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‘Green Shift’: An analysis of corporate responses to climate change

January 2008
International Journal of Management Concepts and Philosophy 3(2)

DOI:10.1504/IJMCP.2008.021271

Authors:

Brunel University London

The concept of climate change is now of global concern. This article explores corporate responses through an investigation of the rhetoric of several major UK companies that claim to be leading corporate adjustment. It argues that their actual business practice fall far sort of the claims made for it. This raises questions about the extent to which solutions based on a philosophy of market and business solutions is capable of either meeting the ends claimed for it or confronting the scale of the problem of climate change. The difficulty, however, is that in the competition of when corporate claims are allow to compete, bad solutions might be diverting attention from and even driving out good solutions.

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Int. J. Management Concepts and Philosophy, Vol. X, No. X, xxxx 1

‘Green shift’: an analysis of corporate responses to

climate change

Gareth Dale

School of Social Sciences,

Brunel University,

Uxbridge, Middlesex UB8 3PH, UK

E-mail: gareth.dale@brunel.ac.uk

Abstract: The concept of climate change is now of global concern. This article

explores corporate responses through an investigation of the rhetoric of several

major UK companies that claim to be leading corporate adjustment. It argues

that their actual business practice fall far sort of the claims made for it. This

raises questions about the extent to which solutions based on a philosophy of

market and business solutions is capable of either meeting the ends claimed for

it or confronting the scale of the problem of climate change. The difficulty,

however, is that in the competition of when corporate claims are allow to

compete, bad solutions might be diverting attention from and even driving out

good solutions.

Keywords: biofuels; BP; carbon trading; climate change; climate change

strategies; greenwash; Marks and Spencer; Tesco; Virgin.

Reference to this paper should be made as follows: Dale, G. (xxxx) ‘Green

shift’: an analysis of corporate responses to climate change’, Int. J.

Management Concepts and Philosophy, Vol. x, No. x, pp.xx–xx.

Biographical note: Gareth Dale is a Senior Lecturer in Politics and

International Relations. He received his doctorate from the University of

Manchester and worked at the London School of Economics and at Swansea

University before joining the School in 2005. His research interests are in the

political economy of climate change, international political economy,

Karl Polanyi, German politics and international migration. His publications

include The European Union and Migrant Labour (co-edited with Mike Cole);

a triology on the history of the East German economy. Currently, he is writing

a monograph on the life and work of Karl Polanyi.

Until Al Gore came to his door in 2006, Richard Branson had not been greatly troubled

by the prospect of climate change. But, on that day he experienced his ‘Road to

Damascus’ (Branson, 2007a). Nothing, he reflects

“wakes one up more to the issues at hand than the former vice president of the

USA coming all the way to your home in London to give a personal lecture on

global warming. … Looking directly at me, he said, “Richard, you and Virgin

are icons of originality and innovation. You can help to lead the way in dealing

with climate change. It has to be done from the top down, instead of from the

bottom up on a grassroots level (Branson 2007 a,b)’”.

Listening to Gore’s lecture, the Virgin tycoon came to see that drastic cuts in greenhouse

gas emissions are imperative or ‘in a very short space of time most of the Earth will be

2 G. Dale

uninhabitable’ (Branson 2007a). Acting swiftly upon this epiphany, he launched a

$25 million prize for the originator of the most convincing invention for actively

absorbing and storing CO2. His company now pioneers a new approach to marrying the

needs of business and the environment, which Branson dubs ‘Gaia Capitalism.’

