Idea #27

Business Must Get Political – For Climate Sustainability

by Eric W. Orts

Most business firms don’t like to “get political” unless they are threatened with an adverse law or regulation.  As Richard Epstein noted when predicting that the Supreme Court’s holding in Citizens United would not spawn unprecedented amounts of political spending by business corporations, it’s rational for most firms to stay neutral in order not to provoke consumers, employees, investors, or other key stakeholders who are likely divided on various political issues.

With respect to climate policy, we have, therefore, seen business interests active mostly on only one side of the debate.  Large oil, gas, and coal firms whose business models and future profits depend on the continued acquisition and burning of fossil fuels have been highly incentivized to act politically – though partisan campaign contributions and lobbying – to prevent policies for climate sustainability.  Most notorious are the Koch brothers, who have piled huge amounts of “dark money” into a political agenda designed to forestall climate regulation in order to protect profits for their oil-based business.  They have followed a strategy of putting “democracy in chains” and been a principal early sponsor of climate science denial.  Infamously also, ExxonMobil has also been caught using a similar strategy of denying climate risks even though its own scientists had many years ago identified the climate problem as real and dangerous.

At the same time, most business firms and business leaders have not engaged politically on climate issues – or at least not with sufficient weight to overcome the influence of the deep pockets of the fossil fuel industry.  Under these circumstances, it is imperative not only for businesses who may profit from recognition of the climate problem, such as firms focused on renewable energy, energy efficiency, or insurance, to “get political.”  It is necessary also for business in general to get involved.

The reason is that the climate crisis imperils the very foundation of global civilization.  Business must therefore become part of the solution rather than only part of the problem on a political as well as an economic level.  An analogy might be drawn to World War II.  In a global crisis, businesses must choose sides: fascism or democracy, climate sustainability or climate catastrophe.  And it’s clear that time is running out.  As climate scientists have now warned authoritatively, we have only about a decade in which to reverse the current trajectory that we are following toward “an uninhabitable earth.”

There are positive signs that business is beginning to get it.  The Business Roundtable of CEOs of many of the largest companies in the world have just released a statement that promises to “protect the environment by embracing sustainable practices across our businesses.”  The devil will be in the details, but this new statement of business purpose at least opens the door to political engagement for climate sustainability.  Several large automobile companies have also recently taken the laudatory and unusual step of rejecting the current U.S. administration’s offer to reduce fuel efficiency standards, and agreeing instead to “do the right thing” (as I was one to advocate) and to comply with California’s stricter, more climate-friendly fuel efficiency standards.

Business must do more.  When faced with a potentially civilization-ending challenge, it is not sufficient for business leaders to shrug their shoulders and say something like: “Climate is an externality that government should regulate.  We will of course follow the law, focus on our own operations, and try to reduce our carbon footprint.  But it is not our job to engage more broadly on the policy issues.  That’s the role of government not business.”  Instead, on some issues of greatest importance at least, business must adopt an approach of what one prominent group of business professors has called “corporate political responsibility.”

Business leaders and investors of all stripes need now to consider the interests of our children and grandchildren.  They need to come together to counter the influence of reactionary business forces that have captured political positions of power and retarded the development and adoption of effective climate policies.  Business must get political to help save our civilization from climatic self-destruction.

Eric W. Orts is the Guardsmark Professor of Legal Studies and Business Ethics at Wharton and faculty director of the Initiative for Global Environmental Leadership.