Overview

The Business & Finance working group at the Conference composed an eight-principle framework, and proposed that it be disseminated broadly to trade associations and individual business leaders (especially at the CEO and board level) as a set of clear and feasible actions that business can and should take on climate change (see page 181 for the full eight principles).

Recent posts | Participants | News | The Framework | Commentary | Related Initiatives  

News

  • September 20, 2006 - Marsh Inc, Ceres and the Yale School of Forestry announce the Sustainable Governance Forum at the Clinton Global Initiative. The Forum is a leadership development program that will prepare corporate directors for the business risks of climate change. The Forum, which will educate over 200 board members from Fortune 1000 companies, has developed, in part, out of recommendations for actions proposed at the Yale F&ES 2005 Conference on Climate Change.Forum, Sept 21, 2006.
    Press release for day 1 of Clinton Global Initiative
  • Mindy Lubber, president of Ceres and project participant, discusses the emergence of climate change as a front-burner issue for major corporate investors (pension funds, insurance companies, etc.). Video (48 minutes).

Eight principles for corporate engagement on climate change

  • 1. Analyze and disclose financial risks and opportunities related to climate change. Undertake a comprehensive review of carbon emissions including products, facilities, transportation, financial risks and opportunities including analysis of financial impact on business P&Ls and balance sheets. Financial analysis will include potential costs of carbon under different scenarios.
  • 2. Develop company-wide plan to address climate change risks and opportunities. Develop a plan and transparent process for addressing and setting goals for reducing CO2 emissions. Goals must be meaningful, including taking advantage of business opportunities. The plan must deal with overall carbon emissions of business activities over the short and long term with specific plans for products, facilities, transportation, and suppliers.
  • 3. Educate CEOs and board members. Provide scientific and financial education of CEOs and relevant corporate board members.
  • 4. Educate customers. Educate customers on the carbon composition of products through websites, labels, bill stuffers, as it relates to the relevant business.
  • 5. Require major suppliers to adopt principles for corporate engagement on climate change.
  • 6. Engage in policy dialogue at the state, regional and national levels.Support efforts to build a market-based, long-term plan to address rising greenhouse gas emissions. Business leaders should establish an internal and external dialogue to discuss the following propositions:
    • a. The scientific evidence of climate change is sufficient to justify that action be taken now, in a planned way, in order to avoid later, deeper cuts that could seriously damage the economy.
    • b. Support a long-term goal for global greenhouse gas emissions from all segments of the U.S. economy at or below today’s levels by 2050.
    • c. Use a broad-based approach to achieve this goal, including market-based mechanisms, innovative technology, education, and informed and supportive policy development.
    • d. Support international action, with the United States leading the debate through diplomacy
      abroad and by example at home.
    • e. Continue scientific research on climate change, and amend policy and practices as scientific consensus warrants.
    • f. Assure honest and fair deliberations in policy debate, and take steps to limit manipulation of scientific information or other dishonest discourse.
  • 7. The investment community should require clear financial analysis related to climate change from publicly traded companies and develop its own competency for analysis of corporate risks associated with climate change.
  • 8. Insurance companies should assess the financial impact of climate-related events. Given the far impact of climate-related claims, insurers and re-insurers should provide historic and forward-looking risk assessment and a plan for addressing increasing claims and adjust pricing of policy based on revised and updated data.

