If you look online for any of the obvious keywords, you’ll find a lot of corporate websites crowing about their environmental initiatives.
You’ll also find plenty of writers who consider corporations in general to be obstacles on the road to sustainability.
In a recent Huffington Post article, Shane Ferro, an author with a dim view of the automobile industry, reported on an award the US EPA bestowed on Chevrolet. The company has partnered with eleven colleges to purchase carbon offsets from their renewable energy and energy efficiency projects.
Carbon offsets, which apparently grew out of the 1997 Kyoto Protocol, essentially mean that a polluting company (the Chevrolet division of General Motors in this case) will pay for carbon-reduction efforts of some other entity (eleven colleges in this case). Chevrolet wants to pay the colleges to reduce their emissions by 8 million metric tons to compensate for an equal amount of emissions associated with its cars.
No one supposes that carbon offsets are a panacea for greenhouse gas emissions. The voluntary carbon offset program is quite small. In recent years, Chevrolet has been one of the largest purchasers, and 8 million metric tons does not compensate for all its greenhouse gas emissions. But it certainly deserves credit for taking initiative to do something.
Ferro’s article contains some mistakes and some polemics. The author says that the program is ending. She links to Chevrolet’s web page, which clearly shows that it has committed to 8 million metric tons, but has so far offset just over 5.2 million. It’s not ending yet, although the page gives no indication that Chevrolet plans to renew it when it reaches the goal.
She also writes, “The language about Chevrolet’s environmental initiative glosses over the fact that it makes cars. . . And this environmental effort is a marketing tool to sell more cars.”
Marketing! The nerve!
Later she writes, “The real point, though, is the world cannot rely on corporations to do the right thing, because the right thing is rarely good for the bottom line.” That claim is simply backside to reality.
Let’s look at the automobile industry’s environmental evolution over the past century and then at today’s corporate sustainability in general.
The automobile industry and the environment
The first scientific report that auto emissions were poisonous appeared in 1923.
At that time, an industry executive pointed out that his company was in the business of making cars and had no intention of dealing with health hazards unless compelled by law.
No such law existed until the Motor Vehicle Pollution Control Act of 1965. It followed by two years the passage of the first Clean Air Act (1963).
The automobile industry was one of the villains of the Earth Day teach-ins of 1970, and several campus protests featured burying new cars.
The Ford Motor Company, however, had spent $66 million in the 1960s to reduce pollution from the manufacturing process. Look profiled Henry Ford II as one of the environmental good guys and invited him to write an article. In it, Ford said that the company was committed to spending another $60 million by the end of 1971.
He pointed out that cars built in 1970 emitted only about 20% as much hydrocarbons as cars built in the 1950s and confidently predicted that internal combustion engines would be virtually emission free by 1975.
Unfortunately his confidence was misplaced, but according to the EPA, cars were 98% cleaner in the 2009 or 2010 model year than in 1970. Chevy, too, started out with unrealistic expectations. It’s chief sustainability executive David Tulauskus hoped to make Chevrolet carbon neutral, but quickly realized that carbon offsets can’t buy carbon neutrality.
Automobiles are dramatically cleaner now than they were 65 years ago, both in terms of emissions and the manufacturing process.
Yet they remain one of the leading sources of greenhouse gases.
Probably few if any automobile executives look forward to a world without petroleum, but most manufacturers are actively investigating electric vehicles.
Besides their share of emissions from electric power plants, electric cars emit no greenhouse gases.
Recent news in corporate sustainability
Ferro claims that sustainability is bad for a corporate bottom line and that therefore we can’t trust corporations to take care of the environment.
An official with the investment bank Goldman Sachs, on the other hand, warns that the bottom lines of companies that ignore sustainability will suffer.
More and more, non-financial issues attract investors. Corporate ustainability has become one such issue to the extent that environmental, social, and governance issues have gotten their own abbreviation (ESG) in the business world.
According to at least one report, 63% of portfolio managers and research analysts consider ESG in order to manage investment risk, and 44% demand data about it. They will not invest or recommend investing in companies that cannot demonstrate commitment to ESG.
Why would that be?
For one thing, companies have found that their environmental concerns reduce costs and increase profits. For example:
- Rearranging delivery routes, as UPS and Walmart have done, saves a bundle on fuel costs.
- Minimizing packaging has multiple economic benefits, including purchasing lesser quantities of packaging materials and shipping more units of product for the same cost.
- Numerous companies have found ways to send zero waste to landfills; sometimes they can sell what they used to pay someone to haul away.
These practices, like Chevrolet’s carbon-offset project, mitigate environmental problems but do not solve them. Solutions require commitment at the highest levels of corporate governance, the G in ESG. And head of the corporate sustainability office isn’t at the top. The board of directors has ultimate responsibility for how a corporation operates.
Ceres, a non-profit advocate for sustainability leadership, reported in 2014 that the directors of only 32% of the 613 largest publicly traded American corporations directly oversee sustainability efforts.
Without active and committed board oversight, decisions made in other parts of the company can negate its best sustainability efforts.
Whoever decided to cheat on emissions tests of diesel cars certainly undermined whatever efforts Volkswagen has made toward sustainability. Strong board leadership commitment to sustainability never would have allowed the deception.
Despite Ferro’s claim, the hit Volkswagen’s reputation took amply demonstrates that good environmental stewardship ultimately benefits the bottom line—or at least that poor stewardship ultimately damages it.
I can’t disagree, however, with Ferro’s final sentence: “Climate change is a society-wide problem and will require a society-wide solution.”
Corporations appear to be accomplishing more right now than the federal government is. The American public talks a much better environmental commitment than it lives.
Progressives ought to give corporations credit for the commitment many of them have displayed. But let’s not count on corporations to bear the entire burden. Federal, state, and local governments have critical roles. Decisions of each individual may have even more influence.
See also my recent post What’s real in corporate sustainability?
As Chevy ends award-winning sustainability plan, the climate is just as screwed as ever / Shane Ferro. Huffington Post. November 20, 2015.
Before and after the first Earth Day, 1970 / David M. Guion (Kindle books)
Chevrolet’s carbon offsetting program wins top honors from US EPA / Kelley Hamrick and Allie Goldstein. Ecosystem Marketplace. February 27, 2015
Goldman Sachs: “If you ignore sustainability you’re going to be worth less” / Johan Nylander. Forbes. November 12, 2015.
How to show corporate leadership in sustainability / Bob Eccles. Forbes. November 3, 2015.
We’re investing in carbon-reducing projects across the country. It’s the right thing to do / Chevrolet.
Carbon offsets. Source unknown.
Car Exhaust. Some rights reserved by eutrophication&hypoxia.
Electric cars recharging. Public domain from Wikimedia Commons. http://en.wikipedia.org/wiki/File:BetterPlaceEVsCharging.JPG
Profit and sustainability. Source unknown.
Corporate governance. Bob Tricker. Public domain from Wikimedia Commons.