Branson is unusually adept in the arts of self-dramatisation and headline-grabbing but

his conversion belongs to a wider trend, the green revolution in the boardrooms of blue-

chip corporations. Scarcely, a week goes by without media reports of new climate-change

mitigation strategies and achievements. In 2007, Virgin was joined by HSBC, which

announced that it had attained ‘carbon neutrality,’ by Barclaycard, which donates half the

profits of a new credit card to projects that tackle climate change, and many more. ‘Big

companies from BSkyB to the banks and the oil majors,’ commented the Guardian, ‘have

been vying to underline their green credentials and portray themselves as caring, sharing

protectors of the planet’1. The green shift is mirrored within business institutions. The

new head of the Confederation of British Industry, according to Jonathon Porrit, ‘talks

about climate change in a very different way from his predecessor, Digby Jones. Ben

Verwaayen, chief executive of BT, now chairs the CBI’s taskforce on climate change and

hopes are high that its recommendations will drag the CBI membership into something

vaguely resembling reality’2. Even the chief sponsor of climate-change denial has begun

to shift. ‘The US and European institutional investors worth $700bn,’ the Financial Times

revealed, led a charge ‘to oust an Exxon board member for ‘inaction’ on climate change.’

The ExxonMobil executive had repeatedly refused to discuss the company’s controversial

climate strategy with them. They intended, the investors announced, to support

shareholder resolutions requesting specific emissions reduction goals and higher

spending on renewables3.

For some analysts, these developments amount to a ‘corporate climate change

campaign’4. Noble (2007) draws attention to the mushrooming of institutions devoted to

lobbying for business-friendly climate change regulation. One such is the Business

Environmental Council, which emphasises that

“climate change should be dealt with through ‘market-based mechanisms’ and

by adopting ‘reasonable policies,’ and expressed the belief ‘that companies

taking early action on climate strategies and policy will gain sustained

competitive advantage over their peers.”

Another is the Partnership for Climate Action, the purpose of which is, in its words, ‘to

champion market-based mechanisms as a means of achieving early and credible action on

reducing greenhouse gas emissions that is efficient and cost-effective.’ These were joined

more recently by the US. Climate Action Partnership, whose ‘Call for Action’ identifies

the ‘urgent need for a policy framework on climate change’ and emphasises that ‘a

mandatory system is needed that sets clear, predictable, market-based requirements to

reduce greenhouse gas emissions.’

In this article, I examine the corporate green shift. I summarise the emissions

reduction strategies of four corporations: BP, Marks & Spencer (M&S), Tesco and

Virgin. For each, I outline their action plan and, where pertinent, the claims made for it

by company spokespeople, and then proceed to analysis and critique. The sample is

selected according to two criteria: it includes large corporations, which unambiguously

position themselves as environmental pioneers. All four were rated by consumers as

among the ‘top twenty’ green firms in a recent survey5.

‘Green shift’: an analysis of corporate responses to climate change 3

1 Climate-change strategies: BP, Marks & Spencer, Tesco and Virgin

From 1995 to 2007, BP’s CEO was John Browne, who frequently professed an urgent

concern for global warming (‘climate change is a risk we cannot ignore – We have to act

now’)6. Under Browne’s leadership the company renamed itself ‘Beyond Petroleum,’

adopted its distinctive sunflower logo, and promised not to invest in oil extraction from

tar sands. In addition to research and lobbying, BP’s climate-change strategy has four

planks: renewables, biofuels, carbon sequestration and offsets.

Renewables. BP is one of the world’s largest producers of solar photovoltaics. It intends

to invest $8 billion over the next ten years in renewable energies.

Biofuels. In Britain, BP is ramping up biofuel production, with a new plant that will use

some of what it terms Britain’s ‘wheat surplus,’ producing fuel with CO2 emissions at

least 40% lower than fossil equivalents. It is funding research on biofuel feedstocks by

Mendel Biotechnology. It has established a demonstration project for jatropha, a bio-

feedstock, and a bio-diesel refinery, and plans to invest approximately $160m in a joint

venture with biofuels firm D1 Oils, to include the creation of over one million hectares of

jatropha plantations in India and Africa7.

Carbon sequestration. In Algeria, BP operates a CO2 capture and storage project that will

‘decarbonise’ natural gas, releasing hydrogen for use in power production. The captured

CO2 is injected into geological reservoirs.

