The Business of Climate Change: Post-Copenhagen Opportunities
II. Key Findings
IV. Questions for the Panel
V. Next Events
VII. WNSF Concept
“The Business of Climate Change: Post-Copenhagen Opportunities”
The luncheon panel looked at the opportunities and risks facing businesses after COP15. With heightened corporate focus on sustainability, business took increased interest in this climate conference. The panelists discussed their impressions on the results of COP15, and how it is affecting sustainability initiatives at their respective companies. In particular, panelists focused on the challenges presented by climate change, and the benefits of initiating sustainable efforts.
II. KEY FINDINGS
- While COP15 accomplished little in way of concrete policy, it was highly effective at increasing global awareness of and concern for climate change.
- With or without government regulation, corporations are making serious efforts to address the issue of climate change.
- Small companies that find it difficult to invest in sustainability can still initiate green efforts that are cheap and cost-effective.
- In the long run sustainability is profitable.
Helle Bank Jorgensen: US Sustainability Advisory Leader, PricewaterhouseCoopers
Dianne Dillon-Ridgley: Director, Interface Inc.
Rebecca Craft: Director: Energy Efficiency Programs, Con Edison
Alison Taylor: Vice President Sustainability-Americas, Siemens Corporation
James Fuschetti: Managing Director Office of Environmental Affairs, JP Morgan Chase
Helle Bank Jorgensen; US Sustainability Advisory Leader, PricewaterhouseCoopers
Ms. Jorgensen opened up the conversation by highlighting the efforts that companies are making to become more sustainable. While the Copenhagen conference did not produce the certainty that many were looking forward to, she said, neither did it diminish the significant role that business plays in advancing sustainability. With 800 specialists working in this field, PricewaterhouseCoopers (PwC) exemplifies corporate sustainability efforts.
In fact, many companies likewise are prioritizing sustainability. Ms. Jorgensen illustrated this point, citing PwC’s 2010 CEO Survey, which questioned some 1200 global business leaders from August to November of 2009, prior to COP15. One of the major findings, Ms. Jorgensen shared, is that one third of all respondents, both in the US and internationally, are concerned that climate change poses a threat to prospective business growth. CEO Tigran Nersisyan of Borodino Group, a Russian soft drink company, said: “We have lost markets due to climate change,” further explaining that increasingly rainy summers in Moscow have reduced the corporation’s sales during what used to be a very profitable season. Other CEOs suggested that it is not only an option, but an obligation for the industry to implement initiatives to combat climate change, independent of government regulation. Many take on that responsibility by setting goals to decrease carbon emissions.
Even amid the recession, the CEO survey showed that companies continue to prioritize climate change investments. In fact, in the past year more companies have raised than reduced them. Lastly, 60% of all companies, both local and foreign-based said at the time of the survey that they were preparing for the impacts of climate change initiatives in the next 12 months.
Dianne Dillon-Ridgley; Director, Interface Inc.
With 30 years of experience working in environment, sustainability, and corporate social responsibility, Ms. Dillon-Ridgley presented a brief historical background on the UN climate change process, pointing out that “Copenhagen” was in fact COP15, the 15th annual conference on climate change.
Yvo De Boer, Executive Secretary of the UNFCCC had resigned just days before, making the meeting a particularly timely event. Ms. Dillon-Ridgley explained that this was no doubt in part from frustration on the failure of COP15 to establish the replacement for the Kyoto Protocol, due to expire in 2012. This was not only disappointing, but also served as a harbinger for the upcoming 16th session in Mexico, she said, adding that the Kyoto Protocol was deeply flawed, in that four of the five largest carbon emitters, China, US, India, and Russia, were not included in the treaty. The US never ratified the treaty, while the other countries were not eligible to do so. If COP15 is any indicator of what is to come, it is unlikely that the UN will be able to implement a strong new framework by 2012, she added.
The UN process on climate change began with the Earth Summit at Rio de Janeiro in 1992, and since then the UNFCCC meets every December. The initial meeting produced the Rio Declaration.
Numerous earth conventions led up to the Earth Summit at Rio, including the Basel Treaty in 1985 dealing with hazardous waste. The resulting treaty attempted to eliminate the transfer of hazardous materials to recipient countries. Ms. Dillon-Ridgley explained that the US is one of only two eligible “industrialized” or so-called “developed” countries not implementing the Basel Treaty. This is largely viewed as decreasing its effectiveness. She suggested that this in part led to the Bamako Accord, a very empowering sign for developing nations.
