Corporations Can’t Ignore Climate Change
Late last October, the New York Stock Exchange stood quiet as Superstorm Sandy battered the East Coast. It was the first time since 1888 that weather had caused the exchange to close for two consecutive days.
In the wake of a disaster like Sandy, it’s easy to point fingers—at industry, regulators, government officials—but several years ago, I came to the conclusion that society is not going to solve our most vexing environmental problems by simply deciding who’s to blame. Instead, we must shift the levers of power by involving the major players in our capital markets.
When a strong storm can bring the world’s largest financial institutions to a standstill, it is crystal clear that the challenges of climate change are inextricably linked to our economy. At Ceres, we work with major corporations, large institutional investors, and others to leverage their power to address climate change, water scarcity and other environmental threats.
Market players are logical actors and they respond to clear market signals. Right now, without a price on carbon, we’re sending the signal that carbon pollution is free. And when things are free, you get more of them. We need honest pricing that will bring corporate interests and environmental realities in line.
When it comes to climate-related challenges, it’s in the long-term interest of corporations, investors and other major economic players to adjust business-as-usual models in favor of new, more sustainable models that ensure future prosperity. Getting them to see their own long-term self-interest can be a daunting challenge, however, but we’re making progress.
Take the example of Ford Motor Company, a long-time Ceres collaborator. Ford has undergone a remarkable transformation over the past decade; it has gone from being a part of the problem to a visionary part of the solution by rethinking virtually every aspect of its business and putting sustainability at the core of its strategy.
For decades, every effort in Washington to raise fuel economy standards and thereby reduce oil consumption and greenhouse gas emissions had been met with stiff opposition from the carmakers who argued it was too costly, too difficult, and would result in cars Americans wouldn’t want to drive. In 2011, when the Obama Administration sought to raise average fuel economy standards for cars and trucks to 54.5 miles per gallon by 2025, it found unlikely allies in Detroit.
Ford acknowledges quite publicly that fuel-efficient cars and trucks are the wave of the future – it’s what customers want, it’s where the company wants to be “best of class.” What a refreshing change from a decade ago when “gas guzzling” cars and trucks was all they could talk about.
Today, Ford is on the leading edge of the development of a new generation of hybrids and electric cars. It is challenging Toyota’s dominance in this market in part with a $135 million investment in an advanced electrification center in Dearborn that will employ a thousand engineers. The company is deeply engaged with a range of stakeholders, listening to their concerns and advice and integrating them into strategy. It’s measuring and reducing its water usage worldwide. Ford’s water consumption is down eight percent per vehicle made between 2010 and 2011, and the company has set a goal of a 30 percent reduction by 2015. For Ford, sustainability is now a core business strategy that is improving competitiveness, creating jobs, and adding to the bottom line.
Ceres has been an instrumental partner in Ford’s transformation; we work with many large companies to bring them along the road to sustainability. There have been disagreements, pushing and pushback, but ever since Ford signaled its desire to become a sustainable company by joining Ceres in 2000, we have been working towards a shared goal, even if we sometimes disagree about how to get there and how fast we need to move.
This approach of constructive engagement has paid off, both for Ford, which is as profitable as it has been in years, and for the planet. Ford today is a sustainability leader because we have worked together, changing the paradigm of how the business of sustainability gets done.
We do, indeed, have a very long road to travel, but change is brewing and it is up to capital market players to chart the path towards a sustainable prosperity, one in which we build an economy within the limits of nature. I believe it is possible, and we can’t wait until the next storm strikes for our work to begin.
Mindy S. Lubber is President of Ceres, the leading coalition of investors, environmental organizations and other public interest groups working with companies and investors to build sustainability into the capital markets and address sustainability challenges such as global climate change.