Road to Copenhagen, Part 4: A New Social Contract

As we approach the climate conference in Copenhagen, politicians arebalking and diplomats are burning the midnight oil, deprived of sleep.But we can take heart. Some unlikely new heroes may come to the rescue.

One prospective hero is The Citizen-Consumer.  Consumers are not thefirst group that pops to my mind when I think about environmentalleadership. Unbridled consumption without regard for consequences hasmuch to do with the mess we’re in.

Then came a poll by Time magazineover the summer. It found that nearly four of every 10 Americanconsumers over age 18 regularly and deliberately choose products madeby “socially responsible” companies.  If conspicuous consumption got usinto this mess, can it be that conscionable consumption will get usout? Maybe. Based on its poll and several other factors, TIME concludes:

In America, we are recalibrating our sense of what itmeans to be a citizen, not just through voting or volunteering, butalso through what we buy…We are seeing the rise of the citizen consumer– and the beginnings of a responsibility revolution.

We might be tempted to assume these green consumers – Time calls them the “responsibles” – come from the liberal wing of America’s vast customer base. We’d be wrong.  According to Time’spoll, “responsibles” are almost equally divided between people whoclassify themselves as conservatives, moderates and liberals.

The second unlikely hero is The Corporation. New evidence suggeststhat companies around the world are beginning to discover that “green”is golden. A significant number of companies apparently are committingto social responsibility and sustainability.

For example, after interviewing more than 200 corporations thatrepresent 75 percent of the $36 trillion equities market in the UnitedStates, Siemens and McGraw-Hill Constructionconcluded that “corporate America’s embrace of sustainability has morethan doubled in strength in the past three years with 76 percent of thelargest U.S. firms reporting efforts and commitments that exceed thoserequired by law.”

After surveying nearly 1,600 business leaders around the world, the Boston Consulting Group(BCG) reported this fall that 92 percent of the respondents said theircompanies are addressing sustainability in some way.  Corporateinterest in sustainability has remained strong even during therecession, BCG found, and there was a strong consensus among thebusiness leaders it interviewed that companies “will play a key role insolving the long-term global issues related to sustainability.”

McKinsey & Company reports that in its annual survey of businessleaders last year, “executives for the first time were more likely toview addressing social and political issues as an opportunity than as arisk.”

This view – social issues as opportunities — continued in this year’s survey.  McKinsey found:

The financial crisis has increased the public’sexpectations of business’s role in society. Most companies havemaintained or increased their efforts to address sociopolitical issues,and many have already derived better-than-expected benefits from doingso…

The 2009 survey supports their views: at companies with clearcriteria about the business goals of their sociopolitical agendas,executives report a variety of business benefits, including access tonew markets and improved operational and workforce efficiency.

Most executives polled by McKinsey believe that of all issuesconcerning the public, including health care and executive pay, climatechange and other environmental issues are the most likely to attractthe public attention and to affect shareholder value over the next fiveyears.

In an interview with McKinsey the CEO of Unilever, Paul Polman, describes the business case for becoming a “values-driven” company:

It is very clear that this world has tremendouschallenges. The challenges of poverty, of water, of global warming,climate change.  And businesses like ours have a role to play in that.And frankly, to me, very appealing. We have every day, in our business,about two billion consumers that use our brands, and so [there is] atremendous opportunity to touch many consumers. And if we do the rightthing, leveraging that tremendous skill, we can actually make majorprogress in society….

And we see the consumer asking for this, to be honest,in today’s environment. Again, the consumer’s trust in business,unfortunately, is lower than we would like it to be. And the standardsthat the consumer sets—the expectations, her own proactiveness andinfluencing with her purchase decisions, and her own beliefs—are onlygoing to increase as we move forward, I believe. So, companies with astrong social mission will be companies that are more successful longterm.

The evidence of a growing green marketplace is accumulating so fast,TIME believes we’re seeing “a new social contract among consumers,business and government”.  I don’t know whether that contract reallyexists, but I am certain about one thing: It would be a very good thingif it did.

So let’s write one. Let’s invite corporations, governments andcitizen-consumers to sign a win-win-win commitment. Its obligationswould include these:

Government – Two of government’s biggest roles inbuilding a green economy are as consumer and regulator. The federalgovernment is so large a consumer of energy and products, ranging frombattleships to paperclips, that it has the power by itself to createlarge sustained markets for green products. President Obama has flexedthat power in his Oct. 5 executive order,which requires federal agencies to reduce their carbon emissions, useless energy and water, and comply with new sustainability requirements.Every state and local government in the United States should followsuit.

Governments at all levels should follow Wal-Mart’s example bygreening their supply chains – i.e., requiring suppliers to comply withprogressive standards that reduce their environmental footprints.

Federal, state and local governments can create their own socialresponsibility and sustainability plans and report progress annuallywith third-party verification. Among other things, these plans woulddetail how state and local governments are using their substantialexisting authorities to promote sustainable practices in buildings(through building codes), power production (through utilityregulation), transportation systems (through regional planning and theinvestment of federal transportation money) and urban design (throughzoning, tax policies and infrastructure development).

Corporations: Despite the positive news from thebusiness sector, corporations have a long way to go. The majority ofrespondents in the BCG survey said “their companies were not actingdecisively to fully exploit the opportunities and mitigate the risksthat sustainability presents.” More than 70 percent said theircompanies have not developed a clear business case for sustainability.

Contradicting the Siemens’ survey, BCG found that among thecompanies it surveyed, most sustainability actions are the minimumrequired by law. TIME’s poll found that 40 percent of the 1,000 largestcompanies in the United States have not created publicly availableenvironmental policies; fewer than 8 percent use third parties toverify progress on their corporate social responsibility policies.

In the new social contract, every company hoping to earn the loyaltyof green consumers would create and regularly publicize its corporatesocial responsibility and sustainability policies. Companies would setclear stretch goals for reducing their greenhouse gas emissions,improving their resource efficiency (including water and energy), usingrecycled content in their products, and replacing high-carbon withlow-carbon energy.

In addition to setting environmental standards for their suppliers,certifying their progress and reporting annually, corporations woulddevelop green labels that disclose the life-cycle environmentalfootprints of their products. They’d avoid green-washing by followingthe Federal Trade Commission’s Green Guides on labeling.

And here’s a big one: Corporations would promise to adhere to thesame environmental standards overseas that they use in the UnitedStates.

Citizen-Consumers:  Consumers would favor green andsocially responsible companies not only in their purchases, but also intheir investment portfolios. They would pledge to conserve energy, torecycle and reuse, and to support local investments in mass transit,hiking-biking paths, urban forestation and smart growth.

Who would manage such a contract and how would it be enforced? Ihave no idea. But the federal government could help by finishing workon a system to track national progress on sustainable development – anexercise that has been underway for years in the White House. Thatsystem could include indicators of how government, business andcitizen-consumers are meeting the terms of the new social contract.

The cap-and-trade bill being considered in Congress would be agame-changer in the economy, for the first time creating price signalsthat discourage consumers from purchases that contribute to globalwarming.  We need that, but we need a deeper change, too – a signalthat we’ve changed our world view and consumption ethic as well as ourprice signals.

We need a global movement in which good government, good businessand good citizenship are mutually reinforcing, with verifiablecommitments to environmental and social responsibility. That wouldindeed be revolutionary.

– Bill Becker

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