— Why sustainability matters more than ever: Fortune 500 chief sustainability officers we talked to are surprisingly unified, agreeing that the pandemic has accelerated their environmental plans, rather than putting them on the back burner. But their policies have yet to be pressure tested in the midst of a global recession and polarized political climate.
— What Wall Street thinks: POLITICO’s Ben White chatted with big bank execs, who say that a short-term reduction in carbon emissions should not allow companies to let environmental goals to slip, warning it may backfire with investors if they abandon their pollution-reduction pledges.
— Rhetoric vs. reality: Oil companies are pledging to be carbon neutral while crashing oil prices give them few other options. Major retailers say they’re building a sustainable workforce while laying off workers. The federal government has a different environmental agenda, leaving states, cities and corporate activism as the hotbeds for sustainable policies.
Hello and welcome to The Long Game. Each week we’ll look at what’s driving the conversation around how policymakers, NGO leaders and C-suite executives grapple with a world of limited resources. I’m Nick Juliano, POLITICO’s sustainability policy editor. I’ll be joined by reporter Catherine Boudreau, along with a rotating cast from POLITICO’s newsrooms around the world.
Two months into a global pandemic, business leaders and policymakers have been forced to shift and sharpen thinking about their relationship with people and the planet.
What is sustainability — other than a buzzword used in corporate and climate activist circles? Sustainability is about more than just planetary health. It includes workforce issues — income inequality is on full display as some of America’s lowest-paid workers are deemed most essential. It’s about corporate governance, which is under scrutiny. These issues are driving the economic agenda.
We’ll bring you original reporting — starting with the week’s Big Idea, fresh data and new insights from the C-suites, states and foreign capitals. You will hear from business leaders, activists and policymakers as part of our Long Game Forum.
We will not be cheerleaders for any policies. We will seek to illuminate rather than hype, and call out the difference between PR and policy.
But first: From bears in Yosemite to lions in Kruger National Park in South Africa, wildlife living in protected ecosystems are wandering into places normally filled with humans and cars.
A CLEANER PLANET, IF YOU CAN KEEP IT — The sky is bluer than it’s been in decades, and wildlife is roaming the streets of shutdown cities. No one would argue those outcomes are worth the cost of shutting down commerce, but the pandemic is compelling companies to accelerate their plans on environmental impact, their workforce of the future and sustainable finance.
“So many people were born into the way it’s always been,” says Lucas Joppa, Microsoft’s first chief environmental officer. “So to get a mind shift that you could have clean skies in a highly polluted city … those are things that people were not only told were impossible but just implicitly assumed were impossible.”
Joppa says Microsoft is redoubling its work to reduce carbon emissions, water pollution and waste from its operations, and continuing to promote biodiversity. We’ve heard a similar message in dozens of conversations over the past few weeks with business and NGO leaders, including the top sustainability officers at Walmart, Starbucks, Nestle and General Motors.
So what’s in it for these companies? It’s not just good public relations to push ahead on environmental goals — it meets the demands of a new generation of investors and a movement within corporate boards to use sustainability as a measure of corporate health.
The pandemic provides an opportunity to make tough choices about our existing energy systems, says Lila Karbassi, chief of programmes for the UN Global Compact, the world’s largest corporate sustainability initiative. For example, she questioned whether China should reopen coal plants that were shut down in recent months. “This is the right moment to think about how to reopen the economy in a way that doesn’t move us toward 3 degrees of warming, which is very dangerous,” she tells us. “We do not see enough of that long-term thinking.”
China rarely responds to such international pressures.
The pandemic highlights how focusing on short-term gains while ignoring challenges like climate change is a huge threat to the viability of businesses and governments. Corporate reputations are at risk as American workers call for a more socially conscious capitalism that prioritizes health and safety over profits.
The bottom line: And none of that may be enough. “Our own research shows that less than 25 percent of corporations are on track to meet their emissions reductions goals,” said Mathias Lelievre, CEO of Engie Impact, a sustainability consultancy that works with 1,000 businesses and local governments around the world. “There are still a lot of industries that operate on carbon, including oil and coal. …They are operating with an old mindset that they need to say something but not act for real.”
LISTEN — Nick spoke with POLITICO’s Jeremy Siegel about how corporate America is — and isn’t — keeping sustainability at the top of its priority list.
The coronavirus pandemic has sent shock waves through the global energy system, resulting in a record reduction in global energy output — and the carbon emissions associated with combustion of oil, gas and coal.
The International Energy Agency tracked the fall in global carbon emissions by historic event. It bases its coronavirus projection on the assumption that responses to the pandemic will gradually be eased, followed by steady economic recovery.
A LOT TO DO — POLITICO’s chief economic correspondent Ben White found lots of continued enthusiasm for sustainability on Wall Street in recent conversations with several senior executives in the industry. These executives say the disproportionate impact of Covid-19 on the less affluent and people of color — coupled with a younger Wall Street workforce that demands more engagement on these issues — has led them to think it’s the right time to put more teeth into what they like to call “ESG” goals, referring to better environmental, social and governance practices.
