9 January 2013
Imagine this: You live in beautiful house with the best of everything. However, when you turn on your faucets, only one-fifth of the water you pay for comes out. The rest leaks from bad plumbing onto your basement floor.
That describes America’s situation with energy. Only 13% of the energy we burn results in useful work. The rest is wasted by inefficiencies in buildings, power plants, infrastructure, transportation systems and equipment. Much of it ends up as pollution.
Just as a responsible householder would fix his plumbing, a responsible nation would fix the leaks in its energy economy. Responsible businesses are figuring this out and are saving money with green energy, including greater efforts to get more work out of every energy dollar, cutting their greenhouse gas emissions in the process.
I discussed this recently with Hunter Lovins, one of the world’s leading experts on the business case for sustainable energy. Hunter, who Newsweek has called “the green business icon,” co-authored Brittle Power: Energy Strategy for National Security in 1982; Natural Capitalism: The Next Industrial Revolution in 2010; and Climate Capitalism: Capitalism in the Age of Climate Change with Boyd Cohen in 2011, now available in paperback as The Way Out: Kick-Starting Capitalism to Save Our Economic Ass.
In her latest book, Hunter writes:
Believe in climate change. Or don’t. It doesn’t matter. But you’d better understand this: the best route to rebuilding our economy, our cities, and our job markets, as well as assuring national security, is doing precisely what you would do if you were scared to death about climate change. Whether you’re the head of a household or the CEO of a multinational corporation, embracing efficiency, innovation, renewables, carbon markets, and new technologies is the smartest decision you can make. It’s the most profitable, too. And, oh yes — you’ll help save the planet.
This post was a two-part interview in Huffington Post.
Bill Becker: In his first news conference after the election, President Obama said he’d like a national conversation on combating global climate change. However, he suggested — and I’ll paraphrase him here — that the conversation needs to address the job and economic benefits of climate action, because that’s foremost on the minds of the American people. You’ve worked with companies around the world on the business case for reducing their carbon emissions. What kind of reception have you found?
Hunter Lovins: A warm one. Smart companies recognize that the best way to cut their carbon emissions is to cut their use of energy through implementing cost-effective energy efficiency, because this cuts their costs.
Mr. Obama is right, but he doesn’t go far enough. Americans are concerned about the economy, but as my latest book describes, the way out of our recession is to unleash the green economy. Green jobs tend to be created here in our communities. You don’t fix up a building by putting it on a boat and sending it to China for retrofit. You buy insulation at local hardware stores; guys in pickup trucks who live in your town come to your house to install solar panels; farmers in Iowa get the revenues from leasing their land for wind farms.
There are already 9,000 more solar workers than steel workers in the U.S., and if we had decent federal and state policies, we’d have a lot more. Doesn’t it make sense to stop buying imported oil from parts of the world that don’t like us, and invest instead in meeting our energy needs from fuel that is free once the capital cost to install the wind turbine or solar panel is paid? Any national conversation on climate protection should put jobs and local prosperity at the center, because protecting the climate is GOOD for our economy.
Often in such talks business gets forgotten. Far too many people still subscribe to that old myth that doing anything to protect the environment cuts jobs and is bad for business. Nothing could be further from the truth, and there are now more than 45 studies from the likes of those wild-eyed environmentalists at Goldman Sachs showing that the companies that are the leaders in environmental, social and good governance policies have 25 percent higher stock value and the fastest growing stock value, while delivering superior financial performance and better investment risks than their less sustainable competitors. Companies like Puma, Novo Nordisk, Baxter and many others are counting the costs and risks of unsustainability in financial reports. They find that behaving more responsibly enhances every aspect of core business value.
It would be good to have a national summit to make such findings more public. The iMatter Campaign(young people working to raise awareness that unchecked global warming means that they do not have a future) is calling for Mr. Obama to convene a national summit on climate change in the first 100 days of his new term. I’m helping them involve business leaders who understand that cutting emissions is just better business.
