Last week I had the opportunity to speak to a big conference of financiers on the topic of greenwashing and climate. Here’s what I told them:

The good news: Greenwashing as we know it is out. For the most part, private sector climate commitments are not greenwashing. They are important, ambitious, and genuine, and they offer more potential for progress than any other initiatives now underway.

The bad news: That doesn’t mean corporate climate commitments are going to save the day. As much as I appreciate these voluntary efforts — and we all should — they won’t be sufficient to achieve meaningful progress, especially in the near-term, unless they are backed by more robust government regulation and public policy. This is a big deal because time is of the essence!

The consequence: We still urgently need to come together and engage in some old fashioned organizing and advocacy work. The highest priority for all climate advocates — including, but not only, private sector climate leaders — is to lobby for improved public policy. We need more and better regulations, mandates, and incentives.

Not your parents greenwashing

Environmental critics of corporate climate commitments tend to dismiss them as “greenwashing,” i.e., “a form of marketing spin in which green PR and green marketing are deceptively used to persuade the public that an organization’s products, aims, and policies are environmentally friendly.”

But I don’t think there is significant greenwashing of this type happening anymore. Of course, there are always some bad actors who engage in deceptive practices, and I have no problem naming and shaming those who do. But let’s not get distracted by a relatively minor problem caused by a small minority when there’s so much important work to be done that will actually advance the cause.

And, in today’s very transparent world, it's really hard to get away with anything for very long — the villains will likely end up being outed either way. (So business people considering greenwashing, take note: your plan is very unlikely to work.)

Next-gen greenwashing

While there may not be as much intentional deception going on, when we look at the overall state of corporate climate action, there may be a new, more insidious kind of greenwashing underway — not ill intentioned but harmful nonetheless. Encouraged by all the highly visible business discourse and activity aimed at climate progress, advocates might be lulled into complacency, concluding that somehow the private sector alone can get the job done. That would be a big mistake.

The actual state of private sector climate progress

In the face of slow policy progress, business has stepped up and led. For that we should thank not only the corporate leaders taking action, but also the many NGOs, activists, customers, shareholders, students, government officials, employees, labor unions and everyone else who has worked hard for a long time to make all of this happen.

I started working in the corporate climate world some 20 years ago, and I don’t think we ever anticipated such ambitious and wide-ranging corporate efforts (although we did expect much more policy progress by now).

Climate Tech Startups

I just spent a few days with some leading VCs and climate tech startups in Silicon Valley. Wow! There is a lot of truly inspiring innovation underway. Seeking to replicate breakthroughs like those we have already seen in solar, wind and EVs, climate-focused entrepreneurs are now pursuing various new opportunities that could be game-changers: green hydrogen, nature-based carbon removal, direct air capture, autonomous delivery vehicles, electric aircraft, next generation nuclear, and so on.

But if you take a close look at the business plans and financial models attached to these ideas, you’ll find that for the most part, they will only work at scale with the support of additional policy behind them (just like was the case for solar, wind, and EVs).

Corporate Net-Zero Pledges

It's also great to see thousands of companies pledge to achieve net-zero carbon emissions. I spend a lot of time in my day job talking to the CEOs who have made these pledges. I believe they are sincere about achieving these goals.

But when you press them on how exactly they will do it, especially given the fact that decarbonizing eventually raises costs or requires big, risky bets — they admit they’re counting on either technological innovations or new policy to level the competitive playing field and to incentivize otherwise unaffordable investments. They don’t know when to expect such wins, which is why they make their carbon pledges far out in time (by 2040 or 2050). Increasingly — and in my view this is very positive and I recommend that they do this more frequently — CEOs are beginning to state publicly what policies would accelerate their decarbonization efforts. In other words, some CEOs are not resisting new regulations. They’re asking for them.

Investor Net-Zero Pledges

Financial institutions are also making net-zero pledges — another positive development. But it's equally unclear exactly how they can pull this off. Take the biggest equity investors — the index funds. These fund managers can certainly encourage the companies they invest in to decarbonize, and I hope they will do so, but by definition the funds are required to own the entire market. They can't decarbonize any faster than the overall market does. Active stock managers have more discretion, but it's still limited. Their fiduciary duty is to maximize returns for shareholders. Debt capital providers have yet more discretion, but it will still be difficult for the biggest players to construct portfolios that don’t align with the overall economy. Every little bit does help — even small efforts here should raise the cost of capital for climate laggards. But let's not kid ourselves. The best way for investors to achieve net-zero portfolios is for them to lobby hard for tough regulatory climate policy.

