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Foreword
Corporate Greenhouse Gas Reduction Targets
Eileen Claussen, President, Pew Center on Global Climate Change
In the United States and around the world, many businesses are demonstrating their commitment to solving the problem of climate change. Not only are companies speaking out on the severity of the problem, they are setting and meeting corporate targets to reduce greenhouse gas (GHG) emissions from their businesses.
DuPont has committed to reduce its GHG emissions by 65 percent from 1990 levels by 2010. Shell will reduce its GHG emissions 10 percent from 1990 levels by 2002. And earlier this year, Alcoa announced it would reduce its GHG emissions by 25 to 50 percent by 2010.
In this Pew Center report, authors Michael Margolick and Doug Russell of Global Change Strategies International, Inc. provide guidance to companies contemplating targets. Based on in-depth case studies of six diverse members of the Pew Center’s Business Environmental Leadership Council—ABB, Entergy, IBM, Shell, Toyota, and United Technologies Corporation—the authors trace the corporate target-setting process from the point of deciding to act on climate change, to the factors involved in setting a target, to management and employee engagement, and to evaluating, monitoring, and performance review.
A number of underlying themes emerged regarding companies’ motivations for setting targets. Among the most salient are these: companies that set GHG reduction and energy efficiency targets do so because they believe that setting and meeting the targets will improve their bottom line and drive innovation. They believe that over the long term, the world will have to deal with climate change, so their climate-friendly investments will pay off. They also believe that by taking the initiative, they can help the government to create a climate change policy regime that works well for business. It is one thing to advocate policies such as reasonable targets and timetables and flexibility for businesses to use various means (such as emissions trading) to implement clearly defined goals. It is another thing to actually demonstrate via corporate action that these measures work.
However, in taking these actions, these leading businesses are taking risks. They are betting that there will ultimately be government policy on climate change, that it will allow companies flexibility, and that it will reward and not punish early movers. If they turn out to be wrong, these companies could be disadvantaged relative to their less proactive competitors.
As climate policy continues to develop, we should keep the following lessons in mind. First, it is clear that GHG emissions can be substantially reduced, and that there are many approaches that can be employed to meet this objective. Second, emissions can be reduced in ways that are cost-effective, and that generate ancillary benefits that improve companies’ competitive positions. Finally, the diversity in the type and scope of targets and implementation activities that companies have taken on voluntarily indicates that policies to reduce emissions should be as flexible as possible. Flexibility not only allows for more cost-effective reductions, but also ensures that companies can focus their limited resources on achieving the greatest reductions. Companies and countries have only so much money to invest in addressing climate change. The more flexibility we allow, the more economically efficient our response will be, and thus the more environmental progress we will achieve.
The authors and the Pew Center would like to thank the companies featured in this report for sharing their experiences and perspectives, and acknowledge the members of the Center’s Business Environmental Leadership Council, as well as Jennifer Nash of the John F. Kennedy School of Government and Sarah Wade of Environmental Defense for their review and advice on a previous draft of this report, and Matt Jones and Bob Masterson for their valuable contributions. Additionally, the Pew Center would like to thank the Energy Foundation for its generous support of this project.
Eileen Claussen, President, Pew Center on Global Climate Change
In the United States and around the world, many businesses are demonstrating their commitment to solving the problem of climate change. Not only are companies speaking out on the severity of the problem, they are setting and meeting corporate targets to reduce greenhouse gas (GHG) emissions from their businesses.
DuPont has committed to reduce its GHG emissions by 65 percent from 1990 levels by 2010. Shell will reduce its GHG emissions 10 percent from 1990 levels by 2002. And earlier this year, Alcoa announced it would reduce its GHG emissions by 25 to 50 percent by 2010.
In this Pew Center report, authors Michael Margolick and Doug Russell of Global Change Strategies International, Inc. provide guidance to companies contemplating targets. Based on in-depth case studies of six diverse members of the Pew Center’s Business Environmental Leadership Council—ABB, Entergy, IBM, Shell, Toyota, and United Technologies Corporation—the authors trace the corporate target-setting process from the point of deciding to act on climate change, to the factors involved in setting a target, to management and employee engagement, and to evaluating, monitoring, and performance review.
A number of underlying themes emerged regarding companies’ motivations for setting targets. Among the most salient are these: companies that set GHG reduction and energy efficiency targets do so because they believe that setting and meeting the targets will improve their bottom line and drive innovation. They believe that over the long term, the world will have to deal with climate change, so their climate-friendly investments will pay off. They also believe that by taking the initiative, they can help the government to create a climate change policy regime that works well for business. It is one thing to advocate policies such as reasonable targets and timetables and flexibility for businesses to use various means (such as emissions trading) to implement clearly defined goals. It is another thing to actually demonstrate via corporate action that these measures work.
However, in taking these actions, these leading businesses are taking risks. They are betting that there will ultimately be government policy on climate change, that it will allow companies flexibility, and that it will reward and not punish early movers. If they turn out to be wrong, these companies could be disadvantaged relative to their less proactive competitors.
As climate policy continues to develop, we should keep the following lessons in mind. First, it is clear that GHG emissions can be substantially reduced, and that there are many approaches that can be employed to meet this objective. Second, emissions can be reduced in ways that are cost-effective, and that generate ancillary benefits that improve companies’ competitive positions. Finally, the diversity in the type and scope of targets and implementation activities that companies have taken on voluntarily indicates that policies to reduce emissions should be as flexible as possible. Flexibility not only allows for more cost-effective reductions, but also ensures that companies can focus their limited resources on achieving the greatest reductions. Companies and countries have only so much money to invest in addressing climate change. The more flexibility we allow, the more economically efficient our response will be, and thus the more environmental progress we will achieve.
The authors and the Pew Center would like to thank the companies featured in this report for sharing their experiences and perspectives, and acknowledge the members of the Center’s Business Environmental Leadership Council, as well as Jennifer Nash of the John F. Kennedy School of Government and Sarah Wade of Environmental Defense for their review and advice on a previous draft of this report, and Matt Jones and Bob Masterson for their valuable contributions. Additionally, the Pew Center would like to thank the Energy Foundation for its generous support of this project.