Offsets. BP has invested in a variety of offset projects. Its website recently highlighted

one such scheme for trapping and burning the methane emissions from pig farms in

Mexico, equating to the emissions of 750,000 cars per year.

The next two companies are in the retail sector, beginning with M&S. Consumers’

decisions, according to its Head of Corporate Social Responsibility, are increasingly

motivated by ‘ethical’ concerns. Internal research indicates that, whereas ‘Four years ago

50% of customers said it mattered to them that M&S was a responsible business, by last

year that proportion had grown to 97%’8. The company has committed to numerous green

initiatives, including reduced packaging, manufacturing fleecy jackets from recycled

plastic bottles and launching a ‘Carbon Challenge’ with the Women’s Institute and World

Wildlife Fund to help customers reduce their carbon emissions. But, its key climate

change commitments can be grouped under five headings.

Renewables. M&S pledges to ‘maximise our use of renewable energy,’ including the goal

of ‘powering all our UK with green energy from a variety of sources, including

‘anaerobic digestion’’.

Biofuels. M&S promises to ban petrol-fuelled company cars and to ensure that ‘all our

lorries run on at least 50% bio-diesel.’

Localisation. M&S is committed to sourcing ‘as much food from Britain and Ireland as

we can and to setting targets ‘to reduce the amount of food we import by air.’

Labelling. M&S plans to introduce carbon labelling, spelling out the ‘carbon cost’ of

products. It will put an aeroplane symbol on air-freighted food products.

4 G. Dale

Offsetting. In its ‘Five-Year Plan’ announced in 2007, M&S declares that it will buy

carbon offsets ‘as a last resort where no green alternative exists’ – for example with

airplane fuel and home furniture deliveries.

As a result of these and other measures in its green ‘Five-Year Plan’ – which M&S

estimates will cost £200 million over five years – the company hopes to become carbon

neutral by 2012 and to be recognised as Britain’s ‘greenest retailer.’ That crown is,

needless to say, disputed by other chains, including Tesco.

Tesco’s key commitments can be summarised under four headings:

Energy efficiency. The company promises that a range of measures will halve its energy

use per square foot between 2000 and 2010.

Renewables. Tesco is to inject £100m into experimental projects to supply energy to its

stores from wind turbines, solar panels, geothermal power and gasification (power from

waste food)9.

Biofuels. Tesco has acquired a major stake in Greenergy, a leading biofuels producer, and

intends to convert its entire distribution fleet to bio-diesel. It already uses 5% biofuel in

its petrol at 185 filling stations.

Labelling. Tesco plans to publish a ‘carbon count’ on its packaging.

Virgin’s strategy can be summed up in one word: technology. One thinks of Branson’s

prize, and Virgin Atlantic’s recent purchase of new, less fuel-inefficient, Boeing 787s.

Then, there is Branson’s advocacy of nuclear power as a low-carbon energy source, and

his suggestion that his space-tourism enterprise, Virgin Galactic, may help with its

shortcomings (‘The biggest problem with nuclear power is knowing how to deal with the

waste. Maybe if our space programme gets going we could send it off into the sun …’)10.

But, the technology upon which Virgin bets by far its highest stakes is biofuel. Entering

this sector, writes Branson (2007b), offers hope for the climate and ‘should be a good

business move – investing in [biofuels] puts pressure on fossil fuel prices and acts as a

hedge for our airline and train companies.’ In 2007, when headlines announced ‘Branson

to invest $3bn to fight global warming’ they were referring to investment in biofuel

development and production. Virgin had already announced its backing for a California-

based bio-ethanol producer, Cilion, and this was followed by the launch of Virgin Fuels,

which plans to invest up to $400 m in bio-fuel projects11. Virgin Trains include bio-diesel

in their fuel mix, while Virgin Atlantic is to form an alliance with Boeing and General

Electric to develop biofuels for aero engines. In this, Virgin hopes to achieve commercial

viability within five years, and has already succeeded in flying a plane on a fuel mix that

included some biofuel. For these initiatives Branson has received widespread acclaim,

notably in Nicholas Stern’s (2007) ‘Economics of Climate Change’ Review, and in 2007,

‘Concerned Consumers Survey’ Virgin Atlantic scored highest, on the question of green

credentials, of the five airlines listed12.

