Hundreds of businesses are now working to deliver net zero emissions, but are their lobbying activities supporting or undermining that goal?
Lobbying has always had something of a bad name. The practice of businesses spending huge sums to improve their access to policy makers and present their preferred proposals to legislators has always been controversial, but in an age of 'dark money' funded campaigns and a revolving door between the public and private sector, lobbying has become more contentious than ever as accusations about vested corporate interests tilting the democratic playing field have become commonplace.
And yet, lobbying can have has its merits. Policy frameworks are hugely complex and seemingly minor decisions made by lawmakers can have huge real world impacts in terms of jobs, investment, and the environment. In this context, businesses setting out their concerns and explaining how legislation can be improved can play a crucial and positive role in the democratic process, especially if businesses are committed to delivering on long term goals to the benefit of society as a whole.
Whether you regard lobbying as a blessing or a curse there is a lot of it going on, and there are reasons to think it is about to become even more prevalent. With governments unleashing unprecedented spending programmes to reboot the economy in a decade pivotal to the world keeping within the Paris Agreement's warming limit, advocacy has dramatically ramped up. Businesses and the trade groups they are members of have recognised that there is more to play for in their interventions with governments than ever before.
Or, as Tom Brookes, executive director of strategic communications at the European Climate Foundation, puts it: "This really matters now. People have understood that by 2025, you have missed the moment. The moment is now, because this [pandemic] crisis has driven capital reallocation on the scale that could otherwise not possibly have happened. If done wrong, you've set the direction of travel, but if it's done right, you've set the direction of travel." The private sector is massively important in the present moment, given its capacity to either "hugely accelerate change, or create massive inertia", he emphasises.
While the increasingly vocal calls from corporates for a green recovery in the wake of the coronavirus - most recently from the Confederation of British Industry - suggest the private sector is using its voice to advocate positively for the climate, elsewhere work needs to be done to ensure that firms' public sustainability goals and ambitions are not undermined by broader lobbying efforts that harm the climate. As net zero carbon and carbon neutrality pledges have proliferated across the private sector, questions have quickly followed as to whether firms' ambitious in-house climate targets are supported or hampered by their engagements with policymakers. Companies may have a net zero target, but is their lobbying activity net zero compatible?
It is a question being asked by a growing band of investors who have realised that lobbying activity can be something of a blindspot for companies that are otherwise publicly committed to climate action. The fear is that a business can announce new emissions targets, impressing investors and the public in the process, only to then instruct their trade associations or public affairs agencies to continue to lobby against progressive climate policies that would actually help to curb emissions.
It is against this backdrop that corporate climate lobbying has emerged as a major new battleground for investors and environmental campaigners alike.
As Veena Ramani, senior programme director of capital market systems at investor-backed sustainable advocacy group Ceres' explains, companies that do not align their lobbying efforts with climate science are essentially engaging in a form of self-harm. "Climate change is a systemic risk, and any corporate activity that does not recognise the enormity and severity of that risk is a company in effect acting against its own best interests," she argues.
While encouraged by a growing number of companies linking their operational sustainability programmes with their lobbying agenda - and in the case of some companies, such as Microsoft, making responsible climate advocacy a pillar of their sustainability programme - Ramani stresses that much more needs to be done across the private sector to ensure that companies are linking their risk, sustainability, and lobbying efforts.
"Clear-eyed understanding about science and risk should include decisions about climate change within a company, both operationally, and from a lobbying perspective," she says. Earlier this year, Ceres published a blueprint for responsible policy engagement designed to help companies integrate their internal and external climate strategies by encouraging more firms to audit and align their lobbying efforts with climate science.
One company that has won plaudits for its approach to corporate advocacy is Unilever. Last year, chief executive Alan Jope wrote an open letter to all the firm's trade associations asking them to confirm whether their position on climate policy was consistent with the 1.5C ambition set out by the Paris Agreement. The move came after the company left the influential Grocery Manufacturers Association in 2018 over disagreements over climate policy. And prior to that, the firm was part of a coalition of companies - dubbed The B Team - to support a campaign in 2015 that successfully pushed for the 1.5C to become the acceptable limit for warming. It was, according to Thomas Lingard, global climate and environment director at Unilever, a landmark moment for climate advocacy.
"It really was a shocker at the time - business piling in on the 1.5 campaign," he reflects. "But it had the effect of resetting the norm, it put heavyweight businesses and CEOs in the camp of the civil society and deep green advocates."
Unilever wants to be part of a "progressive movement calling for faster ambition from policymakers", Lingard explains, alongside We Mean Business and a growing number of policy advocacy coalitions around the world.
