Foreign Affairs: Business and Climate
How Big Business Can Save the Climate
Multinational Corporations Can Succeed Where Governments Have Failed
In September 1987, representatives of 24 countries met in Montreal and accomplished a rare feat in international politics: a successful environmental accord. The Montreal Protocol on Substances that Deplete the Ozone Layer, which UN Secretary-General Kofi Annan later called “perhaps the single most successful international agreement to date,” set the ambitious goal of phasing out chlorofluorocarbons (CFCs) and other dangerous chemicals. It worked: by 1996, developed countries had stopped their production and consumption of CFCs, and by 2006, the 191 countries that had ratified the protocol had eliminated 95 percent of global ozone-depleting emissions.
On its surface, the Montreal Protocol was an agreement among countries. Each signatory agreed to report its emissions and face trade sanctions for failing to meet reduction targets. Developed countries committed to help developing countries meet their targets with side payments and technological support. The treaty’s main targets, however, were companies. By preventing the production and consumption of ozone-depleting substances within countries, as well as the trade of those substances between countries, the treaty gave multinational corporations a clear and short deadline to find substitutes for the chemicals or face being forced out of the world market. The results were dramatic: the companies responded to the pressure by developing alternative methods, going a long way toward solving the problem at its root.
Unfortunately, this success has not been matched when it comes to the world’s greatest collective challenge: stopping climate change. For 20 years, national governments have sought to slow the heating of the planet and the rise of the oceans by apportioning blame and attempting to spread the financial burden. The vehicle for their efforts, the UN Framework Convention on Climate Change (UNFCCC), is a negotiating process aimed at getting countries to commit to reducing their emissions of heat-trapping greenhouse gases, the main cause of global warming. But the UNFCCC has floundered because of disagreements between developed and developing countries; difficulties in credibly measuring, reporting, and verifying emissions reductions; and the power of vested interests in the energy sector.
Above all, the UNFCCC has failed because it does not provide powerful enough directives for companies to develop and use technologies that could radically reduce their greenhouse gas emissions. Unlike the Montreal Protocol, the UNFCCC does not focus on specific internationally traded products that generate harmful emissions. Instead, countries with little power to enforce how products are made are expected to reduce their greenhouse gas emissions on a national basis, leading to quarrels among a wide range of stakeholders and industry sectors. The framework’s reliance on emissions-trading schemes, meanwhile, offers countries and companies a cheap out, allowing them to forestall investments in clean technologies.
Climate diplomacy urgently needs a new approach. Borrowing from Montreal’s playbook, the international community should shift its focus from setting targets that countries cannot meet to setting directives that multinational corporations have to follow. Relying on the threat of sanctions, the UN should compel the multinational corporations that dominate important sectors to define and adopt ambitious targets for driving down their greenhouse gas emissions. Third parties would evaluate the reductions throughout the corporations’ supply and distribution channels.
Individual countries contain multitudes of competing voices and interests, which complicate efforts to get them to change their behavior. But corporations are authoritative organizations that can channel extraordinary levels of human, technical, and fiscal resources toward specific problems and missions. Multinational corporations dominate markets, trade, investment, research and development, and the spread of technology. To fight climate change, the international community needs to harness this power. …