2 Analysis: BP, Marks & Spencer, Tesco and Virgin

Such are the strategies. I turn now to examine their efficacy. Which of them consist

mainly of spin and exaggeration, and which will make a real impact?

‘Green shift’: an analysis of corporate responses to climate change 5

For BP, it is appropriate to put its mitigation strategies in perspective through

comparison with its responsibility for generating climate change. Together with Shell,

the company accounts for an astounding 40% of the CO2 emissions of all FTSE100

companies13. Yet, of its new investment, only 2–3% goes on renewables. Its investment

in biofuels in Britain will supply about a third of that country’s total demand by the end

of the decade and may or may not contribute to climate change – this issue is analysed

below – but either way the sum involved represents ‘petty cash’ for a company of its size,

according to the Financial Times14. On offsets, BP has recently been accused of

exaggerating cuts in emissions from Mexican pig farms: the methane savings, it turns out,

will be a small fraction of the predicted levels. BP admits the anticipated savings ‘will not

be reached’ and has corrected the claims on its website15. As regards carbon

sequestration, critics point out that it is expensive, and perceived as potentially viable

only because the CO2 extracted is injected into depleted oil fields in order to pump more

oil, releasing even more CO2. The procedure is also risky. ‘If we put this stuff away for

thousands of years,’ wonders Nick Riley of the British Geological Survey (McGarr,

2005), ‘then what happens if it leaks?’ BP has retreated from its earlier promise, and will

be investing nearly £1.5 billion in a joint venture to produce oil from Canadian tar sands.

Extracted using high-temperature steam, this oil is upto five times more energy-intensive

than traditional forms of production. ‘By jumping into tar sands extraction,’ a Greenpeace

Canada spokesperson told the Independent (Milmo, 2007), BP ‘is taking part in the

biggest global warming crime ever seen and its green sheen is gone.’ Finally, on public

policy, BP’s claims to exert a positive influence are open to challenge. In the USA, the

oil giant has actually lobbied to block legislation to introduce curbs on GHG emissions

(Harriss-White and Harris, 2007). It is unquestionably a key player in carbon trading

policy formation, but the efficacy of such schemes is questionable, as will be discussed

below.

For M&S, its Five-Year Plan has been widely acclaimed. The campaigns director of

Greenpeace UK enthuses that ‘if every retailer in Britain followed M&S’s lead it would

be a major step forward in meeting the challenge of creating a sustainable society’16. It

does undoubtedly mark a strategic shift, yet it can scarcely be described as major: the cost

over five years will be less than 0.5% of just one year’s turnover. M&S’s primary

commitment, biofuels, will be discussed below; here I concentrate on two others:

offsetting and labelling.

Offsetting is utilised by businesses (like BP) whose profit margins depend upon

delaying a transition to a low-carbon economy for as long as possible and by those (like

M&S) for which an ‘ethical’ profile matters. The best that can be said of it is that it

enables some projects – e.g. in renewable energy – to become viable that otherwise may

not be; plus, it may bring extra investment to poor countries. Its shortcomings, however,

are legion. Offset schemes are virtually unregulated, and different companies quote

sharply divergent prices for offsetting the same quantity of emissions. Much offsetting

involves funding energy efficiency projects, which begs the question: would these

improvements not have occurred anyway? One investigation of offsetting within the

Clean Development Mechanism (CDM; a carbon trading system to be discussed below),

exposed the case of a giant steel mill, run by an Indian company, Jindal (Davies, 2007):

“It had put forward three separate projects, all of which would capture waste

heat and funnel it back into the mill as a source of energy. But the company

insisted it could afford to do this only if the scheme was accepted by the CDM.

