying it is "time for lobbying to come out of the shadows, and for companies to take a more responsible approach" to such issues. These new guidelines now provide the framework for such a responsible approach.
These are not "merely" moral questions about corporate responsibility. There are significant business risks related to getting this wrong. Numerous business studies, including from Harvard and Yale, suggest that traditional corporate approaches to public policy advocacy are fraught with inconsistencies, wasted resources, risks to shareholder interests and significant missed market opportunities.
And the investment world is increasingly focusing on these issues, concerned with academic studies showing that corporate political activity is often negatively correlated to both shareholder-friendly governance practices and to shareholder value.
Because of these concerns, CDP, which represents $87 trillion of investments, has recently called on all the world's largest companies to disclose to them their lobbying positions on climate change and to state what they plan to do to protect their investors whilst pushing for significant progress on climate policy nationally and internationally.
Surprisingly, there has as yet, been no attempt to properly understand and measure these issues in environmental ratings compiled for the use of corporate stakeholders such as investors and purchasers. But with the CDP annual questionnaire now asking about corporate lobbying, and these new guidelines, all that is set to change. One can expect more and more focus on these issues and many companies will need to significantly review the way they think about engagement with public policy, not just on climate change, but on many other social and environmental issues. The new guidelines will be a great help in this regard and should be required reading for CSR and Government Affairs executives.
In developing the guidelines more than 75 thought-leaders, policy-makers, investors and senior executives from numerous companies, including Unilever, IKEA, Novo Nordisk, Sasol and Allianz, were interviewed. Pooling their insights we have put together a compelling business case around issues such as accountability and legitimacy, consistency, transparency and opportunity.
In reviewing best practice and previous studies on these issues, many companies often have little understanding of the risks that inconsistency in CSR commitments and lobbying can represent. In fact, whilst the CDP annual review found that at least 50 percent of the Global 500 are active in climate lobbying, often through trade associations, a recent UN Global Compact report found that only 30 percent of leading companies have aligned their lobbying, with their corporate responsibility commitments, such as reducing GHG emissions.
But, more important than these misunderstood risks, companies, and therefore their investors, are often missing important opportunities to profit from "doing the right thing" on issues such as climate policy and the shift to a low-carbon economy. The report cites numerous examples from around the world where leading companies and progressive business alliances have significantly raised the bar on climate policy.
The guidelines have laid out how companies can connect the dots between sustainability commitments (like emissions reductions across their value chains and efficiency improvements) with their corporate policy positions. A detailed set of recommendations show companies why and how they can review their current position on these issues, understand and manage risks and most, importantly profit from being active in pushing for a shift to a low carbon economy.
Getting this right can help companies provide proactive, constructive business input in order to help governments create effective climate policies. Businesses worldwide urgently need to play such as a role because getting this wrong is not conceivable.
As Paul Polman has said, if we don't get this right, "The gains in prosperity that many in the world have enjoyed over the last century could be severely curtailed."
NOTE: This post has been updated to clarify the blogger's collaboration with the United Nations.