Planet Earth’s Future Now Rests in the Hands of Big Business

On a brisk Monday in Houston in early March, dozens of protesters gathered across the street from the giant Hilton hotel hosting CERAWeek, the energy industry’s hallmark annual conference. The signs accused corporate executives of betraying humanity to achieve financial returns. STOP EXTRACTING THE FUTURE OF OUR CHILDREN, read one. You can read more about PEOPLE BECOMING MORE IMPORTANT than PROFIT. Jennifer Granholm from the U.S., secretary of energy delivered an entirely different message to executives two days later in a standing room-only ballroom at a hotel: The Biden Administration is looking for your assistance to address climate change. The scene encapsulated this moment in the fight to address global warming: some of the most ardent activists say that companies can’t be trusted; governments are saying they must play a role.

They are. The U.S. Department of Energy has collaborated with private companies in order to improve the supply of clean energy, extend electric-vehicle charging and commercialize other green technologies. The agency plans to invest tens to billions in public-private partnerships that will accelerate the transition to clean energy. “I’m here to extend a hand of partnership,” Granholm told the crowd. “We want you to power this country for the next 100 years with zero-carbon technologies.”

Across the Biden Administration, and around the world, government officials have increasingly focused their attention on the private sector—treating companies not just as entities to regulate but also as core partners. We “need to accelerate our transition” off fossil fuels, says Brian Deese, director of President Biden’s National Economic Council. “And that is a process that will only happen if the American private sector, including the incumbent energy producers in the United States, utilities and otherwise, are an inextricable part of that process—that’s defined our approach from the get go.”

For some, the emergence of the private sector as key collaborators in efforts to tackle climate change is an indication of the power of capitalism to tackle societal challenges; for others it’s a sign of capitalism’s corruption of public institutions. Since the introduction of climate change to the international agenda in the 1930s, scientists, activists, as well as politicians, have assumed that governments would be required to make the transition. Unfortunately, attempts at tackling climate change through legislation have failed repeatedly around the globe. Both investors and corporate leaders have begun to be more alert to the risks that climate change can pose to their companies and to work with others to mitigate them. Those developments have laid the foundation for a new approach to climate action: government and nonprofits partnering with the private sector to do more—a new structure that carries both enormous opportunity and enormous risk.

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Just 100 global companies were responsible for 71% of the world’s greenhouse gas emissions over the past three decades, according to data from CDP, a nonprofit that tracks climate disclosure, and pushing the private sector to step up is already showing dividends. More than 1000 companies, worth more than $23 trillion combined, set goals to reduce their emissions in line with the Paris Agreement. “We are in the early stages of a sustainability revolution that has the magnitude and scale of the Industrial Revolution,” says Al Gore, the former U.S. Vice President who won the Nobel Peace Prize for his work on climate change. “In every sector of the economy, companies are competing vigorously to eliminate unnecessary waste to become radically more energy efficient, and focus on the sharp reduction of their emissions.”

Even with all this momentum there are risks. It is tempting for companies to commit to big projects, but it’s important that they have a clear system in place to establish the guidelines and monitor their progress. Without clear policies that reward good behaviour and punish bad ones, even then corporate success is not likely to be enough. “To catalyze business, we need governments to lead and set strong policies,” says Lisa Jackson, vice president of environment, policy and social initiatives at Apple and a former head of the U.S. Environmental Protection Agency. “That’s just what the science says.”

No are companies built to address the array of social challenges—millions displaced, millions more with livelihoods destroyed, the escalating health ailments—that will arise from climate change and the transition needed to address it. “The private sector has been surprisingly aggressive on climate in the last 12 months,” says Michael Greenstone, former chief economist in Obama’s Council of Economic Advisers. “But that is a very misshapen approach: there’s no real substitute for a coherent climate policy.”

It’s increasingly hard to imagine how we find such a policy in time. In February, the IPCC, the U.N.’s climate science body, warned of a “rapidly closing window of opportunity to secure a livable and sustainable future.” Emissions need to peak by 2025 in order to have a decent chance of limiting warming to 1.5°C. In a landmark report outlining the possible levers to cut global emissions, the IPCC found that private sector initiatives, if followed through, could make a “significant” contribution to that goal. The group assessed the impact of 10 private sector initiatives, and found they could result in a total of 26 gigatonnes in reduced or avoided emissions by 2030—equivalent to more than five years of U.S. carbon pollution.

This partnership between the government and the industry will influence not only the course of the emissions in the next years and decades, but also the future direction of democracy and the way society manages the social chaos that is inevitable from climate change.