DuPont was one of the first to prove this; in the late 1990s the company pledged to cut its emissions of greenhouse gasses 65 percent below its 1990 levels, and do it by 2010. That’s a bit more ambitious than the United States, which still refuses to ratify the Kyoto protocol agreeing to cut emissions 7 percent below 1990 levels by 2010.
Did DuPont join Greenpeace? No. The company made its announcement in the name of increasing shareholder value, estimating that every ton of carbon it no longer emits saves its shareholders $6 in operating costs. Implementing energy-saving measures cost less than buying and burning fuel or engaging in processes that emit other greenhouse gasses. In short, DuPont was solving the climate crisis at a profit.
In a 2005 speech at the Conference Board, Gary Pfeiffer, the company’s chief financial officer, described how DuPont had enjoyed a 340 percent increase in share value paralleling a 60 percent reduction in its environmental footprint. By 2007 DuPont’s program had cut the company’s emissions 80 percent below 1990 levels. Doing this created a financial savings for the company of $3 billion between 2000 and 2005. By 2007, DuPont’s efforts to squeeze out waste were saving the company $2.2 billion a year. The company’s profits that year? $2.2 billion.
In a recent report Power Forward noted that more than half of the Fortune and Global 100 companies, including AT&T, DuPont, General Motors, Google, HP, Sprint, and Wal-Mart have set carbon reduction goals; Wal-Mart has pledged to become 100 percent powered by renewable energy, although it does not say when. Ford Motor Company has taken the leadership step of setting “science based goals,” committing to cut its emissions in line with what scientists say is necessary to stabilize the climate. Their target — stabilization at 450 parts per million (ppm) CO2 concentration in the atmosphere — is still too high. Leading scientists now say that 350 ppm is the highest “safe level” — meaning there is only a 50/50 chance of global catastrophe at that level. But setting any goal is better than the sort of handwringing preferred by national politicians, who set tepid goals for 50 years from now when they are safely dead.
What’s a good science-based goal? At least a 4 percent reduction per year is a good start. Regardless of targets, companies are recognizing that they need to start measuring their emissions and implementing programs to cut them. The Carbon Disclosure Project (CDP) receives annual reports from more than 4,000 companies, cities and other organizations detailing their carbon footprints. Why? Initially because CDP was backed by institutional investors with assets totaling more that $78 trillion. If your company intends to go to the capital marketplace, it had better have a report on file with CDP.
More important, companies are finding that using these reports as a basis for cutting their emissions is a route to enhanced profitability. The companies in CDP’s Carbon Disclosure and Performance Leadership indices had nearly twice the average total return compared to Fortune’s Global 500 from 2005 to 2011. Around two-thirds of emissions reduction projects reported by companies to CDP this year exceeded a 30 percent return on investment and 88 percent of projects exceed firm level return on invested capital.
And we’ve only begun to achieve the cost effective savings. CDP reckons an average sized company reporting to it has $30 to $40 million of cost effective energy efficiency opportunities that remain uncaptured.
The United States has energy saving opportunities worth $130 billion annually that remain unrealized due to the various market barriers, according to the consulting firm, McKinsey. It calculated that cutting energy waste a mere 23 percent a year by 2020 would save the U.S. economy $1.2 trillion. The investment to achieve this is only $520 billion, a deal even conservative businesspeople ought to jump at. If they did, we’d cut 1.1 gigatons of greenhouse gas emissions annually–the equivalent of taking the entire U.S. fleet of passenger vehicles and light trucks off the roads.
BB: In your book, The Way Out, you list scores of case studies where corporations and small businesses are profiting from energy efficiency and renewable energy. On the other side of the equation, what have you found about why more companies aren’t doing it?
HL: CPD asked companies this question and found that many executives had no idea where to start. It seemed a daunting prospect to them.
Similarly a 2010 survey of nearly 2,000 company executives by McKinsey found that although more than 50 percent of those surveyed stated that implementing more sustainable practices was very or extremely important to the future of their company and delivered immediate value, fewer than 30 percent were acting on this recognition. They reported lacking clarity about what actions were expected of them and how to begin. To counter that, Natural Capitalism works with companies, communities and countries to help them design strategies to capture their opportunities in ways that drive their profitability.