Internal sustainability goals and targets should work in tandem with corporate lobbying efforts and ultimately raise the environmental agenda across the business sector, Lingard emphasises. "Targets drive internal action but targets are also a tool for creating more ambition and an ambition loop dynamic where you can raise the floor for everybody," he explains.
For instance, Unilever's recent pledge to reach net zero emissions from its products by 2039 has resulted in its plans to channel €1bn into initiatives that will purge its cleaning products of fossil fuel derived chemicals - an investment that could help galvanise government investment in carbon capture and storage technologies.
The importance of cranking up this 'ambition loop' to push a cleaner, greener growth pathway is greater than ever, Lingard says, as the global economy buckles under the coronavirus recession. "We've got to keep driving the climate agenda during a period of wobbly economic conditions," he adds. "This is a time to reimagine the economy, to resteer it."
But many companies have a long way to go before they can emulate Unilever, with a large number of firms continuing - whether by mistake or design - to overlook the fact that their trade associations advocate for policies at odds with their own internal climate goals.
Shell, BP and Total have lately - following long-running investor pressure - published the results of internal audits of their trade association memberships, detailing where those groups' climate policies were misaligned with their internal goals. But while the companies withdrew from a select few associations, they remain members of the influential American Petroleum Institute, a group that has consistently and successfully opposed federal attempts at climate change regulation. And in Europe, the cross-sector BusinessEurope group, chemicals sector lobby group CEFIC, and auto trade group ACEA have all been accused to varying degrees of opposing the introduction of tougher EU climate regulation, despite many of their members having announced ambitious emissions goals and called for bolder climate policies on an individual basis. Policymakers would be forgiven for thinking they are getting mixed signals.
Results from a consultation undertaken to inform a new sustainable lobbying framework being created by the Church of England Pensions Board, Swedish investor AP7, and French bank BNP Paribas, have highlighted a continued disconnect between the views of companies and other groups, including investors and civil society, on the influence of industry associations, according to Clare Richards, senior engagement manager from the Church of England Pensions Board.
"You have investors, civil society, and policy makers thinking industry associations are influential or very influential in the set up," she reflects. "But then the very organisations that are members of those industry associations were downplaying the significance that they had." Almost 120 respondents across 18 countries took part in the consultation, which ran over the summer.
Richards surmised that companies' underestimation of their proxies could be remedied if companies undertook more thorough internal audits of those groups' activities. "Companies need to shake off their disbelief in terms of the impact that industry associations are having in the real world and have an honest, open look at how that aligns their own strategic aims and how they are going to transition their company," she said.
The investor coalition is working with Chronos Sustainability on the new framework, which ultimately aims to help climate-focused investors more easily identify those companies helping to drive a net zero transition by embracing lobbying as a force for good. "It's about moving away from a call to 'do no harm' towards what [companies] can actually do to play an active role in lobbying responsibly," Richards explains.
But this shift will require the corporate sector to rethink both its aversion to ambitious regulation, as well as a historically parsimonious approach to collaboration when it comes to advocacy, according to Tom Brookes from European Climate Foundation, who spent 15 years in public affairs for major tech firms, including Apple and Microsoft, prior to joining the non-profit.
"That idea that you can look at the world company by company and not as a connected set of things that we are going to collectively have to deal with - that perspective has to change, and I think it is changing," he muses. "That level of minimising collaboration as much as possible to get the outcome you need - that's the piece that needs to be flipped on its head, and people are starting to understand that."
He adds: "It's not going to be an individual series of self-governed targets or commitments that is going to get this done. Everyone has to be making their own targets, but also committing to advocating for a change in the level playing field."
Meanwhile, companies that fail to modify their lobbying efforts could increasingly have to answer to investors. A flurry of investor resolutions in recent months at major mining, oil and gas, and finance firms have called on management to better disclose their climate lobbying strategies. And just this month, the Climate Action 100+ group of top institutional investors wrote to over 160 of the world's most carbon intensive firms calling on them to set net zero targets. The group also announced the launch of a new Net Zero Company Benchmark, which will be used by investors to gauge corporates' progress. It will judge firms not just on the targets they set, but also on their decarbonisation strategy, governance, capital alignment, and, crucially their climate policy support, or otherwise.
Some investors are even willing to walk away from those firms that fail to respond to their concerns. Nordic asset manager Storebrand recently dumped roughly $27.2m of investments in oil majors Chevron and ExxonMobil, mining giant Rio Tinto, chemical maker BASF, and energy provider Southern Company in protest at their lobbying activity. Plenty of other major companies have been put on notice.
Lobbying may be inherently controversial, but the message for business leaders is increasingly clear. If you want your net zero strategy to be credible, your lobbying activities need to become a force for good.
This article was produced as part of the We Mean Business coalition's partnership with the inaugural Net Zero Festival.
The virtual Festival takes place over three days from September 30th and you can reserve your place here.
