Withdrawal from Paris Agreement Presents Opportunities for Business

A mere 65 days following his executive order on climate, President Trump fulfilled a campaign promise that won the hearts and minds of his base — America’s exit from the Paris Agreement, the historic global climate change commitment reached in 2015.

On one hand, this is a politically motivated, populist move, exemplifying the ideological divide between energy and environment that tracks with the rift between America’s coasts. The Midwest and South elected Trump on his platform to put America first in terms of growing jobs and manufacturing, while liberal, coastal elites see this as an egregious breach of leadership on climate change. When announcing the decision, Trump stated that continued participation in the agreement would cost America as much as 2.7 million jobs by 2025, including 440,000 manufacturing jobs, figures most independent analysts dispute.

On the other hand, whether he intended to or not, Trump has essentially passed the climate baton to American business — and it appears business is up to the task.

Consider that:

• Over the last year, the U.S. reduced its emissions by 3 percent without Paris and the Clean Power Plan because large power companies like American Electric Power have already reduced coal operations and confirmed long-term investment strategies for natural gas, wind and solar — in part because they believe that long-term carbon constraints are inevitable. In addition, large energy consumers like tech companies from Salesforce to Facebook have made net-zero targets on greenhouse gas emissions and goals to be powered by 100 percent renewable energy.
• Citing employment, economic and manufacturing benefits and the value of competitiveness, technology, innovation and long-term planning, CEOs of 30 major companies signed an open letter urging the President to keep America committed to the Paris Agreement and pledging to do their part “in our operations and beyond” — indicating they will remain committed to policies and practices designed to meet its goals. For America’s multinational companies, this will also likely apply in countries that remain part of the climate deal.
• Asserting that Americans will “forge ahead,” former New York City Mayor Michael Bloomberg and Bloomberg Philanthropies already pledged $15 million to the United Nations Framework Convention on Climate Change (UNFCC) to make up for the void left in the Green Climate Fund (GCF).

Business won’t be alone. Also led by Bloomberg, according to The New York Times, “Representatives of American cities, states and companies are preparing to submit a plan to the United Nations pledging to meet the United States’ greenhouse gas emissions targets under the Paris climate accord.” To date, in addition to 100 businesses, the group includes 30 mayors, three governors and more than 80 university presidents. States like Illinois, Michigan and Nevada have already passed legislation that advances a low-carbon future and clean energy economy, as investors have increasingly called on business to do the same.

This is not really about climate policy. This is the clearest opportunity the U.S. business community has ever had to simultaneously prosper through innovation and bring society closer together on a long-standing, polarizing issue. This moment provides businesses and other leaders with an enormous opportunity to communicate their commitments and showcase the ways they are working toward meeting the challenges posed by a changing climate.

Many financial analysts view low-emissions energy as the world’s largest new market for innovation, placing its value in the trillions of dollars in the coming year. For companies, these commitments are about economics and reducing long-term risk, not President Trump’s decision to exit the Paris Agreement. Given market dynamics, burdensome delays and legal interventions, it’s been over three years since a new coal-fired power plant became operational in the United States, and three plant retirements were announced the same day as Trump’s decision. America’s withdrawal from the Paris Agreement won’t change that.

Energy and environment expert Paul Bledsoe affirms, “Most major U.S. companies are getting more sophisticated in managing their carbon profile and are increasingly making low-emissions investments and transition plans that are climate-friendly, satisfy their business goals and meet stakeholders’ expectations.” Other leaders, from former President Barack Obama to Trump’s Secretary of State Rex Tillerson, agree.

The Opportunity for Business to Lead

One of Trump’s rationales for withdrawal was the UN’s Green Climate Fund (GCF), claiming it “redistributes wealth out of the United States.” The GCF is a $10 billion effort to have developed countries help developing countries finance low-emissions technology, deploy energy efficiency measures and create resilience and adaptation to climate change impacts. It is seen as a model for a far larger, $100 billion annual fund (a figure which will include private sector investment) that should materialize in 2020. The American government’s lack of investment in this effort is another clear opportunity for business to lead.

Ironically, even if Trump had not withdrawn, neither the U.S. nor any other country is obligated under international law to pay into these funds. Inevitably, for these efforts to be successful, the U.S. business community will be needed — and can earn societal trust — with in-kind and/or monetary partnerships with the UN. What’s especially needed is leadership to bring clarity to the GFC’s strategic goals, ensuring that any money governments spend is effective and that planning and execution are transparent.

The big question, then, is this: What is the most appropriate degree of engagement for a company? Is it to lead through investment, participate in the dialogue or monitor the situation? For those companies still on the fence, a reversal of climate commitment is not a free pass on environmental protection. As we noted after the Presidential election, this shift will likely result in companies facing tougher questions than ever on environmental matters, not only because the most entrenched activists will fight harder than ever, but also because Trump’s election inspired more to join the fight. Moreover, long-term greenhouse gas limits seem highly likely, both in the U.S. and globally.

With business poised to continue investing in efficiency and environmental responsibility, is there a chance that this move sets the stage for more win-win solutions, bridging the perceived gaps on energy and the environment? Only if companies have leaders with an appetite to navigate this fertile, yet still new, territory, and if those watching — from employees to society writ large — expect it from them.

Notably, in contrast with President Trump’s base, the majority of the American public by and large are worried about global warming and prioritize alternative energy over fossil fuels. To earn credit for their actions and mitigate reputational risk, companies must connect in meaningful ways with ordinary citizens, opinion leaders and everyone in-between to show that it can be done — that, in fact, we don’t have to choose between economic progress and a healthy, clean, safe environment.

How can companies really know whether they’re ready and who is watching at any given time? One way is by considering how this decision affects a company’s vision and values, how it’s perceived and its willingness to engage on key issues. This brief roadmap might prove helpful.

This particular turning point is a good time to get going. Eyes will be on this space over the next four years since America’s Paris exit won’t be effective until 2020 — right around the next presidential election. As we’ve already seen, businesses don’t have to, and don’t intend to wait that long to lead on this issue.

Amy Hemingway is an executive vice president based in Washington, D.C. and a senior counselor in Edelman’s Energy practice.
Paul Bledsoe, a senior advisor to Edelman on energy and environmental issues and president of Bledsoe & Associates, contributed to this post.

Originally published at www.edelman.com on June 5, 2017.