But here’s what I think is the real problem: lack of attention. In the midst all of the pressures on corporate management, prime among them staying alive in the worst economic recession since the Great Depression, cutting carbon seems low on the list of priorities. We’ve walked into companies that are wasting hundreds of thousands of dollars every year just from leaving lights on. Nationally, unnecessary lighting wastes as much as $10 billion every year. Other companies leave computers and monitors on after everybody’s gone home, apparently thinking, “Oh, it’s not that much energy… ”
In one company we pointed out that just posting a policy to turn the dern things off when no one’s sitting in from of them would save $700,000 the first year. Nationally $2.8 billion dollars a year is wasted this way. In 2010 Ford Motor Company posted such a policy and saved themselves a million dollars.
Good for Ford, but thousands of other companies, large and small are still wasting billions, buying and burning energy they do not need to make the products we desire and the services they provide. A Presidential Summit could sure help bring attention to the enormous economic benefits we would all gain from a commitment to protect the climate. So would one of the recommendations of the Presidential Climate Action Project, where I serve as an advisor: President Obama should issue an nationwide challenge to make the United States the most energy-efficient industrial economy in the world. According to the American Council for an Energy Efficient Economy, we now waste 86 percent of the energy we burn. We should declare a war on waste. Unless we do, our economy cannot become the vibrant, competitive, clean job engine we want it to be.
BB: It seems clear that with their enormous economic and political power, corporations have a major role to play in leading America’s transition to a clean energy economy. Yet, collaboration between the corporate world and the environmental movement seems to be the exception rather than the rule. Do you believe there is potential for greater alliances between companies and environmental groups? If so, how do we achieve it?
HL: I believe that the climate crisis will be solved faster by businesses doing the right thing because it is in their interest to implement climate protection than by legislators finally figuring out that going over the climate cliff is already hurting our economy, costing us jobs and endangering and impoverishing us all. The failure of global governmental negotiations to implement a climate protection treaty is mirrored at each failed global summit by corporate commitments.
But I’m not sure that the old environmental movement versus business myth is true. My work with companies began more than 30 years ago at the little environmental group, Tree People, in Los Angeles. It spread internationally with Friends of the Earth, and continues to this day. Just as the smart companies are taking the lead in implementing more sustainable practices because they understand that it cuts costs, the smart environmental groups are working with companies to help them find cost-effective ways of implementing more sustainable practices.
There is a great talk by Google Chair Eric Schmidt at a meeting of the Natural Resources Defense Council, one of the big environmental groups, in which he outlines how Google has worked with NRDC, and how the company’s actions to save energy, implement renewable energy and cut the company’s carbon footprint meet every criterion of a of a profit-maximizing capitalist. His conclusion, “It’s a no-brainer from a shareholder perspective… When you actually do the math you discover that doing the right thing is also the right thing for business.”
Environmental Defense Fund was one of the first groups to use market mechanisms for climate protection. Following on an article I helped write that set forth the business case for climate protection, EDF argued for a market-based solution at the Kyoto climate negotiations, one of the few environmental groups at the time to understand that business is the engine that will implement good policy. EDF continues this leadership with its Climate Corps, training graduate students in how to work with companies and the public sector to build the business case for energy efficiency. Climate Corps fellows identify and prioritize cost-effective investments that result in energy savings for building owners or leaseholders. They create plans to fund and implement those projects, relieving executives of this chore.
From World Resources Institute, to World Wildlife Fund, to the World Business Council for Sustainable Development partnering with Greenpeace, environmental groups are working effectively with companies to solve this crisis.
BB: A few years ago, members of the Rockefeller family tried to push ExxonMobil into investing more in green energy. The argument was, I believe, that Exxon should be putting money into the development of the resources and technologies that will run our economy in the future. Some of us hoped it would be the start of a revolution in which stockholders began exerting real pressure on oil companies to join the transition to clean energy rather than opposing it. It didn’t happen. Should it?