    Commentary

    • The vision. See the vision statement on page 48, entitled “A Transformative National Effort on Energy.” Many at the Conference agreed that this statement could serve as a highly motivating preamble to the eight principles.
    • A place to begin. The level of engagement of corporate leaders on climate change needs to be substantially intensified – now.Many business leaders have refrained from taking steps on the issue due, in part, to its enormity (“too big and complex”). Put simply, they are vaguely concerned about climate change, but do not know where to begin. Therefore, the group aspired to supply a focal set of principles to overcome this particular start-up obstacle and fashion a path forward.
    • Validating the need. One influential corporate leader said: “If I had something that I could take to everyone in my trade association to get them thinking about climate change, that would be great.” This moment was a key inspiration for composing the eight principles.
    • Implementation guide. The group debated whether a new agency would be helpful in disseminating the principles, but concluded that a better approach would be to commission a neutral entity to produce an “implementation guide” that would assist a company in implementing some or all of the eight principles.
    • Coordinating approach for NGOs. Major non-governmental organizations (for example, NGOs like Environmental Defense and NRDC, both with considerable budgets dedicated to climate change) could consider joining forces on the eight-principle framework, or a comparable statement, in order to send a unified message to business and increase the likelihood of constructive engagement.
    • The Business Roundtable as a venue. There may be particular business organizations or trade associations that could be key agents for disseminating or creating a set of dialogues on the eight action principles. The Business Roundtable, for example, has a modest effort underway on climate change, and it is possible that expanding on this could be worthwhile. A subsidiary recommendation, then, is to take the eight principles to the Business Roundtable and explore their interest in partnering to promote their implementation.
    • Private dialogues. Whether or not trade associations become a platform for dialogue on the eight principles, a parallel effort should be undertaken to orchestrate private, peer-to-peer dialogues about them between business executives. This would entail asking those leaders who agree to undertake implementation of the principles to also reach out to the handful of fellow executives to whom they are closest, encouraging them to follow a similar process of engagement.
    • Segmentation into leaders and laggards? Some favor segmentation of the business community into leaders and laggards, so that those who are prepared to move rapidly toward implementation of the principles can do so without being held back by those who are resistant. A “leader strategy” could create virtuous cycles whereby role models of engagement and constructive action attract others to follow, whereas a “consensus strategy” could hamper progress as the community conforms to the least-common-denominator approach.
    • Dissociate from disinformation. Some want to make Principle 6(f) even more pointed, by encouraging businesses to explicitly dissociate themselves from scientific disinformation campaigns and also coordinated business efforts to stall or weaken formative state and regional policy efforts such as the Regional Greenhouse Gas Initiative in the U.S. Northeast.
    • Internal or external focus? Some favor use of the principles primarily to guide internal dialogue and action at their respective companies, while others favor a more externally coordinated effort to fashion a critical mass of supportive businesses.
    • Downside of disclosure emphasis. There is vigorous debate about whether Principle #1’s emphasis on “disclosure” is a good idea. Many assert that it is consistent with Sarbanes-Oxley and the move toward greater corporate transparency regarding material risks. Others say that “disclosure” would “turn off” businesses immediately and sour their readiness to engage on climate change, especially those whose trade associations have sought to diminish a variety of disclosure requirements. Compliance costs with Sarbanes-Oxley have been high and unwelcome, so anything that threatens to compound that burden and associate the climate change issue with it should be carefully weighed. However, disclosure was ultimately included in the set of principles, in part because it will help businesses themselves to better understand their long-term risks, and other stakeholders such as investors and analysts are anxious to obtain data that can inform their activities.
    • No carbon jargon. The importance of avoiding “carbon jargon”was emphasized. Policy insiders have shaped an intricate and technical dialogue about climate change, one that is not always accessible to business leaders and others for whom climate change is not a fulltime preoccupation. Therefore the group sought to strip jargon out of the eight principles and also said that subsequent dialogues based on those principles should be similarly plain-spoken.
    • Package or piecemeal? Implementation of the framework could proceed with an assumption that it is a package deal, or instead be meted out piecemeal. Some are particularly interested in advancing one or two of the principles in greater depth, while others say that the packaging of an integrated framework for business action is the critical value in this endeavor.
    • Partnership, not antagonism. The group widely believed that there was a need to move away from antagonistic and combative approaches to environmental issues and toward a partnership or consensus-based model. Climate change, they said, is an appropriate issue on which to exercise new forms of partnerships with willing organizations, and the eight-principle framework is intended to be a vehicle for advancing this model.

    Related Initiatives

    • Ceres - Ceres (pronounced “series”) is a national network of investors, environmental organizations and other public interest groups working with companies and investors to address sustainability challenges such as global climate change. Mission: Integrating sustainability into capital markets for the health of the planet and its people.

      About: At its founding 17 years ago, Ceres introduced a bold new vision to the business world. That vision is of a world in which business and capital markets promote the well being of human society and the protection of the earth’s biological systems and resources. Ceres advances its vision by bringing investors, environmental groups and other stakeholders together to compel companies and capital markets to incorporate environmental and social challenges into their day-to-day decision-making. By leveraging the collective power of investors and other key stakeholders, Ceres has achieved dramatic results.

    Get involved in this action.