The UN‘s Rio+20 United Nations conference on sustainable development was an epic failure, and in its wake many are asking whether corporations will be the true agents of change, rather than governments. Will the latter continue to be serving the interests of large, environmentally unconscious corporations or will they finally start passing legislation that will motivate all corporations to take sustainable initiatives on their own?
Corporations in this day and age certainly seem to rule the world. Some 44 out of the 100 largest business entities in the world were corporations when the numbers were crunched in 2009, and some of them are putting their power to good use: Google is investing in renewable energy, Nike and H&M are eliminating toxic chemicals from their supply chains, UK supermarket giant Sainsbury‘s is sourcing sustainable seafood and backing marine reserves, and a growing number of corporations including Unilever and Nestle refuse to buy from Asia Pulp and Paper (APP) so long as it continues to clear rainforests and destroy peatlands in Indonesia.
When the first Rio Earth Summit convened in 1992, the renewable energy industry still lacked a strong presence at UN conferences. But the tremendous breakthrough achieved in the past decade means that its presence is finally felt nowadays. Twenty years ago, we didn’t have over 100 major corporations in the EU calling for a stronger and binding climate target, and so publicly challenging the official position of the EU‘s main business federation BusinessEurope. Now, corporate giants like Danone, Philips and Allianz are demanding an EU climate target of 30% by 2020 compared to 1990 levels because that would provide certainty for investments. And back in the early 1990s, large investors did not challenge corporate self-regulation and a voluntary approach to sustainability reporting. Now they are, with coalitions of investors and businesses demanding at Rio+20 that governments enact mandatory rules for corporate reporting on their social and environmental impacts. In fact one of Rio+20’s most resonating failures has been the fact that governments attending the summit ignored not just the demands of civil society but the demands of key businesses such as Aviva Investors and even BM&FBOVESPA (the only securities, commodities and futures exchange in Brazil) – all urging for mandatory reporting rules for corporations. This is a true pity, as corporations are continuing to report their social and environmental impacts very poorly. Mandatory rules are desperately needed; Bloomberg discovered that only around 24% of the 19,641 companies it researched actually did produce any environmental, social and governance (ESG) data in reports, which in most cases were of very bad quality anyway.
The corporate sector is increasingly split. And while some companies are starting to act, too often some of the most powerful ones continue to represent the main obstacles to achieving 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 America´s Duke Energy present themselves as environmentally-friendly while sticking to the most polluting energy source: coal. 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 allow corporate polluters shy away from regulation, pollution pricing, accountability and liability – the kind of measures that could render the establishment of a green economy profitable.
Giving these corporations a free – or cheap – ride comes right out of everyone‘s pockets: KPMG has estimated that the external environmental costs of 11 key industry sectors were as much as $846bn in 2010 – an increase of 50% over the last decade. On average, companies would lose 41 cents for every $1 in earnings if they were made to pay the full environmental costs of daily business. In today‘s cash-strapped Europe, making polluters pay for their global impacts should surely be high on the agenda.
Shell is a textbook example of “greenwashing”. For a long time it has presented itself as being at the forefront of the sustainability movement, yet the company is turning its back on renewable energy and is strip-mining forests in Canada to gain access to highly polluting tar sands oil. Shell is also the first major oil company to pursue significant oil exploration in the offshore Arctic, and cites this region as the next great oil frontier, with “significant untapped potential”. Shell tells the public that it has “made numerous plans for dealing with oil in ice”, but 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, has claimed it will be able to remove up to 90% of any spilled oil in Alaska, yet the U.S. Geological Survey estimates recovery levels in the Arctic of only 1% to 20%.
Voluntary action by individual companies is always welcome but is not enough to deliver sustainable development. Without clear rules, too many companies will continue to free-ride on society. Voluntary action will only deliver incremental change, and that is much too slow in the face of rising greenhouse gas emissions, declining biodiversity in our forests and the pillaging and overfishing of our oceans. 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 have put the short term profits of big corporations before the public interest that we haved failed to introduce such regulations. It is this lack of spine on the part of governments that causes global summits like Rio+20 to fail.
Drilling in the Arctic will prove to be a key test case of whether corporations will be allowed to continue plundering the earth’s natural resources, or whether they will be forced to become climate-conscious, future-oriented global citizens. Governments need to catalyse a green energy revolution based on energy efficiency and a massive uptake in renewable energy so as to prevent climate change from destroying the Arctic altogether. This revolution will deliver more jobs, increase access to energy for all and cut down on CO2 emissions by 80% by 2050.
In order to deliver this kind of revolutionary change, corporations can’t just be volunteers and governments need to firmly stand their ground on environmental policies and intiatives. We need to deal with the laggards that are free-riding on the commitments that some companies are starting to implement. Global corporations need global rules. Governments attending the Johannesburg Earth Summit in 2002 admitted as much when they pledged to “actively promote corporate accountability” and to develop the necessary intergovernmental agreements. Governments don´t like to be reminded of this pledge, as they have done nothing to implement it. What is needed now more than ever is a global instrument to ensure the full liability of international corporations for their social and environmental impacts. The willingness of a few corporations to take action does not diminish the need for clear rules and penalties for the rest of companies who try to free-ride and dump external costs on society. It is time to implement enforceable rules in order to bring the idlers into the 21st century.
Daniel Mittler is the Political Director of Greenpeace International. He is based in Berlin. firstname.lastname@example.org