HL. It’s a good idea, and the oil majors have dabbled over the years with investments in alternative energy. Royal Dutch Shell, under the leadership of Sir Mark Moody-Stuart, once found it plausible that by 2050 Europe would be half powered by renewable energy. BP probably now wishes it had stuck with its Beyond Petroleum approach — abandoned when Lord John Brown was removed as its CEO. Exxon remains a major investor in algae biofuels. But all of these investments are rounding errors compared to their fossil commitments.
Until Exxon and the other companies whose entire business model rests on roasting the planet understand that they have become an illegitimate industry, little will change. Bill McKibben’s 2012 article in Rolling Stone laid out the math: To prevent the 2 degree Celsius rise in temperature that even the most conservative governments on earth have committed to avoiding, scientists tell us we can burn enough coal and oil and gas to produce 565 gigatons of CO2. Unfortunately, the planet’s fossil-fuel companies, and the countries that operate like fossil-fuel companies (think Venezuela and Kuwait), have five times that much in their reserves. It’s what their share prices are based on. They obviously plan to burn it; indeed, they spend hundreds of millions of dollars daily looking for more. If their business plan is carried out, the planet tanks. McKibben calls them “Public Enemy Number One to the survival of our planetary civilization.”
Several things must happen.
First, those of us who are inadvertent investors in the oil companies should put a stop to the unaffordable tax subsidies that we continue to pay to the fossil industries, estimated by the International Energy Agency at over $550 billion every year. The same idiots who wring their hands over unaffordable help for the wind industry and refuse year after year to cut the far greater subsidies to the oil, gas, coal and nuclear lobbies should be ashamed of themselves.
Second, all of us who use their products must make it clear through our behavior that we “demand” that they change their business models. Companies respond to, and through their lobbyists, and campaign contributions (more than $150 million in 2012) shape the market. How do I change my behavior? My next car will be a plug-in hybrid electric that I will run off the solar panels at my ranch.
Third, the investment community can make it clear that corporate investments in fossil fuel have a cost. Bill McKibben and 350.org are campaigning on college campuses to have university endowments divest of ownership in fossil companies. So far, students on more than 190 campuses with $400 billion in fossil investments have joined the campaign, the largest student movement in decades. Unity College in Maine and Hampshire College in Massachusetts have already committed to divest. The Mayor of Seattle and various religious organizations have also directed their financial managers to divest.
Will such a campaign bankrupt the fossil industry? Clearly not. They make their obscene profits — Exxon was making $104 million dollars a day in 2012 according to one report — selling gasoline to us. But no company can long withstand delegitimization. Bishop Desmond Tutu likens the 350.org student campaign to the efforts to end racial discrimination, saying “Climate change is the great moral issue since apartheid, and we need the same kind of tools to bring it to people’s attention.”
If we can make it sufficiently uncomfortable for the fossil companies, they will begin to make alternative investments. They won’t want to: They will be able to make more money incinerating the planet, but in the end what the Rockefellers started will make a difference.
BB: As you know, the Securities and Exchange Commission issued guidance to publicly traded companies a couple of years ago, urging them to assess and report their climate risks each year. That kind of transparency seems critical in helping investors learn which companies recognize and are managing climate risks. But the number of companies filing these reports is falling. It seems as though the companies you’ve worked with — those that are doing a good job at climate risk management — would like the public to know about it. Do you have any ideas about how to get more companies to comply?
HL: It would help if the SEC enforced its own guidance. The pension funds and leaders such as Mindy Lubber at CERES and Russell Read when he was Chief Investment Officer at the big pension fund CalPERS, who began the pressure on companies that enabled the Carbon Disclosure Project to get its initial traction, can only do so much. There is a real need for good policy.
For example, business leaders and investors brought together last year by the Pew Charitable Trusts issued a statement that the lack of a clear national energy policy is inhibiting their investments in renewable energy. If President Obama wants to stimulate capital investment in a clean energy economy, creating a coherent national energy policy is one way to do it. This is another issue the Presidential Climate Action Project has addressed. We’ve been encouraging the president to create a commission that engages governors, mayors, economists, national laboratory experts, utility executives and key people in his Administration in framing a national energy strategy.