To understand how we got here, it’s helpful to look back to a remarkable coincidence of history. Climate change entered public consciousness at the same time that, in the U.S., the zeitgeist turned against government’s playing a robust role in society. In 1988, when then NASA scientist James Hansen offered his now famous warning that the planet was already warming as a result of human activity, and TIME soon after named the “Endangered Earth” as “Planet of the Year,” American voters had spent eight years hearing President Ronald Reagan tell them that government lay at the root of society’s problems.

So it’s perhaps no wonder that in the decades that followed, government attempts to tackle a new problem, unprecedented in scope and scale, encountered roadblocks. The first step in this effort was made in 1992 when heads of government across the globe met in Rio de Janeiro for an international summit to establish a U.N. structure to combat climate change. With the exception of the 2020 pandemic related issue, many countries have met every year to find solutions. In the two decades that followed, no comprehensive solution was reached. American’s slow progress in climate policy can be partially attributed to their pervasive free-market ideology. Businesses were meant to profit. In the early 1990s and well into the 21st century, both heavy and fossil fuel companies spent huge sums to deny the existence and fund organizations opposing climate regulations. Some companies remained silent on an issue unrelated to core business. Clear results were evident in the political arena. Although President Bill Clinton wanted to introduce an energy tax, Congress failed due to a concerted lobbying campaign by manufacturers and the industry. George W. Bush questioned climate science and appointed oil- and gas industry executives to senior posts in his Administration. Barack Obama pursued comprehensive climate legislation that would have capped companies’ emissions in 2009; the legislation failed to make it to the floor of the Senate after a prominent group of businesses condemned it.

However, business leaders started to feel the need to address climate issues for the first times. ESG (for environmental, socio and corporate governance) was an idea that grew from being a niche concept in the 1990s, to become a common approach to investing 20 years later. There was a steady stream of warnings from financial institutions about the potential economic consequences of inaction. And key voices in the business community—from Michael Bloomberg to Bill Gates—took the message on the road, telling CEOs to take climate change seriously. According to the U.S. SIF Foundation data, which advocates sustainable investments strategies, investment dollars in the U.S. nearly doubled between 2012 and 2014.

In order to build momentum, leaders in government sought to include business representatives into policymaking conversations. They wanted to establish what’s often called a “virtuous circle”: If they were able to get private sector commitments on climate issues, then it would theoretically push the government to do more. This would in turn push businesses to increase their efforts. The 2015 Paris Agreement saw the implementation of this approach when business leaders gathered to discuss climate issues with representatives from government. This resulted in CEOs declaring their commitment to reduce emissions. The final text of Paris Agreement established a framework that allowed private companies and individuals to be included in U.N. official processes.

Just a year later, the U.S. elected Donald Trump as President and began to unravel the country’s environmental rules. He declared that the United States would be leaving the Paris Agreement five months after assuming office. Within hours, 20 Fortune 500 companies declared that they were “still in” the global climate deal and would cut their emissions in hopes of keeping the U.S. on track. More than 2300 American businesses had already joined the coalition by the time Trump was elected. Many believed that working with the private sector was the best way forward for climate action. “More and more power is distributed in societies,” Antonio Guterres, the U.N. Secretary-General, told me in 2019, explaining his extensive outreach to the business community on climate. “If you want to achieve results, you need to mobilize those that have an influence in the way decisions are made.”

In the middle of the global economic system, institutional investors have made the largest private-sector investment. These institutions control billions of dollars and invest in almost all the publicly traded companies. If you hold a lot of everything the possibilities for climate-driven economic downturn are alarming. “We’re too big to just take all of our hundreds of billions, and try to find a nice safe place for that money,” Anne Simpson, then-director of board governance and sustainability at CalPERS, California’s $500 billion state pension fund, told me in 2019. “We’re exposed to these systemic risks, so we have to fix things.”

These investors came together and sent a message, even though the U.S. government was not there. During the French president Emmanuel Macron’s climate summit in Paris last December 2017, a consortium of investors representing $68 trillion brought together for Climate Action 100+. This consortium, which was high-profile investors at the outset, used their position to promote emission reductions in 100 publicly-traded companies by engaging with top-level executives one-on-one.

“All of this made for a reorganization of the politics of climate,” says Laurence Tubiana, a key framer of the Paris Agreement who now heads the European Climate Foundation. “It has now crystallized into something new: a strong coalition between business, financial institutions, investors, and governments.”

