Two juxtaposed articles in Environmental Leader recently caught my eye; one which noted that 40% of companies surveyed in 2008 by Booz Allen Hamilton anticipated a slowdown in green and CSR-related activities over the coming months, and another which cited a US EPA study showing that greenhouse gas emissions rose 1.4% in 2007. Given that green and CSR-related activities were on a high in 2007, why were greenhouse gas emissions still on the rise?
Every day, articles in the green business press highlight companies who have taken major steps to reduce their greenhouse gas emissions; these steps also feature prominently in glossy CSR Reports. There are two main reasons for the discrepancy between the emissions reductions that companies report and the ongoing increase in emissions across the country. Firstly, single projects tend to get more publicity than comprehensive reporting; a solar panel installation makes the news, but a complex picture of environmental performance doesn't. Secondly, companies often report emissions on a relative rather than absolute basis. This means that they report emissions per unit of product sold, rather than the total amount of emissions produced. Even if they reduce emissions per unit of product, if the number of products sold continues to rise, the total amount of emissions produced also rises. Hence the large number of single projects aiming to reduce emissions, and the continued nationwide rise.
Given that the Booz Allen Hamilton report shows that 40% of survey respondents expects that green activities will be delayed, the outlook for national emissions does not look rosy. As my professors at the School of Management would say, we're looking at a case of misaligned incentives. Given that the U.S. is now getting behind a global warming treaty, reducing domestic emissions should become a national priority. Yet the incentives for businesses to take the actions necessary to make it happen are not in place. Energy-saving initiatives were top-of-mind when energy prices were expensive; now the price of oil has tumbled, that's no longer the case. But the price of fossil fuel does not reflect the cost of burning it: it will cost us far more to deal with the emissions once they've contributed to global warming than it will to avoid the warming in the first place. The Obama administration should use this opportunity to craft policies that align the incenvites with the desired result. Companies will fall over themselves to innovate ways to save energy - if it's profitable to do so.
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