Shareholder Activism

Annual shareholder meetings are in full swing, and once again we are seeing shareholder resolutions pushing corporate boards for faster climate progress. This is a great way to direct boards and management teams to pay closer attention to climate. Some of these resolutions are winning — especially those that focus on details such as board oversight of climate and/or better disclosure about emissions and related matters. But others are failing — especially ones that more ambitiously aim to require reductions in a company's emissions or that demand a company exit a carbon intensive line of business.

Why? Because a majority of shareholders realize you can't really micromanage a company by shareholder resolution and/or try to mandate that businesses do things that don't make business sense. Regulators (via carbon taxes or cap and trade regimes) can (and should) require emission reductions. It's not feasible for investors to try to do this company-by-company via shareholder votes.

Corporate Moonshots

Some corporate heroes are doing much more. Hooray for these great companies.

Apple and Walmart, for example, are pushing hard to decarbonize their entire supply chain. In effect these companies are saying, “If regulators won’t mandate all companies (including our suppliers) to decarbonize, then we will do so ourselves.” Apple and Walmart are such huge and important customers, they may have the clout to pull this off. (I sure hope so.) But I don’t think we can count on many others doing so.

Tech giants like Google, meanwhile, pledge to source clean energy 24/7/365 everywhere in the world where they do business! Again, they are stepping up and doing what policymakers should do across the board. You can view these efforts as very big “one off” renewable portfolio standards. Admirable. But what will it ladder up to? How replicable is this? Also, ask yourself: what if Google put the same exact effort and resources into lobbying for clean energy standards and teamed up with a broad coalition to do so? I suspect the results would be at many magnitudes of scale.

Finally, tech leaders like Microsoft, Stripe, and Shopify are taking voluntary carbon removal to a whole new level. These companies are paying very high prices for the highest quality carbon removal projects (both nature-based and direct air capture) and through their disclosure are providing great transparency every step of the way. Their stated goals are not only to achieve net zero but to help this nascent carbon removal market accelerate. Bravo! Unfortunately, I’m not confident that many other companies will decide to follow this positive example on a voluntary basis. But they would if it was required by law.

Not bad, but not yet complete

Don’t get me wrong. All of the voluntary private sector climate initiatives noted above, as well as many others, are very positive and unprecedented. Indeed, they are the best thing going when it comes to climate action. Thank you to everyone who made them possible. And if we had unlimited time, they might even fully succeed.

But we’re in the race of our lives right now. One we’re not likely to win if we don’t bolster these initiatives ASAP with well-designed ambitious public policy.

Is policy progress even possible?

Trust me, I know firsthand how discouraging it is to pursue climate policy on Capitol Hill these days. We need to prepare for some tough battles. But we shouldn’t be intimidated. We’ve achieved policy breakthroughs on other weighty issues that previously felt impossible – marriage equality, civil rights, auto safety, cigarette regulation, etc.

The greatest thing we have going for us right now is our very diverse coalition.

Here’s a thought exercise: Imagine what would happen if the various players who made everything described above happen — activists, students, CEOs, fund managers, students, VCs, farmers, NGOs, et al — somehow all came together, found common ground, and leveraged all of their extraordinary resources to systematically push hard for no-regrets common-sense but ambitious climate policy?

We’ve banded together before. Many people remember USCAP — the broad coalition that pushed for legislation on a cap-and-trade system to reduce GHG emissions in 2009 — as a failure. But my take is that this experience should give us confidence. We actually came very close to passing landmark climate legislation. That means it’s within the realm of the possible. And if we built a broad coalition once, we can do it again but better and broader this time.

What does this coalition actually look like and what should they be doing? Stay tuned because we’ll tackle that in the next issue of The Instigator.

In the meantime, onward.

The Instigator

Corporate Climate Efforts Are Not…