Corporations and the transition to a low-carbon economy

Background

The ability of governments to act on climate change is clearly limited by factors such as the difficulties in negotiating an effective international agreement, the pressures on government finances because of the global financial crisis, and the unwillingness of governments to take actions that may have adverse effects on competitiveness.

Recognition of the limits of state-based action has led to increased interest in the role that non-state actors can play in developing a more effective response to climate change, and in the extent to which they could be more effectively enabled by new forms of public policy.

This project focuses on the role of corporations – and on the influence of the different actors such as investors, customers, NGOs and the media that govern their behaviour – in the transition to a low-carbon economy.

Not only are corporations significant contributors to global greenhouse gas emissions in their own right, but they also have a wider impact through the products and services that they provide and through their ability to influence their suppliers, customers and other parties to reduce their greenhouse gas emissions. The question of how best to harness the skills, competencies and influence of companies to deliver the dramatic – 60 per cent or 80 per cent by 2050 – reductions required to avert the most significant consequences of climate change is one of the central issues in climate change policy.

Over the past ten years we have seen companies take a variety of actions to reduce their own emissions and, in some cases, seek to influence the performance of their suppliers and customers.

There have been various drivers. The most obvious have been high energy prices and government legislation, but the drivers have also included customer and client demand, reputation, brand/PR, investor pressure and NGO campaigns. There have also been a variety of internal factors at play: the motivations and interests of CEOs and corporate leaders, the learning and capacity building that has resulted from companies establishing management systems, the momentum created by exploiting ‘low-hanging fruit’, the constant pressure for efficiency and business improvements, and so on.

The project

The ESRC Centre for Climate Change Economics and Policy project ‘Governance Beyond the State? Corporations and the Transition to a Low Carbon Economy‘ has been established to examine how corporate climate change performance has been influenced by non-state actors (NGOs, investors, employees, customers, etc). The project seeks to understand:

• The factors – external and internal to the organisation – that have influenced corporate climate change performance;
• The extent to which these have influenced corporate behaviour and, specifically, how far they have moved companies beyond the actions that are required by legislation or that would be justified in narrow cost-benefit terms.

The overarching objective is to understand how these interventions work and how effective they are, or could be, in moving us towards the goals of a low-carbon economy and, based on this analysis, to offer proposals on the public policy frameworks that need to be in place to facilitate or accelerate these changes and to make the non-state interventions more effective.

The project will focus initially on the retail sector. This sector is of importance for three reasons:

1. Not only does the sector have a significant carbon footprint through its own activities and operations, but it also has a potentially huge influence over its supply chain and though its relationships with its customers;
2. Companies in the sector have taken significant measures to reduce greenhouse gas emissions from their buildings and their transport fleets. A number have gone further and have worked with their suppliers to reduce their emissions, and have encouraged their customers to reduce their carbon footprints through the provision of energy efficient products (e.g. low-energy light bulbs) and through encouraging changes in behaviour (e.g. low-temperature washing).
3. Relatively little – in particular, given its carbon footprint – regulatory attention has focused on the sector and, therefore, it allows the question of how corporate action can be encouraged in the absence of explicit regulatory drivers to be examined in some detail.

Wider importance

While the retail sector is the initial focus, the objective is for the project to explore wider questions around the governance of companies and of transitions to a low-carbon economy.

We therefore intend to explore wider questions about the origins and influence of different forms of governance, and around how corporate actions can be directed towards ends that are socially and environmentally sustainable.

The sorts of questions we intend exploring are:

1. Who might be involved in different governance initiatives? What role might they play? What are the implications of their involvement – positive and negative?
2. What sort of governance instruments may be deployed by different actors in different situations?
3. What sort of institutions are required to enable these instruments to work?
4. What sorts of checks and balances might be required? What is the role of government?
5. How are the effects of these governance mechanisms mediated by conditions within the corporation? Are some companies more receptive to them than others and if so why?
6. How might the governance process and the outcomes achieved evolve over time?
7. Do they only work whilst there are easy options to be pursued? Do they have the potential to drive deeper changes or faster transitions?

Additional information

• The Centre for Climate Change Economics and Policy (CCCEP) project will run from July 2010 to June 2013. More about CCCEP
• The project is being led by Professor Andy Gouldson and Dr Rory Sullivan. For further information, please email Andy Gouldson.
• The project is part of the ‘Climate change governance for a new global deal’ research programme.