These threads all came together last year at the U.N. Climate Conference in Glasgow. It would be easy to forget the fact that this conference was intended for officials of the government if you walked around the Scottish Events Center in November. A visitor could quickly spot prominent business leaders in the hall amongst the other 40,000. The private sector was the biggest news according to most accounts. Six large automakers joined national governments in declaring that they will produce zero emission passenger cars by 2035. An alliance of $130 trillion-worth financial institutions committed to aligning their investments and operations with Paris Agreement.

How much emissions reduction is this really bringing in? Truth is, no one knows. A study of 300 companies participating in the Science Based Targets initiative (a major voluntary program for corporations that sets emissions reduction targets consistent with the Paris Agreement) found that on average each company reduced their annual direct emissions by over 6 percent between 2015-2019. But the global framework for emissions reduction centers on country-level commitments, and in its most recent report, the IPCC noted the ability to track corporate progress separate from national-level commitments remains “limited.”

This multilateral system to address climate change, which was created by the government for the government in Rio, is now something completely different. According to many activists, this result leaves out the concern about justice in the process. Glasgow saw activists from civil-society and activist groups complaining about being excluded in negotiating rooms, while business leaders were invited on stage. “It now looks more like a trade summit, rather than a climate convention,” says Asad Rehman, who organized for the COP26 Coalition, a climate-justice group. These activists worry about what the resulting government decisions look like when they’re made hand in hand with businesses. “The very people who created this crisis are now positioning themselves as the people who will solve it,” says Rehman. “The decisions being made seem very much to be locking us into a particular approach to solve the crisis—and, of course, that approach is not necessarily in the best interest of the people.”

A few weeks later, when I returned to the U.S., from Glasgow, I took a flight from Chicago, Illinois to Washington, D.C., and was greeted by United Airlines as being the first to fly on a jet fuel-free aircraft. As we approached Reagan Airport, Scott Kirby, the airline’s CEO, told me about the coalition—including companies like Deloitte, HP, and Microsoft—he has formed to help bring the fuel to market. “This is not just about United Airlines; this is about building a new industry,” Kirby told me. “To do that, we’ve got to have a lot of airlines participate, we’ve got to have partners participate… and we’ve got to have government participate.” Kirby had chosen Washington as the destination for this flight for a reason: to truly deploy the technology would require some help from the U.S. government.

The Biden Administration has been eager to serve as a partner, proposing a tax credit for sustainable aviation fuel and using the bully pulpit to tout United’s work—and aviation is just the tip of the iceberg. This administration is looking to collaborate with businesses across the nation and in different industries on climate.

Biden is the United States’ most active president on climate issues. His administration has introduced or tightened more than 100 environmental regulations; worked with activists to address the inequalities worsened by climate change; and put climate at the center of “Build Back Better,” its signature, $2 trillion spending package that failed to pass Congress last year. To address inequalities caused by climate changes, he has worked alongside activists. Engaging with the private industry offers another avenue for pushing for emission reductions, which, according to administration officials, has been an integral part of his climate strategy. “That’s him availing every tool he’s got,” says Ali Zaidi, Biden’s Deputy National Climate Advisor, of Biden’s private sector engagement. “One of those superpowers that he has is the ability to meet people where they are and bring them along.”

That approach is also based in a sense of realism: the technologies we need to cut emissions over the next decade exist today and any reasonable consideration of how the world can cut carbon emissions means deploying those technologies as quickly as possible—largely by getting companies to adopt them. We need “to take the technology that DOE has spent so many years working on and actually get it in the hands of consumers,” says Jigar Shah, who runs the department’s Loan Program Office.

I met Shah, who previously ran a clean energy investment fund, in a small conference room in Houston where he had been taking meetings with a range of companies to convince them to do business with his agency—and more broadly the federal government. Shah has $40B to invest in promising projects and companies. The idea, he says, is if business and government work together, they can move quickly to build a low-carbon economy by restoring the country’s ability to do big things. “We actually haven’t done these big things for 30 years,” he says. “America truly has sort of lost this general understanding of, like, how does an airport add a runway? What is the process of extending a road? Who makes the decision on upgrading our wastewater treatment plant?”

Biden Administration is characterized by a business-oriented approach on climate change. Last September, I watched in the back of the room in Geneva as John Kerry, Biden’s Special Presidential Envoy for Climate, pitched the Administration’s approach to CEOs of some of the world’s biggest companies, presenting more than 30 slides detailing a new government program to catalyze production of clean technologies, in sectors ranging from air travel to steel manufacturing. Kerry suggested that instead of imposing mandates on companies, they should take control and make deals to buy clean technology. “Because we’re behind, we have got to find ways to step up,” he told the gathered CEOs.