“It might slow down for a time a particular focus on decarbonization. When gas at the pump is so cheap and energy companies are getting slammed it makes it a little harder,” said the CEO of one of Wall Street’s largest banks who did not want to be identified by name in order to speak freely. But the CEO added that “the broader focus on economic inclusion and addressing these areas that really need help with business development and better access to health care is only going to accelerate.”
JPMorgan Chase CEO Jamie Dimon recently said the bank would meet its goal of $200 billion in investments in such projects five years ahead of schedule. “ESG is just built into our business model now,” a JPMorgan official said. “And that means focusing on small-business development, minority-owned businesses, affordable health care, environmental sustainability and jobs and skills training. And Covid has just opened another window into just how much work needs to be done here.”
The Long Game convened some of the sustainability policy world’s biggest movers and shakers, some of whom we spoke to for this debut edition. Watch for more from this group.
LOW-WAGE WORKERS TAKE CENTER STAGE — The pandemic arguably revealed the disparity between how important a job is and how well it pays. Post-pandemic, executives and investors may have to ask whether a company can really say it’s committed to sustainability if its workers don’t feel safe or have paid leave or health care.
As Unilever CEO Alan Jope recently put it: “Can you believe it takes tens of thousands of people dying for us to recognize and appreciate the true value of a nurse, or a checkout clerk, or a bus driver or a cleaner or a cafeteria operator in our companies? They are the heroes of the moment, not the highly paid CEOs.” A Unilever spokeswoman said no employees have been furloughed, and the company is guaranteeing income for a minimum of three months.
A top Amazon executive quit Friday over what he said was his dismay with the tech giant for firing warehouse employees who demanded more sick leave, hazard pay and child care. Tim Bray, vice president of Amazon Web Services, left the same day that workers from Amazon, Whole Foods, Walmart, Target and FedEx walked off the job in protest, saying their employers prioritize profit over their well-being.
Executives at Tyson Foods warn of looming food shortages if their operations slow down and point to the added benefits they are temporarily giving to employees, including hourly wage hikes, bonuses and emergency paid leave. Some retailers including Costco and Kroger are now limiting how much beef, pork and poultry people can buy.
And what about companies like Marriott International, which in the months before Covid-19 used cash reserves to pay out dividends to shareholders, and then furloughed thousands of employees once the economy came to a screeching halt?
The upshot: The most vulnerable employees, some of whom are dying on the front lines of the pandemic, will gain a larger public voice and political backing.
As with any new venture, your feedback is critical to making this newsletter on point, so tell us what you think and what we’re missing. We won’t take anything personally, promise. Send tips, critiques and all of your burning sustainability questions, and answers, to [email protected] and [email protected]. Find us on Twitter @ceboudreau and @nickjuliano.
This week, we want to know, in your job, how have sustainability priorities changed since the pandemic?
Send us your answers here, and we may share your thoughts in a future edition.
DIP AHEAD — The pandemic is testing the resiliency of state budgets. Florida, where 80 percent of annual spending is built on the back of sales taxes, shut down tourism to fight the outbreak and is feeling the pain.
The pandemic might give states and municipalities impetus to diversify anachronistic or regressive taxes.
Until they do, the cost of the pandemic has knocked the wind out of some environmental efforts, POLITICO Florida editor Lorraine Woellert tells us. New York Mayor Bill de Blasio has all but obliterated organic waste recycling as part of coronavirus budget cuts. And backers of a bond to raise money for climate resiliency in California say they’ll broaden the measure to address economic recovery from the coronavirus. But not everything is on hold: Democratic attorneys general are suing the Trump administration over a rule that is shrinking wetlands.
For states, the biggest test of sustainability — i.e., government continuity — could come on Election Day. Few states are prepared for a massive shift to vote by mail, especially in a presidential year. Polling still typically takes place at fixed locations on a single day. That’s all about to change.
A POST-PANDEMIC ‘GREEN DEAL’? — Leaders in Europe are talking a big game about folding their Green Deal agenda into a more than trillion-euro coronavirus stimulus package, but countries are still split on who should pay what and how to divvy up the cash. A draft proposal had been expected as soon as Wednesday by European Commission President Ursula von der Leyen, who along with German Chancellor Angela Merkel are two of the most vocal supporters of ensuring the recovery package helps the bloc meet its goal of net-zero emissions by 2050, but its release may slip to next week or later. All 27 members of the bloc will have to approve the coronavirus stimulus, and right now, countries like Poland and the Czech Republic are demanding that climate policies be eased during the pandemic. European industries like the airlines and car and plastic manufacturers are in their corner, calling for “regulatory relief.”
The big picture: The conversations in Europe over a green recovery are far ahead of the U.S. However, EU emergency measures so far haven’t come with additional environmental strings attached, as Ryan Heath reported, along with POLITICO reporters in Canada, Brussels and D.C. The largest beneficiary of a $41 billion coronavirus investment initiative in March was Hungary, which saw carbon emissions rise the past five years on record, from 2014 to 2018.