That strategy would put us on the trajectory to meet the President’s greenhouse gas reduction goals; guide future research; encourage greater coordination between state, local and federal policies; and guide the federal budget. President Obama has the opportunity to make America’s transition to clean energy his legacy issue over the next four years, and to move us far enough down the road that we won’t reverse course.
BB: We most often hear that the corporate sector wants government to get out of its way. But in your dealings with CEOs, have you found any support for federal policies that companies think would help them invest in clean energy? If you could sit down with President Obama, what would you encourage him to do to bring more corporate investment into clean energy?
HL. Oh, c’mon, the idea that businesses want government to get gone is another of those myths. Business cannot function in the absence of the rule of law, of a level playing field (however much they may try individually to tilt it to their advantage) and the other services that a competent government delivers. If you want to do business without government, go to Somalia. It’s a functional chaocracy. And I guarantee you don’t want to try to do business there.
Renewable energy and energy efficiency are already lifting the American economy. By 2007 they had generated over a trillion dollars in sales and created more than 9 million jobs. This exceeds the $905 billion in combined 2007 sales of the three largest U.S. corporations, Wal-Mart, ExxonMobil, and GM.
More than 2,000 business leaders who are members of the Pew Clean Energy Business Network agree that the clean energy economy, which delivered jobs two and a half times faster than the rest of the economy between 1998 and 2007, is a vital part of the country’s economic landscape, and that we need a national policy to migrate from the dirty energy system we have now to one that protects people, our national security and our climate.
According to estimates by researchers at the University of California at Berkeley, comprehensive clean energy and climate protection legislation could create up to 1.9 million new jobs. The Center for Climate Strategies found that if the federal and state governments took 20 core actions, we’d reduce emissions nationally by 16 to 25% below 1990 levels, generate more than 1.2 million jobs in the next seven years, save society $14 trillion by 2030 and add $88 billion to our GDP by that year. Meantime, we’d cut our oil consumption by 5 billion barrels and our greenhouse gases by 13.5 billion metric tons. If even more aggressive but sensible federal energy policies of the sort outlined in the Presidential Climate Action Project were implemented, clean tech industries could generate more than 37 million jobs in the United States by 2030.
There are two national policies that would be particularly helpful: restoring PACE (Property Assessed Clean Energy) financing and instituting a national CLEAN contract program.
Let’s start with PACE. This is a program that allows local governments to put together a pool of money to loan to citizens and small businesses to implement energy efficiency in their homes and offices, and install local, renewable energy. It is one of the biggest potential job generators that we have.
How do I know that? Because it’s been done. In Sonoma County in California in 2009, the county put together such a fund. In the first nine months of the program–right at the peak of the recession–construction trades in the county went up 8.4%. In neighboring Napa County that did not have this financing program, jobs went down 3%, as they did for the Bay Area as a whole.
PACE was ready to roll out across the country–communities everywhere were setting up such financing programs–and then those paragons of financial rectitude, Fannie Mae and Freddy Mac–both bankrupt–said they would redline any jurisdiction that implemented PACE financing. So far, nobody has slapped them down. A Congressional effort in 2012 sought to forbid Fannie and Freddie from interfering. This would be an excellent thing for the new Congress to pass. Many jurisdictions are going ahead anyway, clear that this program delivers real jobs and greater security in their neighborhoods. A number of states have passed legislation authorizing PACE financing.
The second policy, Clean Local Energy Accessible Now, is a variant of the legislation that is enabling Germany to transition from dirty energy to its goal of being 100% powered by renewable sources, which it should achieve before 2050. The new book Clean Break describes this amazing transformation, and the policy tool that is driving it. Germany is rejecting coal and nuclear and investing in renewable energy, and this clean energy economy is driving its prosperity, leaving it the only country in Europe in a position to bail out the southern European nations.
