What is the Role of the Private Sector on Addressing Climate Change?
October 02, 2017
By Rachel Huang
With the current Paris framework, nations establish targets for reducing their carbon emissions but are not legally bound to hitting them. These commitments are voluntary in good faith, and symbolic at most for the U.S., since the U.S. Senate never confirmed a 2/3’s vote on the Paris Climate Agreement as a treaty recognized by the Constitution.  Therefore, some could say that the withdrawal isn’t as severe because there are no legal consequences. However, all but Nicaragua and Syria, a total of 195 nations, signed the agreement, and will continue to uphold their commitments without U.S. leadership. What U.S. withdrawal means to the international community, time will tell, as some countries will champion the cause and others will potentially slack, seeing as the U.S. has stepped back as well.
Most were hopeful that the light shed on climate issues and the Paris Agreement will now provoke local communities and the private sector to take more charge. With a lack of leadership from Washington, the public looked to cities, states, and businesses. Just as well, a coalition called “We Are Still In” was formed as a response to the Trump administration’s withdrawal. Their webpage featured an “open letter to the international community and parties to the Paris Agreement from U.S. state, local, and business leaders.”  The list, spanning across diverse facets of the American economy, includes higher educational institutions, eBay, Airbnb, Lyft, Microsoft, Facebook, Target, Tiffany & Co. and many other fortune 500 and local businesses. 
Whether it speaks to their bottom line or their values as a company, many in the private sector are on the climate issue. Dubbed as a ‘direct threat to national security’ by a GOP-led defense bill, the private sector, too, sees the potential risk of global warming to their assets, investments, and customers.  Large companies say that they’re a prominent force in addressing and implementing climate issues and solutions through financial assistance and investments, technological advancements, and partnerships. Tech companies and their executives realize the ominous situation of climate change, like Bill Gates of Microsoft who said, “We need a massive amount of research into thousands of new ideas – even ones that might sound a little crazy – if we want to get to zero emissions by the end of the century.”  He has since launched the Breakthrough Coalition with 27 of the world’s richest to invest billions of dollars into researching new energy technology.  These billionaires, including CEOs from Amazon, Alibaba, Facebook, and Hewlett Packard, all believe that their investments into several different areas, transportation, agriculture, electricity generation, will find a key to reaching zero emissions. Likewise, companies like Apple have transitioned 93% of its facilities to renewable energy and have its sight set on 100% renewable energy.  Apple invested $850 million into a solar energy farm to power their California stores, offices, HQ, and data center. Google has also set goals to buy enough clean energy to meet “its global needs this year.”  Investments like these not only cut down on fossil fuels and avoid impacting the environment, they also save these large companies money. In 2016, the 190 companies that reported on their targets saved $3.7 billion in that year alone. Other companies, such as Musk’s Telsa Motors, build innovation and sustainability into their brand through products like batteries and electric vehicles. Most top companies see sustainability and climate issues as a key driver of innovation.
Consumers expect that companies’ actions and their products are morally and ethically right for the environment and human health, or that the government will hold these companies accountable when something goes wrong. Despite public assumption, a company’s bottom line still matters and Volkswagen’s ‘diesel dupe’ was a prime example of how companies can play into ‘greenwashing’ and environmentally-friendly identities but not actually accomplish it. Dating back to 2015, the EPA found that VW’s diesel cars had a “defeat” software that knew when it was being tested and changed its performance to meet emission standards.  The diesel cars were heavily marketed as low emissions to consumers and led them to believe that this was an eco-friendlier diesel car. With the “defeat device,” VW could cheat and improve the results of test. As a result, when actually driven on the road and out of test mode, the engines emitted nitrogen oxide pollutants up to 40 times over U.S. regulations.  As of January 2017, VW agreed to pay $2.8 billion in criminal penalties and $1.5 billion to cover EPA’s claim for civil penalties.  In overall history, ExxonMobil, BP, and Chevron have also been big emitters of pollution.  And likewise, though those CEOs have been pushing for a more environmentally-friendly image, there are still lobbyists for the oil and gas industry pushing their agenda in Washington.
While some large companies make strides to provide innovative solutions to the world’s problems and make climate issues a current issue, others finagle their way around it and ‘greenwash’ their image to gather public acceptance and follow trends. This is where government comes in and regulates industries and actions of companies. And despite the turmoil in D.C., states and cities have more governance over U.S. energy policy and have committed to staying on track with the Paris framework. The best way to prosper with these climate issues is if the private sector shapes their actions towards a better future and policymakers, to the best of their extent, create opportunities that allow these companies to do the right thing.
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The views expressed on the Student Blog are the author’s opinions and don’t necessarily represent the Penn Wharton Public Policy Initiative’s strategies, recommendations, or opinions.
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