We’d like to think that businesses have the power to make a difference on the climate.
It’s why we pressure them to make commitments to reduce their emissions. That way, we can hold them to their word.
Many such commitments were made after the Paris Accords. But today? Most companies aren’t even close to achieving them. Some have abandoned them completely.
In Episode 2 of our third season of Insight Unpacked: Why is it so hard for companies to follow through?
The answer has a lot to do with pressure—or a lack thereof.
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Podcast Transcript
Laura PAVIN: It’s 2021. JBS, the world’s largest meatpacker, makes a commitment. Net zero emissions by 2040. Their slogan? “Anything less is not an option.”
Four years later, a reporter from Reuters asks the company’s chief sustainability officer about that commitment.
His answer? “It was never a promise that JBS was going to make this happen.”
JBS wasn’t alone. After the Paris Accords, companies across every industry made commitments like this one. And then, one by one, quietly, they walked them back.
[music]
This is Insight Unpacked: Can We Still Build a Green Economy? I’m Laura Pavin.
Businesses, broadly, as a group, produce a whole lot of emissions. It’s why they’re usually the target of pressure campaigns to act more sustainably. And companies do respond. But they also struggle to commit.
Why is it so hard for them to stick with their original commitments?
On episode two of this five-part series, we regale you with stories. Each about a company making a commitment to change—an oil company, a tech giant, and an Italian energy company—and each with a different kind of pressure to commit. Each is a case study, of sorts, on how pressure can change behavior—and how not all kinds of pressure are created equal.
That’s next.
…
Let’s start by talking about promises. Climate promises. They’re a lower-stakes kind of pressure, certainly in America, because they’re optional.
Companies made a lot of promises to reduce their emissions after the Paris Accords happened in 2015.
Matt ROLING: It became very, very trendy for companies to set these targets.
PAVIN: Matt Roling, whom you just heard, teaches at Kellogg. He’s the director of the Abrams Climate Academy at the school.
But he was a consultant at KPMG when the Accords got everyone amped up. A lot of companies came to him for help meeting the targets they’d set.
One of those was a small oil company. It had promised to reduce emissions by 2030. Like everyone else at the time. By the time they got to Roling, some years had passed since they made that commitment.
ROLING: They look up on the calendar, and all of a sudden it was 2023. They say, oh, 2030 is not that far away. We should probably figure out whether or not we can still do this.
PAVIN: So Roling and his colleagues get to work, take stock of their operations, and see that their goals might be hard to swing—being an oil company is inherently emissions-y.
But there was this promising new thing at the time that could make a sizable difference. Carbon capture.
ROLING: Where you kind of put a cork in the top of the chimney, so to speak. And you capture the greenhouse gases before they escape into the atmosphere, and you liquefy them. And you either sell them to be used in even something as pedestrian as a Coca-Cola, like a fountain drink, or you liquefy it and shoot it underneath the ground to be stored, to be sequestered or captured underground.
PAVIN: The technology was very cool. Its price, not so much. It was incredibly expensive. And this was a smaller company.
But Roling puts it in the report, meets with the company, and says,
ROLING: Where do you wanna go from here?
PAVIN: And how did they react to that?
ROLING: You know, one of the executives was a lifelong oil and gas person. And he had strong feelings about all of this stuff, in general. But the CEO and the CFO were a little more pragmatic about it, and they wanted to understand what the rest of the industry was doing. And they wanted to understand how oil and gas businesses that had made commitments, how those commitments had shifted or changed in the years post–Paris Agreement.
PAVIN: In other words, the conversation had shifted from “what can we do?” to “how do we tell people we can’t do it?”
And the company ends up walking back its promises.
This type of thing, it didn’t surprise Roling. Their whole reason for changing was built on a weak foundation. A climate commitment.
ROLING: These aren’t binding. These are just promises. And so they’re only as good as the people that make that promise, and whether or not they’re willing to keep it.
PAVIN: When change is hard, messes with a bottom line, and is optional? The case for change becomes weak. And the promise is abandoned. Or at least amended.
