Corporate Engagement In Public Policy Consequences For Mitigation Accounting Essay

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Over the last decade, many businesses began to measure, reduce and disclose greenhouse gas (GHG) emissions. By 2009, over 80 percent of the world's largest 500 companies reported their HG emissions to the Carbon Disclosure Project (CDP)and efforts to report emissions continue to spread rapidly around the world, particularly in Brazil, Russia, India and China.Today, in addition to tracking GHG emissions, best practice in business means publicly addressing the risks and opportunities presented by climate change.

As business has become more responsive to climate change, corporate involvement in climate policy has also skyrocketed: in the US the number of interests lobbying on climate change grew 400% from 2003-2008 [5] and estimated lobbying expenditures topped US$90 million annually by 2009. For business, policy engagement presents an opportunity to shape the rules, incentives and institutions that define the overall operating context. Corporate promotion of systemic change in public climate policy can help business move in coordination and at a large scale towards low-carbon investments.

But as corporate involvement with climate change policy broadens, so too must the scope of corporate reporting to enable stakeholders to understand the potential impacts of these activities. Comprehensive and reliable reporting on climate policy engagement must not only incorporate disclosure on political financing, but outline the process of identifying activities for engagement, demonstrate how decisions about policy direction are taken and highlight areas for improvement. Such disclosure enhances accountability, creates a starting point for dialogue, and arms stakeholders with the tools to distinguish public relations stunts from long-term, positive climate engagement.

The business case for involvement in climate policy

For many companies, involvement in climate change policy is seen as a critical investment. In the absence of predictable and effective public policy can pose a bottleneck to efforts to scale up investments in renewables and energy efficiency initiatives. For example, Google's programmes to help consumers save electricity are reliant on US legislation that would attach a price to carbon and trigger interest in low-carbon technologies. [6] 

Current uncertainty over the shape of future climate policy provides further motivation for companies to seek involvement on policy matters. Companies such as Ford and Hong Kong-based power company CLP are calling on governments to provide the regulatory certainty they need to make multi-decade investments. Timberland CEO Jeff Swartz has argued, 'I just want to know what the facts are, and I'll get around to innovating in order to make a profit against them.' [7] 

Corporate engagement in public policy: consequences for mitigation

Corporate engagement in climate policy can have direct consequences for how-or whether-national lawmakers and the international community find effective techniques for mitigating climate change. Business participation can add valuable technical expertise and generate significant investment capital for new initiatives. Yet when corporate interests fail to align with mitigation goals, involvement may dampen or halt legislative attempts towards emissions reductions or low-carbon development.

In early 2010, for example, the powerful US Chamber of Commerce petitioned the US Environmental Protection Agency over its finding that greenhouse gases endanger public health. [8] 'Astroturf' organisations-supposed grassroots groups actually formed and funded by business-can also muddy the policy debate. In 2009 Greenpeace USA accused a major trade association for oil and natural gas companies of planning 'Energy Citizen' rallies to discourage support for a federal climate change bill. [9] In Europe intense lobbying from select sectors was believed by some observers to have diluted the EU climate policy targets. [10] Some Australian industries were similarly blamed for trying to weaken that country's attempts at a comprehensive emissions reduction plan. [11] 

Yet business interests do not always run contrary to the public good. Business involvement in initiatives such as Combat Climate Change, Caring for Climate and the Copenhagen Communique support calls for climate policy that puts the world on a path for climate stabilisation. By early 2010 over 1,000 global companies comprising US $11 trillion in market capitalization and 20 million employees were calling on policymakers to enact climate legislation, [12] along with over 5,000 US-based companies. [13] Encouragingly, reporting on climate policy engagement seems to also be increasing. A BSR assessment of 150 global industry leaders shows the vast majority are voluntarily reporting on some level of climate policy engagement. [14] 

Reporting responsibly and comprehensively on public policy engagement

Environmental groups, consumers and investors increasingly are adding policy engagement to issues companies are already reporting on such as corporate emissions and mitigation strategies. However at present there is no widely accepted set of indicators for corporate reporting on climate engagement, [15] making it difficult for companies to decide what information to disclose or to compare their reporting practices with peers. It can also be difficult to describe the tangible influence a company has had on a policy process. Communication may primarily occur through informal discussions or indirectly through public statements, making cause and effect unclear. [16] 

Nevertheless, there is an opportunity to establish more common definitions and norms around climate policy engagement that would lead to more meaningful discussions, better disclosure to stakeholders and greater incentives for companies to advance systemic climate solutions. While efforts are underway, they are isolated. The Carbon Disclosure Project investor coalition and Climate Counts consumer scorecard have both started to include policy engagement as a criterion in their company rankings. Until standards are established, businesses can take the lead in disclosing their engagement with climate change policy by meeting the following stakeholder expectations.

Building of conceptual and technological links. Demonstrate the impacts businesses have on climate change through influence on public policies. In a similar way that BT and Autodesk report emissions in terms of atmospheric share, [17] companies can list what governments they seek to influence, what commitments they seek of them, and what this portfolio represents in terms of potential outcomes. They can reference the Climate Interactive C-ROADS platform, which shows the reduction potential of different regimes and the effects that their different commitments are likely to have.

Comprehensive disclosure of corporate processes. More comprehensive reporting regarding company activities and their underlying rationale, such as company strategy and, more generally, aspects of governance. [18] 

Creating benchmarks for performance with activities related to climate policy. Disclosing financial and in-kind support to political parties and politicians, and listing membership in trade groups is only the first step in outlining engagement with climate policy. Other efforts, such as funding scientific research on climate change or releasing position statements, should also be included in reporting. Reporting on involvement in shaping climate policy should be publicly accessible and easily understandable, creating a benchmark against which to assess the impact of corporate efforts on policy outcomes. [19] 

Engagement of the board of directors on policy involvement. Making boards the decision-makers on climate policy has been positively linked to provision of high-quality information on climate policy and greater engagement with policy-makers. [20] Commitment at the highest levels not only leads to enhanced reporting but embeds these values throughout an organisation, increasing the likelihood that strategy on climate change is far-reaching.

Internal and external alignment of policy efforts with company strategy. A corporation's public stance on climate change should cohere with the private actions it takes to shape policy through 'lobbying, whether as an individual company or as part of a group'. [21] Ensuring a consistent message among all business communications on climate policy and integrating this message into sustainability, marketing and government affairs teams makes it more likely that corporate messaging reflects a real commitment to mitigation strategies.

Evidence of improvement with each initiative. Reporting instances of lessons learned from climate policy engagement-in particular, challenges overcome-makes future engagement more effective. [22] Reporting may also highlight discrepancies among organisational and departmental positions.

Development of independent verification mechanisms to confirm reporting results. External confirmation of reporting content can build credibility and bolster consumer and investor confidence in corporate reporting on policy engagement.

Taking the above as a minimum standard for policy engagement on climate change provides stakeholders with a clearer picture of the nature of engagement in climate change policy and its consequences. While commitment to combating climate change has grown in the last decade, there is still a long way to go. Comprehensive and comprehensible public disclosure of who companies engage with in this global discussion, what outcomes they seek to influence, and how they make and carry those decisions is a crucial element in ensuring that corporate engagement carries real, positive, and transparent consequences for mitigating climate change with public policy.