In late September, just two days before the Department of Energy released its long-awaited climate-change technology strategic plan, officials from several of the corporate world’s largest emitters of carbon dioxide gathered in Washington, DC, to endorse a new business framework that could significantly cut industrial greenhouse gas emissions.
Days later, while DOE’s climate-change technology program was being criticized by legislators on Capitol Hill for failing to lay out a path for industry to follow to best use new, clean technology, University of Michigan management professor Andrew Hoffman was receiving calls from companies impressed by his eight-step framework that serves as a how-to guide to reducing greenhouse emissions. Hoffman developed the framework for the Washington, DC-based Pew Center on Global Climate Change. He surveyed 31 corporations and conducted detailed, on-site case studies of six companies, including such mammoths as Shell Oil Co, Alcoa Co, and DuPont. Hoffman described himself as “smack in the middle” of the tension between the business community and environmental organizations over global warming, a position that allows him to work with both sides. Indeed, he encourages everyone in the debate to resist the “good guy-bad guy” stereotypes.
Global warming “has moved beyond that,” he said, and it has reached a critical time for corporations. “They’re in a gray period,” he said, where it is clear that within the next five years—maybe a little sooner, maybe a little later—the government will regulate CO2 and other greenhouse gases. Corporate officials, even skeptics who believe global warming is a hoax, must face the reality of the marketplace, Hoffman said. “And the marketplace is in transition [toward a carbon-constrained world].”
At the meeting to unveil the business plan, Randy Armstrong, the compliance assurance manager for Shell Oil, talked bluntly about his company’s interest in reducing greenhouse gas emissions. “We find we’re in the middle of the global warming debate, whether we want to be or not, because we’re the source of 3% of the world’s emissions [of greenhouse gases]. Our industry over the next 50 years will face radical changes, and we want a seat at the table.” Adopting a business model now that recognizes the problem and does something about it ensures that Shell will be at that table, he said.
Pittsburgh-based Alcoa, the world’s largest producer of aluminum, began programs to cut CO2 emissions in the mid-1990s, said Lee Califf, the company’s director of government relations. He said, “The chairman of Alcoa decided global warming was real and wanted to know how Alcoa was contributing to the problem.” A host of programs were instituted, he said, “and the goal of reducing our direct emissions by 25% was met in 2003. We’re now 30% down from 1990.”
Proactive approach
Hoffman’s Pew Center report, Getting Ahead of the Curve: Corporate Strategies That Address Climate Change , is a guide for businesses concerned about global warming and the impact of global warming regulations, said Pew Center president Eileen Claussen. “If you look at what is happening today [with global warming regulations] at the state level and in Congress, a proactive approach in the policy arena clearly makes sound business sense,” she said in a statement at the meeting. “In the corporate world, inaction is no longer an option.”
Hoffman’s business framework reads like a corporate document and notes that “the first step in developing a climate strategy is to analyze a company’s GHG [greenhouse gas] emissions profile throughout the value chain.” The framework discusses how to measure direct emissions, as well as indirect emissions from off-site contractors, outside power sources, or even employees driving their cars to work.
Step two, “gauge risks and opportunities,” says that companies need to pay attention to emissions from their products and services. Whirlpool Corp, for example, is responsible for more greenhouse gas emission through the use of its appliances than through its manufacturing processes. Alcoa, according to the document, developed a low-mass truck wheel that the company claims reduces vehicle weight by 10% and results in a 7% decrease in greenhouse gas emissions for the vehicle.
Influencing policy
Hoffman moves through the steps businesses should take, including action options, goal setting, developing financial mechanisms, and getting employees “engaged” in the program. One of the final steps deals with the importance of influencing government regulatory policy.
The report quotes Jim Rogers, CEO of Duke Energy, as worrying about the “stroke of the pen risk, the risk that a regulator or Congressman signing a law can change the value of our assets overnight. If there is a high probability that there will be regulation, you try to position yourself to influence the outcome.”
The Bush administration has been criticized by environmentalists and many Democrats on Capitol Hill for seeking only an 18% reduction in the intensity of greenhouse gas emissions by 2012, a goal that ties emissions to economic growth and allows total emissions to rise. Although the administration is not advocating the kinds of regulations corporations fear, Hoffman notes in the framework document that “there are signs that a national climate policy is very near.”
As of July 2006, 266 mayors had signed climate protection agreements committing their cities to reducing greenhouse gas emissions. In 2003, 43 senators supported the McCain-Lieberman greenhouse gas cap-and-trade bill, and in 2005, 54 senators supported a nonbinding resolution calling for a national, market-based program to slow and eventually reverse the growth of greenhouse gas emissions. In the wake of the Democrats winning both the House and the Senate in the 7 November mid-term elections, there was a sense on Capitol Hall that global warming regulation would gain momentum.
The climate-change technology program put forward by DOE in late September commits about $3 billion in federal money for “technology research, development, demonstration, and deployment” to cut emissions and increase economic growth. The program outlines the value of hydrogen, clean coal, nuclear fission and fusion, and other energy sources that “have the potential to transform our economy in fundamental ways.”
Representative Judy Biggert (R-IL), chair of the energy subcommittee of the Committee on Science, was not impressed with the report. Whereas a federal global-warming science research plan completed in 2003 has been widely supported, she said, the technology plan “appears stalled near the starting line.” Instead of proposing how clean-energy technologies can be integrated into the economy, Biggert said, “Congress is left to figure out how and to what degree each of these technologies, individually and collectively, will contribute to achieving our climate change goals.” Rep. Sherwood Boehlert (R-NY), chair of the science committee, described the technology plan as “more of an inventory of existing programs and a wish list of possible future ones than a planning document with clear priorities.”
Mark Way, the head of sustainability issue management for Swiss Re, an international reinsurance company, said the impact of global warming arose as an insurance issue in the early 1990s. “In looking at our future health [as a business], it is an important component.” It isn’t wise for business to wait for the federal government to catch up, he said.
Combining land, ship, and satellite measurements, this Goddard Institute for Space Studies image shows 2005 as perhaps the warmest year ever recorded. The image shows temperature differences relative to the 1951-80 mean. Colors ranging from yellow to red are above the mean, while colors ranging from green to purple are below the mean.
Combining land, ship, and satellite measurements, this Goddard Institute for Space Studies image shows 2005 as perhaps the warmest year ever recorded. The image shows temperature differences relative to the 1951-80 mean. Colors ranging from yellow to red are above the mean, while colors ranging from green to purple are below the mean.