That’s one way to understand why companies struggle to keep their climate commitments.
…
But, this is just one case. One story. Not all companies that make commitments are doomed to fail.
Commitments are made stronger when you’ve got someone else, an additional party, holding your feet to the fire. Adding a little extra pressure in there.
Brayden KING: It’s hard to imagine how, you know, change around climate would ever happen if you didn’t have activists pushing it.
PAVIN: That’s Brayden King. He studies activism. He’s a professor of management and organizations here at Kellogg.
There are different kinds of activists, he says. The ones that immediately come to mind are the ones that attract the most attention with big flashy statements that get picked up by the media. There’s a reason for that.
KING: Attention is an important form of influence. We listen when two environmental activists go to the Louvre and throw paint on a precious painting. We listen because it’s outrageous and because it is shocking, even to somebody who agrees with the cause. But it’s important to remember, we know about it.
PAVIN: Right. But today’s environmental activists? They’re doing more than just screaming from the rooftops about their cause.
Take the Environmental Defense Fund. They helped Walmart, a big emitter, develop and articulate its climate goals. Come up with a plan to reach them.
Which was actually pretty smart.
KING: You know, who’s better to come up with a plan about how to reduce carbon emissions than the activists who are experts on the topic? Like, they understand the technology, they understand the problem, they’re in many ways offering their services for free to these companies, to Walmart in particular, to help them find ways to reduce their emissions. And so a lot of the changes that you see in Walmart’s sustainability plan came about because of that particular partnership.
PAVIN: I do think it’s important to say here that the Walton family, who created Walmart and still owns a majority stake in the company, their foundation did donate tens of millions of dollars to EDF. So, take that for what it’s worth.
Anyway, if you think about these two different types of activism—attention-getting and collaborating—together, they create this kind of interesting ecosystem of influence that can be effective in the climate space.
King and some colleagues learned this when they were looking at activists and local emissions. Specifically, they were studying how much influence activists had over the amount of toxic emissions companies produced. The activists who worked with the companies, rather than calling them out, they had more luck than the provocateurs.
But there was something else.
KING: What we found is that if the community had a history of disruptive antagonism—think of these protests where they try to shut down the plant by chaining themselves to the gates of the parking lot or something like that—if that community had a history of that kind of antagonism, then it actually made the collaborative strategy more successful.
So it increased the likelihood that the collaborative strategy would be successful in finding solutions and reducing the health risks as associated with emissions.
PAVIN: That’s the good news. That, in the absence of companies being forced to change by a higher regulatory power, they can still change at will. Activists have a role to play in that. Especially when they play the role of good cop and bad cop.
…
But activist influence—this extra check on commitments—it does have a ceiling.
Which brings us to our second story about an insurgent activist, of sorts.
Drew Wilkinson was that activist. At Microsoft.
Before that, he was doing work for environmental nonprofits. For groups like Sea Shepherd that focus on marine conservation. And he was in a punk band called Run with the Hunted.
Drew WILKINSON: Is there anyone who’s like punk rock and into sustainability? There aren’t many of us, actually.
PAVIN: Wilkinson’s band eventually ends, and he moves to Seattle, where he struggles to make ends meet. And then, an opportunity comes along: a job as a paralegal at Microsoft. His friend tells him about it, and he’s like, “I guess.” So he does apply, nabs an interview, and he gets the job. Which was good … technically. But maybe not as much internally.
WILKINSON: Yeah, I felt really, really conflicted. I mean, genuinely I felt like a sellout. And on top of that, I was like, “I’m just another white guy in Seattle driving a Subaru, working at a tech company.”
PAVIN: But the guy’s gotta put food on the table. So he takes the job. Does the job. And kind of quickly, he realizes something.