The dynamics between governments and the private sector have evolved over the past 18 years, as have the key players in the discussions on climate change Ms. Dillon-Ridgley said. Although conditions are unpredictable, there are still opportunities.
In her closing remark Ms. Dillon-Ridgley declared that the most important thing to note is that we have spent the last 35 years politicizing the environment. What we should have been doing was environmentalizing politics. Environmental issues need to be a primary focus in policy decisions, she said. Instead of arguing with climate change skeptics, people need to take action, Ms. Dillon-Ridgley urged.
Rebecca Craft: Director; Energy Efficiency Programs, Con Edison
A representative of Con Edison, Ms. Craft brought the conversation to the local level, and discussed some of the risks and opportunities in the State of New York. Con Edison serves 3.2 million electricity customers. All contribute to greenhouse gas emissions, so in addressing climate change, both companies and individuals alike must be made aware of their responsibility, she said. Ms. Craft was disappointed with the results of Copenhagen, explaining that policymakers at both the state and local levels have the potential to implement sustainable policies. New York is making efforts in this process, she said
Con Edison has had an efficiency program since the 1970s. These programs are valuable not only because they benefit the environment, but also because they benefit the company and customers financially. By focusing on sustainability, Con Edison has been able to decrease its costs and thus decrease costs for customers as well. The company has lowered greenhouse gas emissions by 30% since the year 2005 and hopes to decrease emissions by another 10% in the next 10 years. Reducing emissions beyond that will not be possible without the efforts of the many Con Edison customers, she said.
Ms. Craft then described the three main types of greenhouse gases that Con-Edison is directly addressing: 1) Combustion gas emission reductions at steam/electric generating stations from NY power plants; 2) Fugitive sulfur hexafluoride gas which, she said, is far more damaging; 3) Fugitive methane, most commonly emitted from gas pipes and storage units. Through corporate responsibility initiatives, Con Edison has drastically reduced the latter two kinds of emissions.
In an effort to engage individuals, Con Edison supports New York State’s efforts to help customers reduce energy use by 15% by the year 2015. Numerous programs help customers assess their electricity usage and find ways to minimize it, such as purchasing more energy-efficient appliances. These programs benefit customers and the company alike.
Ms. Craft concluded on an optimistic note, noting that in spite of the disappointing results of COP15, companies have been and will continue to be heavily involved in the climate change movement. This in turn will decrease carbon emissions.
Alison Taylor: Vice President Sustainability-Americas, Siemens Corporation
Ms. Taylor, who was also at the Copenhagen talks, discussed the bottomline implications of COP15 for companies, focusing on business opportunities in the current uncertain regulatory environment. While she was disappointed by the results of the conference, she was heartened by the high level of interest in climate change displayed by business. Having served as the Chief Counsel to the U.S. Senate Committee on Environment and Public Works before joining Siemens, Ms. Taylor had attended climate conventions before, but this was the first time that she saw so much corporate interest.
More and more companies are making sustainability an integral part of their business plans. She pointed out that while large companies invest in sustainable equipment and technologies, this option is less feasible for smaller companies, whose smaller budgets often force them to choose between equipment and employees. More concrete government policy on carbon emissions would create incentive for these companies, she said. Nonetheless, she has observed that sustainability initiatives are mushrooming, with or without a concrete policy. In response to the non-binding accord to decrease emissions by 2020, agreed upon at COP15, many countries are implementing voluntary reduction initiatives. This indicates that governments and businesses alike are eager to confront climate change, even without the pressure of a regime, she said.
In the US, policymakers, including President Obama, continue to push for comprehensive climate and energy legislation, she noted. Some possibilities include linking a cap-and-trade system or emission auction. Some policy makers suggest that “cap and trade,” should be rebranded in order to avoid some of the negative publicity it has received. The recent bill introduced by Senators Maria Cantwell and Susan Collins outlines a cap and dividend system to minimize market manipulation and benefit consumers and households. On the whole, Ms. Taylor concluded, there is a lot more hope in the US than many would think.