[An advisor to the CDM board], however, found the mill had decided to do this

6 G. Dale

years earlier and accused Jindal of making statements which were ‘blatantly

wrong’. He warned the CDM board that the evidence showed Jindal would

have gone ahead with the three schemes on purely commercial grounds and

were, he reported, ‘clearly nonadditional’. But the board accepted the projects

whose supposed cuts in carbon emissions are now being used to allow extra

emissions, mostly in Europe”.

The other typical offset scheme is forestry. Trees do absorb CO2, yet at a low level

relative to fossil-fuel emissions: in order to absorb just the USA’s current CO2 emissions

31% of that country would have to be planted with new forest (Warr, 2006). Forest cover,

being less reflective than other forms of land surface, traps extra heat (except, to a small

extent, in the tropics). Tree planting requires land draining and clearance, releasing

carbon. Most new forests are monocultures, requiring high water, fertiliser and pesticide

inputs to thrive. Moreover, for carbon to be fixed permanently the ‘offsetting’ trees must

not die and rot, or burn; and if protected from loggers these must not be displaced to

another forest.

Offsetting, critics contend, offers high-polluting industries the opportunity to

‘greenwash’ their activities. The schemes involve financing projects that are in any case

necessary; they typically involve exploiting the North–South emissions and incomes

gaps: companies in the North increase emissions, but assuage their critics and corporate

consciences by paying for cheap emissions reduction projects in the South. In essence,

this amounts to ‘offsetting’ developed-world pollution against the underdevelopment of

others17. The overall effect of offsetting is to legitimise carbon emissions – a truth that is

expertly satirised by cheatneutral.com, a website that offers disloyal partners the prospect

of offsetting their infidelities by paying money to couples who pledge to stay faithful

(‘First you should look at ways of reducing your cheating. Once you have done this you

can use Cheatneutral to offset the remaining, unavoidable cheating’).

As with offsetting, labelling may produce a small effect, at the margin. Yet, even this

initiative has significant drawbacks. If customers are ignorant when information is scarce

the provision of additional statistics for each product may merely induce bewilderment

and paralysis. Carbon footprints are notoriously difficult to measure. (Should, for

example, that of a bottle of orange juice includes the nitrous oxide – a greenhouse gas

300 times more potent than CO2 – emitted by artificial fertilisation of the oranges?) In

addition, many consumers show little trust towards corporations. One recent survey of

over 2,700 people in Britain and America suggests that the recent wave of corporate

greenery will have little impact on consumers ‘because nine out of 10 consumers are

sceptical’ about the information they receive from companies and governments (This

contrasts with 60% who trust scientists and almost half who put the same faith in

environmental groups)18. But, the most important limitation of labelling is that all but the

wealthiest consumers are aware that as individual consumers their influence is negligible.

This problem will actually be exacerbated by carbon labelling, for it represents an attempt

by corporations to delegate responsibility for combating climate change to individuals.

This, Heather Rogers suggests (2007), should be understood in the light of past business-

led campaigns against litter and for recycling. The latter campaign, she writes, served to

‘ingrain a sense of personal culpability for increasing levels of trash … the rhetoric of

recycling targeted individual behaviour as the key to the garbage problem, steering public

debate away from the regulation of production.’ The current discussion of individual

‘carbon footprints’ – to which carbon labelling belongs – is an extension of the same

tendency.