WILKINSON: I had come from such resource-constrained environments and tiny nonprofits, and suddenly it was like, we have a trillion-dollar market cap. We operate in 150 countries. We have 200,000 of the smartest people in the world. We can literally move markets with a single press announcement. So the opportunity of what you could do at a systems-change level from inside a power structure, that was very enticing. And so that sort of began the journey of figuring out, how do I get my hands on those levers?
PAVIN: Impacting change at Microsoft would be big. So he starts poking around. He finds some other employees with the same idea. They get together, talk, and decide, “let’s start with some low-hanging fruit. Single-use items.”
It was an incredibly visible part of Microsoft campus life.
WILKINSON: Overflowing trash cans everywhere with things that are used for five minutes: disposable coffee cups, disposable … whatever. Day after day after day, overflowing in the trash can.
PAVIN: They set up a meeting with decision-makers. They don’t make a fuss. Just offer recommendations. And they walk out feeling like, well, at least they heard us out. Months later, they’re invited to a soft-opening of the campus cafeteria. They go, and they’re kind of shocked by what they learn.
WILKINSON: We went into this cafeteria, and they were like, “we took every recommendation from the report that we could make feasible, and we’re gonna run with it for a year and collect some data.” And so we were just like, we were floored.
PAVIN: They had paperless terminals where you could buy your food and get a digital receipt emailed to you instead of printed on paper you’d throw out seconds later. Reusable plates and utensils.
WILKINSON: They listened and they made a change based on two employees who refused to go away or take “no” for an answer, for one year. So immediately I went to my kind of punk-rock community-organizing background and just thought, now, what would happen if there were thousands of us?
PAVIN: The group of employee activists grows. They keep the conversation with leadership going. And eventually, Microsoft starts making commitments. Says it’ll be carbon negative by 2030. Makes really big promises that Wilkinson and his colleagues are really excited about.
But around this same time, some reporting from environmental journalism outlets had been coming out about Microsoft’s collaborations with oil and gas companies. They were using Microsoft’s cloud service, Azure, to make oil extraction more efficient. Wilkinson and his colleagues know about it. But they felt like, “let’s stop while we’re ahead. Put a pin in that for now; circle back later.”
About a year goes by, and Microsoft calls a meeting with Wilkinson’s group. They want to discuss their collaborations with the fossil-fuel companies. They get together, and Microsoft tells them, “listen, our work with these companies, it’ll be guided by a handful of principles.” Initially, they seem fine. Until Wilkinson starts reading them more closely.
WILKINSON: “Microsoft may provide technical and engineering resources to develop or co-develop specialized services for subsurface exploration and extraction of fossil fuels with energy customers who have publicly committed to net-zero targets.” And the second half of that sentence is the most important part of all.
PAVIN: Microsoft saying that it would work with energy customers who had publicly committed to net-zero targets? Well, that didn’t mean a whole lot. Remember how promises are only as good as the companies that keep them? Like the small oil company from the top of the show?
Anyway, the group wasn’t able to further the conversation in a meaningful way, after that. Despite how hard they tried. Microsoft started behaving in the ways you expect a big corporation to behave: promises that never happened, meetings that went nowhere, kicking the can down the road. Eventually, the group kind of realized something.
WILKINSON: Employee pressure alone would never be enough. Absent of policy and regulation that forces corporations to change their behavior, to essentially clean up their act, take responsibility for the environmental pollution they cause? Anything they do about sustainability is voluntary. This was the line they were not going to cross.
PAVIN: Wilkinson said some of his colleagues quit in protest over this. Wilkinson got laid off.
For Microsoft’s part, it had its reasons for not severing ties with these clients. Stated reasons. Their logic was that oil and gas companies weren’t going anywhere. So the question wasn’t whether they existed—it was more about how they operated. And Microsoft believed that their technology could make them less bad. More efficient drilling. Less wasted energy. Lower emissions per barrel.
I circled back to Matt Roling to pick his brain about this. Remember he was a consultant at KPMG, helping the small oil company that that I told you about at the top of the show?
I asked him how else Microsoft might have justified not letting go of the fossil-fuel clients. Why the activists’ hopes that they sever ties might feel like a bridge too far.