James Fuschetti: Managing Director Office of Environmental Affairs, JP Morgan Chase
Like other panelists, Mr Fuschetti was disappointed by the results of COP15 and said he thinks the UN framework is flawed, partly because the conference is too big and unwieldy to reach a consensus. He noted that a big disappointment has been the drop in both media coverage and apparent public interest in the topic since the conference. The immense publicity and interest in climate change before the conference has drastically dwindled. Mr. Fuschetti also said that he thought the target to limit increase in climate change to two degrees centigrade is unlikely to be executed.
Nevertheless, he said the establishment of REDD (Reducing Emissions from Deforestation and Forest Degradation) presents an excellent deterrent to climate change, one that was not included in the Kyto Protocol. Forests are an excellent sink for carbon, and REDD offers rewards for preserving forests. He pointed out that preserving forests not only mitigates the effects of carbon emissions, but also potentially creates an opportunity to transfer wealth from core countries to the periphery.
Mr. Fuschetti also talked about what companies are doing to combat climate change. Echoing Ms. Taylor, he noted that while large companies are generally making efforts to promote green growth, without concrete policies, smaller companies have a tougher time. While this is worrisome, he said, fortunately, many major business leaders are continuing their green efforts, with or without government regulation.
IV. QUESTIONS FOR THE PANEL
Q: Jim, as a lender and source of capital, how does JP Morgan encourage middle market firms on the margin to start making investments in sustainable business?
Jim Fuschetti: We must keep in mind that one year ago, the American capital market suffered a near-death experience. We are still recovering, and middle market companies had the hardest time weathering the recession. While large corporations still have access to capital, many midsized companies are finding that their credit worthiness has gone down and they are less able to take on large investments. Likewise, lenders are less proactive, creating a difficult situation.
Dianne Dillon-Ridgley: The biggest problem is that we still lead with the mentality that implementing environmentally sustainable practices will cost more, when in fact it may cost less and is certainly more cost-effective over time. To quote Amory Lovins, Chairman of the Rocky Mountain Institute,
“We needn’t debate how much it will cost to reduce emissions, nor whether that cost is worth paying, nor who should pay-because protecting the climate is not costly but profitable. Saving fuel is cheaper than buying fuel: energy efficiency costs less than the fuel it saves, as thousands of practitioners prove daily.
Many people get confused because economic theorists don’t count the money we save by needing less fuel. In fact, as many business leaders understand and apply, energy efficiency is one of the highest-return and lowest-risk investments in the whole economy.”
Rebecca Craft: Cost-effective sustainable practice is not limited to solar panels, which will never be cost-effective. There are a lot of less glamorous things that individuals and businesses can do to be green and save money. Some practices include installing good windows that bring in daylight effectively, and turning off lights that are not in use. People don’t talk as much about these unglamorous practices, but they work and they do pay back.
Alison Taylor: Government entities have been thinking about how to create incentives for these companies to become more environmentally sustainable. Possible incentives include subsidies, rebates, and tax exemptions for small companies that go green. I am in agreement with Dianne that “going green” is in fact more profitable for companies. When Siemens consults other companies, many of them discuss becoming more sustainable as one of their goals. We have many cost-effective products to help clients do that. Slowly we are moving away from addressing sustainability only as “green” or “environmental.” We are discussing it in terms of its return on investments, and in that way it is profitable.
Q: Alison, please share with us an example of profitability you’ve seen through sustainable initiatives. What can be done to bridge the gap between best practices at places where people can afford them and the middle market that can’t?
Alison Taylor: At Siemens, from 2007 to 2011 we decreased our energy usage by 20% and found that this actually saved money. There are many cheap ways to decrease energy usage such as deploying energy efficient light bulbs in offices. CEOs often share information on best practice informally in conversation. Discussion forums like this one spread awareness, and that is the first step to integrating sustainable practice into business.
Q: Coming to the root of the problem, how specifically can each individual decrease his or her energy usage at the local level? How much energy do the various household appliances use, and which plug should we pull to decrease the total?
Rebecca Craft: The average apartment-dweller in New York uses 350 kilowatt hours per month. This is in fact far lower than the average American. The biggest energy user is the refrigerator, so investing in one that is energy efficient will greatly decrease energy usage. The second biggest is the air conditioner. Luckily in New York, this is only a seasonal appliance, and not one that is used very much. The third biggest user is the set top box for the TV. To eliminate this load, customers should buy a new TV that does not need a set top box. Lastly, the vampire load from plugs that are not being used greatly increase energy usage.