In 2011, cold, cloudy Germany installed 28 times as much solar as California did that year, despite the fact that California gets 70% more sunlight. The Federal German CLEAN contract, there called a feed-in tariff, mandates that the utilities must pay anyone who generates green electricity a fair price for what is produced and do so for 20 years. Germans are installing renewable energy everywhere, much of it owned by the local communities, enhancing their prosperity. Wildpoldsried, Germany, for example, generates 321% more energy than the town uses. It sells the excess, earning $5.7 million a year for the community. An increasing number of towns in German are becoming100% renewably powered by solar, wind, and biofuels.
Deutsche Bank studied the economics of the German feed-in-tariff experience. It found that in the first five years the program delivered 480,000 new jobs. It did raise electricity rates: two to three Euros a month, $50 a year for a total of 8.6 billion Euro more a year. That may sound like a lot, but Deutsche Bank found that had the Germans done nothing — just kept burning coal — they would have paid 9.4 billion Euro more. Coal costs are going up about 10% a year. So, yes, with such good policy you are going to pay more. You will pay less more if you have good policy than if you do not. We ought to try it here.
BB: Small businesses got a lot of attention during last year’s presidential campaign. It makes sense. They are the engine of job creation in the United States. The problem is, smaller companies may not have the engineering expertise, or the research capacity, or the capital that larger companies do, to invest in clean energy. Any thoughts about how do solve that problem?
HL: Small businesses are half of our economy, 90% of the non-governmental employers, and, as you say, the engine of job creation. A Kauffman Foundation study showed that on balance, big companies are net job destroyers. The job creators in our country are the small startups. We know from studies in California and across the country that the green economy delivers three times the number of jobs of the traditional economy. And a quarter of these green economy jobs are in manufacturing compared to 9% for jobs in the traditional economy.
Yet little has been done to help small businesses achieve the sorts of savings that the big companies are starting to realize are the key to prosperity. A good first step would be to keep some of the government programs that successfully help small businesses. Among them is SBA’s Service Corps of Retired Executives. The SBA should recruit retirees with expertise in clean energy and equip them with a web-based learning tool, Solutions at the Speed of Business, that helps busy entrepreneurs cut their costs. It offers pragmatic measures that save money and enhance brand image. The tool guides users to develop an individual action plan, providing the information, advice and instructions that suit each small business user’s unique circumstances and learning style. It enabled a company called Hero Arts, a small manufacturing business in California, to save $45,000 on its heating, ventilating and air conditioning system. Another company, Give Something Back Office Products, used the lighting module to develop a plan to save $7,350 a year retrofitting its lights. The retrofit would cost $6,000, but deliver the owners a 106% return on an investment the first year.
The U.S. Department of Energy’s Industrial Assessment Center program uses engineering students to conduct energy and pollution analyses for small and medium companies that don’t have that capability on their own.
Or, if you prefer business solutions, the managers of large supply chains can insist that their suppliers implement climate protection as a way of cutting their costs and thus the prices that they have to charge. Best case, these big retailers should help pay for these measures, but even putting out the call can make a difference.
One company with whom Natural Capitalism worked, Mi Rancho Tortilla Factory in San Leandro, California, had little interest in becoming green, but it wanted to sell its product to Wal-Mart. The world’s largest retailer has not only announced a policy to favor suppliers who can meet its 15 question “Sustainability Scorecard,” it’s now tying incentives given to its buyers to adherence to the Scorecard. Question number 1: “Do you measure your carbon footprint?” Question 2: “Do you report it to the carbon Disclosure Project?”
To make itself more attractive to Wal-Mart, Mi Rancho implemented a variety of more sustainable practices, from a lighting retrofit to eliminating waste packaging. Surprise: Mi Rancho saved $35,000 in electricity that previously ran inefficient lights, while reducing that part of its carbon footprint 63%. The company saved another $140,000 by eliminating unnecessary packaging and waste. Altogether it projected savings of $450,000 over the following five years and an emissions reduction equivalent to taking 300 cars off the road.