Laura Pavin: What is the rational argument that Microsoft might make for the decision to not decide to do anything on its fossil-fuel clients?
ROLING: It’s really hard to drive changes like that because you’re asking a company to shrink its pool of customers unilaterally, because we don’t want to do business with x, y, z corps, right? In this case, oil and gas.
PAVIN: Cutting off a powerful, deep-pocketed client? It was too much. And in addition to that, the decision might set a precedent they didn’t want.
ROLING: Oil and gas, while they are the poster child for carbon-intense industries that need to change their behavior, they’re just one piece of a broader problem, right?
Consumer packaged goods, chemicals, agriculture, pharmaceuticals, automotive, right? Like, where do you draw the line? I’m not saying that companies shouldn’t be aware of it and that they shouldn’t be responsive to employees, but from my perspective, if you’re an employee in an organization and you are trying to start a conversation like that, it can very quickly become a slippery slope.
PAVIN: It makes you wonder, weren’t they successful?
There’s this framework, an international rulebook that was created in the early 2000s to help companies figure out how to measure their emissions. It breaks them down into a few scopes, from direct to indirect. The direct emissions are the ones most-obviously associated with your operations, like your fleet of vehicles. But as you get to the indirect emissions, it gets a little messy. Requires some judgement to figure out, “do my customer’s activities count towards my footprint?”
But in the U.S., we don’t have a clear, economy-wide system that says what companies are required to do about emissions. Or what happens if they don’t.
Here is where all the experts and activists say we need policy. Something more binding than voluntary commitments.
ROLING: A lot of people like to point fingers about who’s responsible for a market failure, a tragedy, the commons, the destruction of our natural resources, whatever you wanna call it, right? And on some level, it’s kind of, well, let’s set aside the blame game. The solution game is when the community and the private sector and the government work together to fix these problems. And so singling out the private sector and saying, “this is your problem to fix,” I don’t think you’re going to get where you want to go.
PAVIN: To recap here: Promises and activist pressure, they can only go so far when you’re playing a game in a market where the rules aren’t clear. And the clients and market power you sacrifice for the sake of the planet feel too big to bear.
So what happens when you add in a new ingredient—a new kind of pressure—where the rules are binding, and companies have no choice but to adapt?
For that story, we must go to Europe.
…
In the 2010s, the European Union rolled out a set of policies to help accelerate the clean-energy transition, de-prioritizing “dirty” energy in favor of the renewable type. Member countries fell in line, with some countries even giving renewables priority access to the grid. This basically means that, when electricity was distributed, clean energy would be used first.
Traditional utilities, big names like RWE and others, felt it. Weren’t happy about it. A coalition of Europe’s biggest utilities protested over it. Asked the EU to slow its roll. Which it didn’t.
And so, suddenly, a lot of companies had to rethink their entire business model. One of them was E.ON Italia.
KING: E.ON Italia is sort of a mid-level energy company in Italy, meaning they’re not one of the top energy companies.
PAVIN: That’s Brayden King again. The Kellogg professor whom you heard talking about activism earlier. King did a case study on what E.ON did.
KING: And so, E.ON had to figure out what it was going to do to deal with this change in the environment. And they also recognized at the same time that there was growing consumer demand for clean energy.
PAVIN: The landscape was moving away from a centralized energy model, where energy was produced for consumers by a single entity—usually a power plant. This was the model E.ON Italia operated on. But now, if they couldn’t be the gatekeepers of this centralized energy, and customers could get their energy from a bunch of local sources like solar panels and batteries, they’d have to figure out a new way. And they realize, “hey, maybe we can be the people who help customers make that transition.”
KING: And so they began to rely on new kinds of technology. Less on, like, what they would call centralized energy distribution and more on home energy solutions. Selling heat pumps to families where you’re using in a much cleaner way energy around you to heat and cool off your homes.