Dianne Dillon-Ridgley: New age refrigerators exponentially increase energy efficiency compared to older ones. Replacing an old refrigerator is a great way to decrease emissions. Another important factor is education. For example, teaching children ages nine to twelve about energy efficient practices can really improve the entire household. Psychologically, she explained, it is the middle school years in which one adopts their major world view and framework. Educating youth regarding energy efficiency will pay off in public policy for generations to come.
Q: Some of you spoke about subsidizing clean energy, but at present there are many subsidies of dirty energy. Although coal is considered cheap, when monetizing the real costs, coal costs 16.5 cents per kilowatt hour. Although customers do not pay this cost, taxpayers do. I would like to ask the large corporations with big lobbying groups, how are you pushing new bills to stop the old subsidies of dirty energy and replace them with support for clean energy?
Jim Fuschetti: I suggested that the government implement a policy to double the price of electricity. This would drastically decrease energy consumption, eliminating the need for subsidies altogether.
Rebecca Craft: Con-Edison does not have a lobbying group. However, carbon is deeply embedded into our system. What customers need to recognize is that decreasing emissions requires movement on everyone’s part. For example, since California has started using Smart Meters, people have been outraged by the true cost of energy. A simple solution to these high prices is to turn off the air conditioner, yet this is a price that customers are not willing to pay. Without these efforts on the consumers’ part it is impossible to make energy cheaper.
Alison Taylor: I find that investing in research and development accomplishes far more than lobbying. For example, Siemens invests a lot into researching wind energy and bringing it into the market. Ultimately it is the market that will pick the winners and losers among different energy technologies, so it makes little sense to lobby against coal subsidies or other specific technologies.
Q: Some of you discussed that the industry will self-regulate as oppose to government-imposed regulation. What is the role of policy? Where is regulation pushing the population?
Rebecca Craft: That depends on what you mean by policy. There is policy at both the state and local levels. State policy is quite strong in the US, and you will see that price signals allow the public to adjust its behavior. The federal government however, looks a lot more like Copenhagen, but smaller. There are very diverse interest groups across the States, making it difficult to settle on an agreement, but at the State level policymakers are taking aggressive action.
Dianne Dillon-Ridgely: There is a huge quagmire of misdirected subsidies that accomplish the wrong things. It is hard to decide where to begin because so much needs to be rebuilt, and we need to decide what to prioritize. People want the biggest return on investments, the lowest taxes, and the maximum protection from the government. It is of course impossible to have all of these things at the same time. What the public should do is demand honesty from policymakers. Then it would be possible to construct policies that are both feasible and directed appropriately. People are willing to deal with hardships if it means that they can achieve something better for their children.
V. NEXT EVENTS
- In June, WNSF Executive Director Ann Goodman will be honored with the University of Chicago Public service Citation. This is largely in recognition of her efforts in co-founding and directing WNSF. Dr. Goodman will receive the Award on June 5th at the University of Chicago.
- WNSF has moved to a new office. The organization is now headquartered at 440 Park Ave S, Second Floor.
- In February 2010, Iris Burkat joined WNSF as the Marketing Director.
- In February 2010, Lana Zaman joined WNSF as the Program Administrator. With a BA in Mathematical Economics from Brown University, Lana is delighted to be part of an organization that bolsters the movement towards a sustainable economy.
- WNSF’s Board Chair wrote an article for the book Written in Water, published by National Geographic and edited by Irena Salina, who made the film “FLOW: For Love of Water.” The foreword is by Peter Glieck, founder of the Pacific Institute. The book is a compilation of short personal essays on the importance of water to each author.
VII. WNSF CONCEPT
WNSF provides a forum for business and professional women to congregate, reflect, and act on the converging issues of corporate social responsibility and sustainable development. Through meetings and simple electronic support tools, the Network aims to facilitate the exchange of experiences and best practices on these vital workplace issues. By creating a new network of executive women, the Network seeks to improve responsible practices in workplaces; sensitize corporate culture more generally to issues of sustainability and social responsibility; and encourage a public commitment locally, nationally, and internationally to sustainability principles.