Greenwash or Leadership? Business, regulation and sustainable development

Some businesses are doing the right thing, but others remain powerful blockers of a green economy. That is why we need stringent regulation  now more than ever and why progressive businesses need to stand up to their laggard colleagues.

This is unedited version of an article that was published by Europe´s World.

In the wake of the epic failure of the United Nations Conference on Sustainable Development - Rio+20 – many are asking whether corporations, rather than governments, will be the true agents of change going forward. Will corporations deliver our children the future that governments failed to agree on in the Polluter´s Charter they adopted and called – seemingly without any sense of irony – „The Future We Want“?

It is certainly the case that corporations rule our world today. Many are bigger than entire nations – or many nations combined. Of the world’s 100 largest economic entities in 2009, 44 were corporations,if you compare revenues to GDP. And, indeed, some are starting to put that power to good use. Google is investing heavily in renewable energy; Nike and H&M are eliminating toxic chemicals from their supply chains; supermarket giant Sainsbury‘s is sourcing sustainable seafood and backing marine reserves, and a growing number of corporations including Unilever and Nestle are refusing to buy from Asia Pulp and Paper (APP) as long as it continues to clear rainforests and destroy peatlands in Indonesia.

When the first Rio Earth Summit was convened in 1992, the renewable energy industry, which has seen a tremendous breakthrough in the last decade, didn’t have a strong presence at UN conferences. Now they do. Twenty years ago, we didn’t have over 100 major corporations in the EU calling for a stronger, binding climate target for themselves, publicly challenging the official position of their main business federation, BusinessEurope. Now, we do, with corporate giants such as Danone, Philips and Allianz demanding an EU climate target of 30 percent by 2020 compared to 1990 levels to provide certainty for investments. Twenty years ago, we didn’t have large investors challenging corporate self-regulation and a voluntary approach to sustainability reporting. Now, we do. Indeed, there was a large coalition of investors and businesses telling governments at Rio+20 that they need mandatory rules for corporate reporting on their social and environmental impacts. One of the true tragedies of Rio+20, to me, was that governments ignored the voices not just of the grassroots or Greenpeace but also of the likes of Aviva Investors or BM&FBOVESPA –the only securities, commodities and futures exchange in Brazil – who were asking for mandatory reporting rules for corporations. A true pity, as corporations are so far reporting their social and environmental impacts badly. Bloomberg discovered that only about 24% of the 19,641 companies they researched reported any environmental, social and governance (ESG) data at all and what data did exist was almost always of poor quality.

The corporate sector is increasingly split. And while some are starting to act, some of the most powerful companies continue to be decisive blockers of a green economy. The business associations – such as the International Chamber of Commerce – sadly continue to be dominated by these backward polluters who may claim to be green and socially responsible, but in reality make big profits from exploiting and polluting the planet . A recent Greenpeace report, Greenwash+20, shows that corporations such as Ameria´s Duke Energy talk a good talk while sticking to the most polluting energy source: coal or that Indonesia´s Asia Pulp and Paper continues to destroy rainforests while running a massive global advertisement campaign claiming to be green and responsible. The report also shows that governments still continue to let corporate polluters run the show because they shy away from regulation, pollution pricing, accountability and liability – the kind of measures that could change the calculus and make building a green economy profitable.

Giving corporations a free (or cheap) ride isn’t cheap for us and our children. KPMG has estimated that the external environmental costs of 11 key industry sectors were as much as US$ 846 billion in 2010 – an increase of 50% (!) over the last decade. If companies had to pay for the full environmental costs of their business, on average they would lose 41 cents for every US$1 in earnings. Yet, making polluters pay for the impacts they impose on society is strangely not high on the agenda in a Europe where governments are desperate for cash.

A textbook example of greenwash is Shell, who for more than 20 years has been touting its leadership on sustainability, yet is turning its back on renewable energy and strip mining forests in Canada to access extremely polluting tar sands oil. Shell is also the first 'supermajor‘ oil company to actively pursue a policy of significant oil exploration in the offshore Arctic. The company sees this region as the next great oil frontier, saying it has “significant untapped potential and will play an increasingly important role in meeting the energy challenge in the future”. Shell senses a clear opportunity in Alaska, arguing that “much like landing on the moon, it doesn’t hurt to be first”. The company has confirmed it will return to drill further wells in the Beaufort and Chukchi Seas in the coming years. While Shell confidently tells us that it has “made numerous plans for dealing with oil in ice”, the company also admits that the technical and environmental challenges of oil exploration in the Arctic “are immense”. Specialists believe that “there is really no solution or method today that we’re aware of that can actually recover [spilt] oil from the Arctic”. Shell – which was recently responsible for significant oil spills in Nigeria and the UK – says it will be able to remove up to 90% of any spilled oil in Alaska. This is an incredible assumption when you consider that the US Geological Survey estimates recovery levels of 1% to 20% in the Arctic. Only about 17% of oil was ever recovered after Deepwater Horizon. But not to worry. Shell proves its environmental credentials by pointing out that it “banned the use of Styrofoam cups on board any Alaska operating company owned or contracted vessel in order to assure cups do not blow into the water”.

