Businesses to continue pushing climate agenda

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Negotiators at the climate change summit in Morocco last year were only into their third day of talks on 9 November when a sudden chill swept through the Bab Ighli resort in Marrakech.

 

But, rather than a much-hoped for drop in global temperatures, this was the news that US billionaire Donald Trump had won the US presidential election after campaigning on a manifesto to “tear up” the 2015 Paris Agreement that committed countries to cut greenhouse gas emissions.

 

The shock was understandable: from 20 January the leader of the world’s largest economy and largest polluter will be a man who has gone on record saying that climate change is a “hoax” perpetrated by China in order to make American manufacturers uncompetitive.

 

He followed through on that promise announcing that he intended to withdraw the US from the agreement, with the possibility that he would seek to renegotiate it.

 

But, for multinational corporations the threat is more existential. After years of debate and analysis many decided to embrace a climate friendly corporate strategy.

 

This meant not only reconfiguring their internal business processes but insisting that their suppliers had to cut emissions in their products and their manufacturing techniques or risk losing their contracts.

 

Businesses faced a choice between sticking with their strategy of procuring climate-friendly goods and services for the sake of consistency and to reassure consumers, or revert to sources that might be less environmentally friendly and almost certainly cheaper.

 

Just as analysts had identified a first mover advantage for companies that moved to secure low carbon supplies before their competitors, would companies be able to secure a cost advantage by reversing first?

 

The message from the corporate community, publicly at least, has been pretty unanimous in saying that President Trump has not changed their outlook on climate change.

 

More than 360 other businesses and investors, including major procurers such as Kelloggs and Starbucks, urged Trump not to rip up the Paris accord when he takes office saying that implementing climate policies “in our own operations and beyond” would create jobs and boost US competitiveness.

 

As Matt Patsky, CEO of Trillium Asset Management, with $2bn under management, said: “The enormous momentum generated by the business and investment community to address climate change cannot be reversed and cannot be ignored by the Trump administration. That train has left the station and to stand in its way is folly.”

 

 

Resilient supply chain

 

 

There are strong economic reasons why statements like these are more than just rhetoric. Firstly, climate-friendly is now a well embedded business practice.

 

Paddy Padmanathan, CEO of ACWA Power, uses the example of “cheap and nasty” light bulbs — the filament or incandescent bulb that converted most of its power into heat rather than light. “They don’t make them anymore, so you might change your policy but you still can’t buy nasty bulbs.”

 

Gregory Barker, a former UK climate minister and now a board member of the Environmental Defense Fund, a science-based non-profit, says that Trump may in fact contribute to mainstreaming climate change with his proposed $1tn infrastructure investment spree.

 

“If he is going to build this new infrastructure particularly in cities, no one will finance cheap and nasty ‘old school’ infrastructure because it has to be resilient to climate change and major weather events such as floods and hurricanes,” he says.

 

There is a double benefit for the supply chain contribution to climate change. Firstly, modern cement will almost certainly be decarbonised and the extra demand will benefit suppliers. Secondly, it will be designed to be climate resilient so help America’s adaptation to the impacts of climate change.

 

Professor Nick Stern, who wrote a major report on climate change for the UK government exactly a year ago, pointed out: “If you think about infrastructure, which Donald Trump has committed to, and about competitiveness then there is something to talk about with President Trump.”

 

The second reason for calm over Trump is that while he is head of the federal government, the leaders of many US states, cities and giant corporations have committed to their own alternative path.

 

Drinks giant Coca-Cola, for example, operates in 207 countries and territories and has more than 900 manufacturing facilities. When it needed to switch to plastic packaging some 25 years ago, it worked with its supply chain to invest in developing those technologies. “That didn’t happen overnight,” said April Crow, Coca-Cola’s global environment and sustainability director, at the time.

 

 

Trump sees ‘connectivity’

 

 

Meanwhile states such as California have legislated for a “cap and trade” system that puts a price on carbon permits needed to pollute and then withdraws those permits over time.

 

Asked whether it would have an impact on the state’s policies if Trump tore up the Paris deal, California’s secretary for environmental protection Matt Rodriquez pointed out that the state passed its 2006 Global Warning Solutions Act during the era of president George W Bush.

 

“We have had a number of programmes that have been in progress for the last 10 years and frankly we don’t see that the change in Washington DC will change California’s approach,” he says.

 

“The momentum is great, we have successful programmes for reducing greenhouse gas emissions and we have partners around the world we continue to work with.”

 

Third, investment in green technologies has started to make many initiatives economically viable. Projects using photovoltaic and wind power are being built based on similar prices to coal at below $5 US cents per kilowatt hour and solar power prices are falling fast.

 

Businesses always have to balance short-term moves with long-term trends. The election of Donald Trump is certainly a dramatic short-term change but the fact that Paris received enough signatories to enter into force after just 11 months — the Kyoto Treaty took eight years — indicates the long-term direction of travel.

 

The train, as Trillium’s Patsky said, has left the station and many businesses would be right to feel that it is less risky to stay on than to jump off now.

 

This article was originally published in December 2016.

 

This article is a piece of independent journalism, written by an experienced journalist and commissioned exclusively by Procurement Leaders.