PAVIN: They could sell them the clean tech. And not only that, but they could help them renovate their homes to be more efficient. It was a great idea. And after testing some things out, they realize this could work. The business case is strong. It all technically makes sense.
But they also had the foresight to know that the change wasn’t going to be as easy as flipping a switch.
KING: You know, every company is just made up of people, and they have ways of doing things. And to change the mindset, not just of one or two people, but the entire company, really required a transformation of the culture of the company.
PAVIN: They install a new CEO. A guy by the name of Frank Meyer.
Meyer’s background was in telecommunications. He also had a PhD in mathematical physics. And one of the things that linked those two different roles for Meyer was that, to get anything done, you needed to get people rowing in the same direction. And a really effective way to do that was to get people believing in that direction.
And Meyer had a strong sense of what that would be for E.ON Italia.
Frank MEYER: We created the Make Italy Green purpose. We said, “actually, our work contributes to making entire Italy green and contributing to the energy transition in Italy.”
PAVIN: That’s Meyer.
Meyer gave them a purpose to work toward, and he also gave them a say in how they achieved that. With workshops and town halls and interviews, they were asked, “What are we good at? Where is the energy market going? What role could this company play in the clean-energy transition?”
MEYER: You create a result, a strategy narrative for the entire company; you communicate it.
PAVIN: He created a narrative with sustainability at the center, with the goal being to get everyone—from executives to installers—to see how their work connected to that mission.
Sales teams tracked not just revenue, but how much carbon their projects reduced. Installers could see exactly how many tons of CO₂ their work helped eliminate.
MEYER: Basically, everyone in our organization could see how they contributed to this deep purpose.
PAVIN: Within just a few years, Meyer says, renewable energy solutions went from zero percent of the company’s profit to eighty percent. The company’s earnings tripled. And it became the market leader in installing clean-energy systems like solar panels and heat pumps in homes across Italy.
…
On the one hand, this is a story about the power of a good message. When change requires a lot of scary changes—changes that can result in some temporary hurt—it helps to believe it’s in pursuit of a higher purpose.
KING: A belief in kind of the values of creating a green movement was a more-immediate, and he believed more-motivational, goal than simply saying, “let’s make more money.” And it turned out both were true.
PAVIN: Indeed! To Meyer, making more money for the business goes along with creating societal impact.
MEYER: This all doesn’t work if the fundamental thing doesn’t work. And the fundamental thing is, you need to run your business well. The business results need to be there. The growth needs to be there. The profitability needs to be there. This is the reason for a business to be, next to its higher purpose and its responsibility to create positive impact. If you do not have this right, you have not earned your right to do these things.
When we think about these stories—the small oil company, Microsoft, E.ON Italia—it becomes harder to believe that company will, on its own, or in combination with activist pressure, will be enough to make significant changes. External pressures, specifically, like the regulatory pressure E.ON faced? Well, they’re pretty important if we want to get anywhere on the climate.
But they’re not the only tool in the arsenal for compelling change.
There is another powerful force in the economy, one that can bend companies to their will: the capital market.
On the next episode of Insight Unpacked …
There’s this idea that we can use our investment dollars to get companies to do the right thing.
But does our stock market have the patience for it?
Jeff GITTERMAN: It’s just, you know, they say neurologically, human beings are wired for a punch in the face. We’re wired to see that punch coming and react. We’re not wired for slow-moving crises.
That’s coming up.
PAVIN: This episode of Insight Unpacked was written by Laura Pavin and Andrew Meriwether, edited by Rob Mitchum, and produced by Andrew Meriwether and the Kellogg Insight team, which includes Fred Schmalz, Abraham Kim, Maja Kos, and Blake Goble. It was mixed by Andrew Meriwether. Our theme music is by Sam Clapp. Special thanks to Matt Roling, Brayden King, Drew Wilkinson, and Frank Meyer. And additional thanks to the Eleven Eleven foundation for their support.
As a reminder, you can find us on iTunes, Spotify, or at kell.gg/unpacked. If you like this show, please leave us a review or rating. That helps new listeners find us.