Once upon a time, sustainability was something that didn’t bother corporates that much. Ever since the Industrial Revolution, business had been based on exploitative, profit-driven mentalities.
Today, the world is much altered. With major global energy agencies, the COP series of conferences and stakeholders all pivoting on how to embed sustainability fully and immediately across business and government, leadership in this space is essential.
The more vexing question, however, remains what kind of leadership. ‘Greenwashing’ remains common in the corporate world and globally, the reputation of a business isn’t covered in glory when it comes to sustainable practice.
Trust and Truth
Those corporates who truly wish to lead on sustainability have two key weapons at their disposal; trust and truth. Using these consistently will drive any company’s profit and growth.
The key truth is this; leadership isn’t about being the best or the fastest. It’s about being the most honest. A corporate which transparently discloses its carbon emissions, its failings and its intentions to address these will ultimately win the battle against another using marketing to push an untrue message.
A good example surrounds The Energy Charter Treaty (ECT), an international agreement that establishes a multilateral framework for cross-border cooperation in the energy industry. The treaty covers all aspects of commercial energy activities including trade, transit, investments and energy efficiency.
But in recent years, the ECT has been criticised for being a significant obstacle to enacting national policies to combat climate change, in that it actively disincentivises national governments from compliance with recent international climate treaties such as the Paris Agreement due to the threat of significant financial loss.
Jean Blaylock, trade campaign manager at Global Justice Now (GJN), said: “The fossil fuel industry is already doing everything in its power to delay and deter climate action, and we have lost too much time already to this glacial pace.
“The last thing we need is for governments to give these companies a secret weapon in their battle to squeeze maximum profits out of climate breakdown. But that’s what we’ll be doing if we fail to withdraw from the Energy Charter Treaty.
“It cannot be right for big polluters to get massive payouts simply because governments are making the necessary decisions to tackle the climate crisis. It is an affront to democracy and an affront to justice. It is long past time to bring this shadow corporate court system to an emphatic end.”
GJN argues that fossil fuel companies can claim billions from governments when they take action against climate change. The UK, it says, faces legal claims of up to £11 billion from oil and gas companies over the steps needed to meet its Paris Agreement target, reaffirmed at COP26 in Glasgow, to keep warming below 1.5°C, according to recent research published in the journal Science.
These legal claims are made possible by a controversial system of tribunals known as Investor-State Dispute Settlement, or ISDS, which is written into trade treaties. The ECT, which contains these tribunals, is the greatest source of risk of these potential claims and is already being used by fossil fuel companies.
The most recent UN Intergovernmental Panel on Climate Change report warns of “regulatory chill” from investor-state disputes, specifically mentioning the ECT and highlighting the risk of fossil fuel corporations using this to “block” the phase-out of fossil fuels by making the transition unaffordable.
So, corporates in this space have a leadership choice to make – truthfully call out the ECT and lose billions, or keep quiet, claim the cash, but ultimately delay climate action and worsen the profit-destroying impacts it will generate in coming years.
GJN says that reform proposals have been being debated since 2018, with eleven rounds of talks but no agreement so far. On fossil fuels, the reform proposals would at most exclude claims by fossil fuel investors after the mid 2030s, but possibly in some cases up until 2040.
As fossil fuel projects need to be cancelled now, it argues, this would allow fossil fuel investors to continue to make claims when climate action is needed. Campaigners therefore consider the reform to be weak and inadequate, and call for withdrawing from the ECT instead.
Which of these paths would represent business leadership? Truth in the present for sustainable profit and operations, or short term cash and lies leading to economic breakdown when climate impacts come?