‘Green shift’: an analysis of corporate responses to climate change 7

As for Tesco, its commitment to halving its energy use per square foot by 50% may

be laudable, but given its outlets’ rapidly expanding acreage the results are less

impressive in absolute terms. Moreover, the degree to which energy efficiency initiatives

are genuinely ‘green’ is open to question. In a widely cited article entitled ‘green is the

new black,’ Tesco’s CEO Terry Leahy (2007) claims that they are. The article addresses

the question (as phrased – hardly impartially – by Leahy): ‘‘Why now? Why has Tesco

suddenly taken on a role as a leader in the environmental debate? Isn’t this all just

opportunism, or ‘greenwash’?’ His argument, in essence, is that the key techniques of

mitigating climate change are identical with those designed to reduce energy and

materials costs. Tesco, he concludes,

“has been getting greener for years …, [after all,] there are sound commercial

reasons for cutting energy consumption in stores, reducing fuel consumption in

distribution and getting rid of excess packaging, and we’d be doing many of

these things even if we had no concern for the environment at all”.

Although Leahy’s avowed intention is to counter accusations of ‘greenwash,’ in

admitting that Tesco would ‘be doing many of these things even if it had no concern for

the environment at all’ he gives the game away, effectively conceding the argument to

those critics who accuse his firm of painting actions taken for ‘sound commercial

reasons’ green in order to pre-empt pressure to introduce measures that, while seriously

addressing climate change, could impair profitability.

The principal shortcoming of Tesco’s strategy, however, is that it does not address

transport, except through use of biofuels19. Tesco and its cousins have developed an

exceedingly fuel-intensive business model involving centralised distribution networks,

meaning that produce is trucked up and down the country from big warehouses.

(Vegetables in its stores travel an average 600 miles before they reach the customer).

Tesco’s trucks clock 68 million miles each year, with rail transportation of goods only

1.2% of this. In addition, it air freights millions of tonnes of products around the world.

Tesco supports industrial – fossil fuel-intensive – agriculture; and its stores are located to

facilitate access by car – many are out of town. As Tesco expands, smaller local shops

shut down, forcing customers to drive further. When this model was threatened by a

government proposal for a tax on out-of-town parking, Tesco rounded on and defeated

the proposal. A final limitation of Tesco’s strategy – and indeed of the other firms under

discussion – is that the promises are not copper-bottomed. As George Monbiot points out,

in an open letter to Terry Leahy, ‘At no point in your [Corporate Responsibility Review]

do you explain which – if any – of the cuts you list have been independently audited.

Without auditing, we have no guarantee that your claims are anything but spin’20.

Finally, we come to Virgin. Few developments symbolise the corporate green shift

better than Branson’s damascene conversion to ‘Gaia Capitalism’. Of the tools with

which Virgin proposes to tackle climate change, the one that has hit the headlines is the

‘Earth Challenge’ prize: to be awarded to any individual or group developing a

commercially viable technology capable of removing CO2 and other greenhouse gases at

the rate of at least one billion tons per annum over a decade. So far, two technologies

appear to be serious candidates. One is the so-called ‘synthetic tree,’ that would use

caustic soda to filter CO2 out of the air; its inventor estimates that 250,000 such trees

would be needed to soak up the CO2produced worldwide annually. The other is seeding

relatively lifeless parts of the oceans with iron filings (or urea) to stimulate phytoplankton

8 G. Dale

growth. About 25% of the carbon absorbed, its advocates predict, would sink to the

bottom.

Yet both of these technological fixes face major obstacles. Assuming it ever leaves

the drawing board, the major obstacle facing synthetic trees would be the energy

expended in creating and processing the chemicals (the second law of thermodynamics

springs to mind). Massachusetts Institute of Technology engineer Howard Herzog

estimates that this alone would make the trees unviable21. As to ocean seeding, scientists

have cast doubt on the prediction of 25% absorption. Empirically, the small-scale open-

ocean trials that have been conducted to date have not demonstrated sequestration into

the deep ocean. Rather, they found that zooplankton multiplied too, consuming the

phytoplankton and releasing CO2. In addition, the danger is that it would produce

massive unwanted side effects in marine ecosystems. If iron seeding were to go

commercial, scientists warn, it ‘could cause substantial harm to the ocean ecosystem and

may even reduce its ability to sequester carbon’22. A further problem, highlighted in

Nature by Irina Marinov and colleagues, is that stimulating phytoplankton production in

one part of the ocean can act to depress it elsewhere23.