Read more from Ryan in his weekly Global Translations newsletter.
Corporate America is taking sustainability seriously like never before, or so its leaders say. But there are still plenty of loopholes and assumptions in their pledges. We will sort through the latest pledges.
GETTING TO ‘ZERO’ — There’s a new trend in the oil world: Promising to eliminate your carbon footprint within a few decades. But how meaningful are the promises we’ve seen from European companies like Shell and BP to be carbon neutral or achieve “net zero” emissions? They’re certainly setting themselves apart from companies such as U.S.-based Exxon, which labels competitors’ climate targets a “beauty competition.”
Here’s the rub: The European companies aren’t really changing their behavior that much. Instead, they’re relying on optimistic assumptions about consumer behavior or yet-to-be-invented tech to reach their goals.
“A lot of it is the same old thing dressed up in new language,” says Mark Campanale, founder of the Carbon Tracker Initiative, although he does give the European companies credit for upping their investments in renewable energy.
Abandoning drilling may not be the most important factor, argues Amy Myers Jaffe, who runs the climate and energy program at the Council on Foreign Relations. Just making an emissions pledge shows which companies are planning for a future.
“Either Exxon’s management is right or Shell’s management is right, and one of them is going to be right and the other one of them is going to be wrong,” she tells us. “And if you’re an investor that’s what you’re trying to figure out for yourself.”
ALIGN YOURSELF — Pressure from shareholders and consumers has been one of the most effective tools in getting corporations to be more environmentally responsible and treat workers fairly. We are in the thick of proxy season, when these demands often come up at annual shareholder meetings. This week, for example, Barclays shareholders meet as activists pressure the bank to stop financing energy projects and companies that do not align with the goals of the Paris climate agreement. The bank’s board is against a resolution put forward by activists but has offered an alternative that calls for an “ambition to be a net zero bank.”
But the pandemic has forced those meetings online, depriving shareholders an opportunity to press their case in person with CEOs and board members. “We’ve had some of our breakthrough moments with companies in those kinds of direct dialogues that have accompanied annual meetings,” says Andrew Behar, CEO of As You Sow. “So we don’t want to make this whole idea of just virtual [annual meetings] something that becomes permanent.”
QUOTED — “The pandemic we’re experiencing now is further highlighting the value of sustainable portfolios,” Blackrock CEO Larry Fink told investors on the company’s most recent earnings call. “We’ve seen sustainable portfolios deliver stronger performance than traditional portfolios during this period, and we expect clients rebalancing in the current environment will include a substitution of some traditional assets to sustainable ones as they see the potential for the long-term benefits.”
NOT SO FAST — One consequence of the ESG-investing trend is banks refusing to finance projects to drill for oil in the Arctic. Morgan Stanley, Wells Fargo, Goldman Sachs, JPMorgan Chase and Citigroup have all declined to back drilling projects in recent months.
Now, some Republican senators are pressuring those banks to reverse course and warning them that there are risks to ruling out specific projects. “You think this is a cost-free action? Let’s see about that,” Sen. Dan Sullivan, an Alaska Republican leading the effort, told POLITICO’s Anthony Adragna last week. “The federal government fully supports these guys across the board in so many ways, including a bailout 15 years ago. Now they get to pick and choose who’s favored and who’s not favored in the U.S. economy based on what? Political pressure that they get at cocktail parties in Manhattan?”
???FIRST IN THE LONG GAME — Commercial and industrial buildings, which use over half the electricity generated in the U.S., are a source of increasing demand for renewable power as businesses pledge to run on 100 percent clean energy and slash their carbon emissions. But state policies can be a barrier to those targets, according to a new report from the REBA Institute, a nonprofit affiliated with the Renewable Energy Buyers Alliance, whose members include companies like Walt Disney, Facebook and Johnson & Johnson. We got an early peek at the report. Look for it here this afternoon.
Allowing C&I buyers to choose their suppliers would allow for renewable energy to be installed 11 percent cheaper than when customers have to stick with one local utility, according to the report. In states without competitive electricity markets, renewable energy subscription programs run by utilities can provide opportunities for more renewables, as can expansions of state-level renewable portfolio standards, the report found. The REBA Institute analyzed electricity policies in eight states and is sharing the results with regulators and lawmakers around the country. “We shouldn’t overlook that there’s an opportunity to build back cleaner and that that’s in step with what some of the biggest businesses in the country are asking for,” says Bryn Baker, REBA’s director of policy innovation.
Some of the other articles we read that we think you should too:
— “Lithuanian capital to be turned into vast open-air cafe,” via The Guardian.
— “The Humbling of Exxon: The industrial giant missed the shale boom, overspent on projects, and saw its debt rise to $50 billion as its stock plummeted,” via Bloomberg Businessweek.
— “We’re Not in This Together: There is no universal politics of climate change,” via The Baffler.
— “‘Microplastic Hot Spots’ Are Tainting Deep-Sea Ecosystems,” via Wired.