Cynical statements such as these show without doubt that – despite the positive initiatives by some businesses - voluntary action by business alone will never deliver sustainable development. Indeed, it´s not an either or: Voluntary action is always welcome and Greenpeace will praise those companies who are making steps in the right direction. But the evidence is clear that, without clear rules, too many companies - such as Shell - continue to free-ride on society. While it is wonderful that more and more businesses are starting to act, the reality is that this is  only delivering incremental change. While individual companies are getting better, global greenhouse gas emissions are rising, biodiversity in our forests is declining and our oceans are being pillaged and overfished.

Indeed, the battle to stop laggard companies such as Shell and the battle to achieve good regulation is one and the same. It is because governments put the short term profits of the likes of Shell before the public interest that we fail to have the regulations we – including progressive businesses who want to prosper under a new model - need. It is that lack of spine – the unwillingness for governments to govern – that makes global Summits like Rio+20 fail.

The Arctic is going to be a key test case of whether those corporations not yet changing course voluntarily are allowed to plunder the last corners of the world or are forced to become global citizens, who respect the needs of our climate and future generations. Governments need to protect the Arctic from exploitation altogether and in order to prevent climate change from melting the Arctic, governments must urgently catalyse a green energy revolution, based on energy efficiency and a massive uptake in renewable energy. Unlike with other revolutions, there is no reason for governments to be afraid of this energy revolution. Indeed, it will deliver more jobs, access to energy for all and cut down CO2 emissions by 80% by 2050, exactly what is needed for investments now and climate safety in the future.

In order to deliver this kind of revolutionary change, corporations can’t just be volunteers. We need to deal with the laggards that are free-riding on the commitments some companies are starting to implement. To do so, we need global rules for global corporations. Governments admitted as much at the Johannesburg Earth Summit in 2002 (Rio+10), when they pledged to  „actively promote corporate accountability“ and develop intergovernmental agreements to do so. Governments don´t like to be reminded of this pledge, as they have done nothing to implement it since. But, indeed, while it is heartening to see some businesses pushing for mandatory corporate reporting, what is needed now more than ever is a global instrument to ensure full liability for social and environmental impacts of global corporations. Progressive companies have nothing to fear from such rules. But only enforceable rules will bring the laggards to join the 21st century.

For us at Greenpeace, therefore, the fact that we actively welcome the willingness of some corporations to act does not lessen our urgent call for clear rules and penalties for those which try to free-ride and dump external costs on society. Just as it is unacceptable for tax payers to pay for the reckless gambles of greedy banks, it is irresponsible that the people of Japan, for example, are now having to pay for the financial fall-out of TEPCO´s (Tokyo Electric Power) irresponsible behaviour. It is adding financial insult to environmental injury. And the opposite should be the case: Whoever damaged people or the environment, should at the very least know that they will be held to account – including financially.

It is easy to despair at the difficulties of getting effective regulation in place and therefore tempting to hope that corporations on their own will deliver a liveable future for all. Lack of regulation certainly gives no excuse for corporations to continue destructive practices and we expect corporations to take full responsibility for their supply chains and be true leaders in their field.

But for us as societies and communities to achieve sustainable development we simply need proper regulation and enforcement. The „good guys“ will not succeed unless governments helps them to deal with the „bad guys“ and sets the frameworks we need to a fair and just green economy. It is heartening that more and more businesses are saying so themselves and are calling for binding climate targets or corporate reporting rules. Civil society and progressive corporations working together to deliver the laws we need for our future is indeed a model to pursue. Together, progressive businesses and civil society must free our governments from the strangle hold of a small clique of polluters  - such as Duke, APP or Shell - whose short term interests currently  trump our collective interests. Europe´s future - our future - depends on us ensuring that rights for people are delivered through effective rules for big business. There are no short cuts, but there are test cases, such as the urgent need to draw a line in the ice in the Arctic and protect it for all before it is destroyed forever. How many progressive businesses will support us in ensuring that governments declare a global sanctuary in the Arctic and make the Arctic off limits for oil and industrial fishing, I wonder? If you are ready to do so, drop me a line.