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Kerry’s approach echoes the realism of the Biden Administration’s. The truth is that in 2022 Big Business has the power to influence—and halt—much of what the government does. “I’m convinced, unless the private sector buys into this, there won’t be a sufficient public-sector path created, because the private sector has the power to prevent that,” Kerry told me in September. “The private sector has enormous power. Our tax code in this country reflects that fact. And what we need is our environmental policy to reflect the reality.”

It makes sense then that from the outset, the Biden Administration’s climate-spending plan has focused primarily on carrots rather than sticks. That is, it included a laundry list of rewards for companies doing positive things—namely tax credits for clean energy and subsidies for technologies like electric vehicles. Meanwhile, the two key policies that would have penalized businesses for their emissions—a fee for methane emissions and a tax when power companies failed to meet emissions-reductions targets—were abandoned after industry pushback. Despite those concessions, the most influential trade groups that lobby in Washington on behalf of big businesses still refused to back the overall legislation—because it required an increase in corporate taxes. It’s a reality that climate advocates readily decry as hypocrisy, and an indicator that business isn’t serious about climate change.

Businesses will get another opportunity to demonstrate their commitment to climate policy in the weeks ahead as negotiations accelerate for a revised climate-spending bill. It brings to mind a key moment in a panel I moderated in April last year with Granholm, and a handful of top corporate executives’ work to reduce their companies’ emissions. “You are visionaries and you are leading, and there’s so many thousands of other businesses that can learn from your example, and there are a lot of members of Congress that could learn from your words. And it’s not to get political, but sometimes folks just need to hear,” she told them. “To the extent you can, we’d be really grateful because we feel like our hair is on fire.” They can still help, but the clock is ticking.

Even before Joe Biden took office, the American auto industry had begun to adopt the President-elect’s ambition of a rapid transition to electric vehicles. Within weeks of winning the election, GM settled a lawsuit seeking to prevent stricter fuel-economy standards. It declared that it will go completely electric in 2035 two months later. Biden, on the other hand, committed to purchasing hundreds of thousands electric vehicles from the federal government. The U.S. has entered an electric-vehicle arms-race, as companies from all walks announce new capital spending to improve the nation’s electric-vehicle stock. GM claims it will spend $35Billion on the project over the next few year. Ford says it’s spending $50 billion.

“The biggest thing that’s happening here is there’s a realization, on the part of both labor and business now, that this is the future,” Joe Biden said as he stood with auto industry executives, union leaders and administration officials on the White House lawn last August.

In order to witness the impact of this change in Ohio, Tennessee and other cities that had relied upon the automobile industry for many decades, I visited these states last year. Talking with local workers and officials I felt excitement but also anxiety. Building an electric vehicle requires less labor than does its old-fashioned counterpart, and there’s no guarantee that new jobs created will be covered with a union. “There’s just going to be a lot less people building cars,” Dave Green, a GM assembly worker who previously led a local UAW branch in Ohio, told me at the time.

Also, the green transition will eliminate oil, gas and coal workers. Cities in flood or fire areas will see their entire population dislocated. More diseases will become common. Without a government-led comprehensive approach, how will society deal with such issues, which can be complicated by a variety of interests? If past transitions show, it’s not so good. Inequality rose during the Industrial Revolution. The U.S. still struggles with the economic consequences of globalization in 2000s when blue collar jobs were being outsourced.

In order to compensate for slow progress in government policy, activists now aim at directly influencing corporations. In 2019, Amazon employees protested the lack of progress in addressing climate change. In a wide range of industries, leaders in corporate America now stress that the issue of climate change is top on their list for concern. Companies are being pressured by consumers to adopt better labor standards and environmentally friendly practices, partly through their power as customers. “It’s not perfect,” says Michael Vandenbergh, a law professor at Vanderbilt University Law School who served as chief of staff at the U.S. Environmental Protection Agency under Clinton. But “it will buy us time until the public demands that government actually overcome some of the democracy deficits that we face.”

It is no easy task in these highly polarized times. However, it’s necessary to address the democratic deficit. Not only does this help to speed up the transition to fossil fuels, but also helps to protect people most affected by the impacts of climate change. It’s for that reason that the upswing in climate-activist movements—from the youth’s marching for a Green New Deal to the union members’ joining with climate activists to push for a just transition—matter beyond any policy platform. People’s lives will be transformed by climate change. To achieve a just transition, people must engage in the fight against climate change.

—With reporting by Nik PopliAnd Julia Zorthian.

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