The Carbon Disclosure Project is now working with companies with large supply chains to help drive such savings throughout the entire economy. Companies like Mi Rancho that want to increase sales to bigger businesses who are demanding emissions reduction programs of their suppliers are suddenly finding climate protection not only a great way to cut costs, but to drive growth in their companies.
Wal-Mart announced that beginning in 2013, it will use its Sustainability Index to influence the design of its U.S. private brand products, and the products it sells under its own label in its stores. By the end of 2017, Wal-Mart intends to buy 70% of the goods it sells only from suppliers who use the Index to evaluate and share the sustainability of their products.
BB: It’s clear that energy efficiency and renewable energy are good for business. But are you saying they are always the cheapest choice?
HL: No. Once you capture the savings from good housekeeping like turning off unnecessary lights, saving even more energy is an investment, and like all investments, it takes money. Then it’s a question of how fast you need your investment paid back.
Many companies say that they can only tolerate a year or a year and a half payback. Or less. That’s a 70% return on investment! You would not require that of any other investment, and good luck getting it for your 401K. But companies are afflicted with crippling short-term thinking, driven largely by the Wall Street casino, in which traders insist on getting quarterly reports on profits. Absent good Federal policy to make it attractive for a company to make efficiency and renewable energy investments that may take two years or 10 years to pay back, we will see far less of these than good economics would deliver.
This is why Paul Polman, CEO of that little start-up Unilever, told Wall Street that Unilever would not submit quarterly reports. Polman stated:
The focus on delivering short-term shareholder value has led to widespread addiction to quick artificial highs–rather like a junkie hooked on heroin or a financial trader on cocaine. The ultimate cost of short-termism was the financial crisis of 2008-9…Too many investors have become short-term gamblers: the more fluctuations in share price they can engineer, the better it is for them. It is not good for the companies or for society, but it is influencing the way firms are being run….To drag the world back to sanity, we need to know why we are here. The answer is: for consumers, not shareholders. If we are in synch with consumer needs and the environment in which we operate, and take responsibility for society as well as for our employees, then the shareholder will also be rewarded.
The company’s share price fell 10%. His answer: Good, that’s not the sort of investor we want. He announced Unilever’s Sustainable Living Plan: double sales AND halve the environmental impact of Unilever’s products over the next 10 years, improve the nutritional quality of its food products and link half a million smallholder farmers and small scale distributors in developing countries to its supply chain. Achieving this, he said, will require the sort of longer-term investments that quarterly analysis penalize. As he put it:
The Occupy Wall Street movement sends out a very clear signal. If you look out five or 10 years…consumers will not give us a sense of legitimacy if they believe the system is unfair or unjust. Companies that miss the standards of acceptable behavior to consumers will be selected out.
BB: So what are our prospects for the future? Are you optimistic we will make the transition to a clean energy economy and reduce our carbon emissions?
HL: The question is not whether we will reduce emissions, it’s whether we’ll do it in time to prevent a permanent weirding of the climate. If we leave it to the market, as imperfect as it is, in due course we will transition away from dirty dangerous fossil fuels, and achieve an economy based on locally available clean energy. There will come a realization in which business and government join together to defeat this crisis.
To accelerate progress, I’d like to see a federal effort to unleash the green economy, perhaps a modern-day variant of the old Atoms for Peace program in which the U.S. and other governments promised to deliver nuclear power to any country that pledged not to use the technology to build bombs. What if the United States, Germany, China, India, maybe Brazil–the countries now leading in solar manufacturing–pledged to meet the energy needs of the rest of the world through renewable energy? The panels, wind turbines and such would be manufactured in our countries, creating jobs at home. Use the billions now being spent to make the fossil technologies look cheaper than they really are, use the World Bank’s coal expenditures…. We’d meet our various development pledges to emerging nations, and by getting the volume production of these technologies up, we’d drop the prices so that the technologies would then sweep the global economy.
Oh, and we’d solve the climate crisis in a way that would lift the world’s economy into prosperity.
As President Kennedy said of poverty, we created these problems–we can solve them.