By: Paul Salach
2022: Shell vows to achieve net zero emissions by 2050.
2024: Shell announces they will not lead new offshore wind investments and splits power generation business.
2019: Unilever commits to achieving a 50% reduction in virgin plastic by 2025
2024: Unilever commits to achieving a 33% reduction in virgin plastic by 2026
These are just a couple examples of corporations promoting bold visions to improve their environmental footprint only to backtrack as they get closer to deadlines. Based on this, is there any level of faith that one can place in the private sector to help us move towards a better future?
The Inflation Reduction Act invested $350M to develop and standardize environmental product declarations, which can be thought of as nutritional labels for emissions, and label building and construction products with low embodied carbon. Beyond the direct impact on building products, these actions intend to build a market understanding of the carbon footprint of materials and finished goods. Supporting companies in labelling their products allows downstream consumers to responsibly purchase materials, which creates value chain pull for decarbonization and supports companies investing in sustainability. Similarly, the growth in investor expectations around companies having a sustainability report and the growing number that voluntarily disclose their emissions creates mechanisms for investors and consumers to responsibly spend.
Even with a changing public sector, the growth in goal setting and disclosure at the corporate level will create market pressures that reward leaders and hold greenwashers accountable. Imagine being able to go to a store and compare the carbon footprint of home goods like the calories of regular and diet soda. Before nutritional labels, many would have scoffed at the idea of sugar-free soda or low-fat potato chips, but both became extremely successful with consumer education. Similarly, impact investing would not be feasible without companies disclosing goals and emissions standards for both better and worse.
In the future, methods of disclosure will create a market pull for consumers to voice their values and reward actors that are taking legitimate actions towards sustainability and exit those that are not. This will in turn create demand for the private sector to clean up their act. In the short term, companies may be able to take advantage of cynically setting aggressive goals, but the damage caused by failing to achieve those goals may outweigh the short-term bump from eager ESG investors.
As we approach 2030, initial goals will become much more real for hundreds of companies. Those passionate about sustainability will need to watch closely and reward leaders with wallet or portfolio share and pull back from those who proved to be hucksters. As you think about goals for 2025, and ways you can drive meaningful change, consider taking some time to review the corporate sustainability report for your favorite brands to see whether they are making meaningful progress towards their goals and taking the threats facing our planet seriously. While the recent backtracking of select corporations can be depressing, it is incumbent on us to reward the firms that achieve their 2025 targets and are on pace for their 2030 goals. Absent federal policy, market and investor pressure for firms to deliver on sustainability targets may be the best chance we have.
Reader Questions:
Do you feel corporate sustainability goals are useful tools in driving change? Can collective consumer and investor action serve as safeguards against greenwashing?
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The Institute for Climate and Sustainable Growth is a collaborator of the UChicago Sustainability Dialogue, but is not responsible for the content.