Forget Cancún. What we need are Unreasonable CEOs.

01 Dec 2010 – Geoff Lye

As I left last year’s failed Climate Change Conference in Copenhagen, it dawned on me that the search for a new global agreement on climate change under the auspices of the UN is providing perfect cover for inaction by business leaders. Take BP’s then CEO, Tony Hayward who, to paraphrase his words from the Copenhagen World Business Summit a few months prior to COP 15, assured us that climate change is not a problem for business. Let the world decide what it wants; put in place the policies and regulations to deliver it – and we will comply. In other words, it is down to governments to set the rules and we in industry will follow.

Whatever happened to leadership and climate responsibility which reflects a company’s values and principles? What happens if and when governments fail to deliver adequate regulation – is business as usual an option?

The one thing we can be sure of – and informed business leaders know this too – is that even the best outcome in Cancún over the coming weeks will not be enough to reduce the risk of dangerous climate change to an acceptable level. A report recently released in London, prepared by climate scientists under the auspices of the UN, has calculated that if the signatory countries sign up to the Copenhagen Accord (and then actually deliver – not likely on past experience with the Kyoto Protocol), we would still not be cutting emissions enough to avoid breaching the 2°C global warming threshold – with the potentially catastrophic consequences that would entail.

A successful outcome in Cancún is of vital importance, of course. Even if the targets agreed are inadequate, a refined protocol will establish new rules of the game. This will, hopefully, include the critical steps towards a global price for carbon; a substantially improved Clean Development Mechanism; and integration of a scheme to reward protection of forests. Establishing global frameworks and rules on these and other issues will be massively powerful in driving down the carbon intensity of the global economy. But the new rules of the game are the starting whistle rather than the end game itself. The revised rules for Formula One motor racing unleashed completely new strategies for winning and – in the process – completely re-ordered the winners and losers. Similarly, businesses can and should be developing winning strategies based on low carbon solutions.

To borrow the title of John Elkington and Pamela Hartigan’s 2008 book The Power of Unreasonable People, perhaps the time has come to call on Unreasonable CEOs to step up to the challenge. Unlike democratic governments, CEOs can lead and inspire rapid and massive actions to reduce emissions. Just consider how quickly WalMart has moved from a slow follower to global business leader in squeezing carbon out of its supply chain; no government could move as quickly or as efficiently. And Unilever’s Paul Polman’s recent pledge to double their business while halving their environmental footprint is nothing less than a paradigm shift in their underlying business model.

Compare, on the other hand, the actions of the world’s largest public oil companies. Between them, ExxonMobil, Shell and BP’s products account for about 15% of global energy-related emissions over their full lifecycle. Their strategies have massive implications for succeeding or failing the 2°C imperative. If we judge them by their actions rather than by their words, we can track a growing commitment to energy security at the expense of climate security. Investments of all three show how BP and Shell have followed ExxonMobil into ‘difficult’ (for which, read ‘risky’) and ‘unconventional’ (for which read ‘dirty’) sources of energy. ExxonMobil has at least been consistent and honest in its future pathways; whereas both BP and Shell have – far from de-carbonising their portfolios as promised at the turn of the century – aggressively re-carbonised them, particularly by investing in oil sands. Unreasonable CEOs can act unreasonably in breaking the status quo or, as in the oil industry in recent years, shifting the problem and the solutions to regulators.

At various times in recent years I have asked senior oil industry executives what they would do if we lived in a world of no regulation. Other than rejecting hypothetical questions (politicians take that line too), they clearly have no idea. Surely, I press, this is when your company values and business principles kick in? In other words, given that climate risks are at least as great as safety risks (e.g. “Every employee has the right to return home to their families with all their fingers and toes intact”), should companies not set their own standards of responsible behaviour and measureable goals to guide their strategies, investments and business models? And, if they did, would this not require voluntary targets for absolute emissions reductions and for squeezing carbon out of the supply chain (à la WalMart)? Blank faces. Unreasonable executives.

(This article also appeared in Outreach, a multi-stakeholder magazine on environment and sustainable development.)