Regrettably, the likelihood of a technology being devised that would allow extraction

of greenhouse gases from the atmosphere rapidly enough and in volumes of sufficient

magnitude to significantly restrict climate change is minimal. For technological fixes in

general, the hazard is that they create a costly smokescreen for continued reliance on

fossil fuels and divert funds from investment in proven technologies such as renewable

energy, building insulation and public transport. This provides a clue as to why Branson,

of all billionaires, is the one to step forth with his prize: not one of the technologies and

domains just listed applies to aviation. The Earth Challenge initiative ‘may hold

particular appeal in the aviation industry as there really are no other viable, cleaner fuels

in the pipeline,’ suggests Steve Rayner, a professor of science and civilisation at Oxford

University. ‘I think that’s why Branson has latched onto this’24. A technological magic

bullet would allow airlines to continue business as usual; failing that, the prize justifies

Virgin’s continued investments in air travel expansion on the grounds that Branson at

least is generously funding the search for solutions.

Branson is explicit that his strategy demands faster growth of his airline business. Is

this not paradoxical? Surely, the continued fast growth in air travel cannot be maintained

‘without causing climatic disaster’ – a quote from Friends of the Earth, the inclusion of

which on Virgin Atlantic’s website can only be described as facile25. Branson’s guiding

assumption is that only politicians and business leaders can act effectively to mitigate

climate change; therefore, being an environmentally conscious citizen, his position as

wealthy entrepreneur must be maintained. ‘I can hear people saying,’ he writes (2007b),

“If CO2 emissions are the problem, why doesn’t Richard Branson just stop his planes

from flying?’ But … if we stopped, we’d leave a gap that somebody who might have no

sense of responsibility at all would fill.” This vision, Monbiot has remarked, depending

as it does on the expansion of Virgin Atlantic, can be paraphrased as ‘we must destroy

the planet in order to save it’26.

The Earth Challenge prize, one should concede, is dwarfed by Virgin’s biofuels

ventures. And what if biofuels proved to be Branson’s desired magic bullet? Monbiot’s

jab could then be shrugged off. Sadly, this is improbable. For one thing, their viability as

a jet fuel is open to doubt. The Intergovernmental Panel on Climate Change asserts that

‘there would not appear to be any practical alternatives to kerosene-based fuels for

commercial jet aircraft for the next several decades’27. Branson places his hopes in

‘Green shift’: an analysis of corporate responses to climate change 9

ethanol, but this has a flashpoint of 12°C, which ‘would present major safety dangers,’

according to researchers at Imperial College, London28. In addition, it releases

acetaldehyde at low power settings, ‘bringing localised health problems around airports,

especially for ground support staff.’ Nor is bio-diesel suitable: at low temperatures, it

turns cloudy or even forms a gel, blocking fuel filters and fuel lines. It is true that in

February 2008 one Virgin Atlantic flight did include what Branson calls ‘sustainable

biofuel’ in its fuel mix: 20% of the fuel of one of its four engines was made from the oil

of coconuts and wild-growing babassu29. But one wonders, how ‘sustainable’ is this?

Even leaving to one side the difficulties of flying on a 100% biofuel mix, were this

possible, three million coconuts would be needed to fly just one aeroplane from London

to Amsterdam. Yet 1,300 flights leave London’s Heathrow airport each day. If all were

biofuelled they would consume the oil of three billion coconuts (plus an indeterminate

amount of babassu oil), and the total global production of coconuts would keep Heathrow

going for 18 days (Reguly, 2008). Aware of these problems, Branson pleads that the

airline industry must ultimately turn to algae in its search for a viable biofuel. Yet

processing algae, environmentalists caution, ‘may produce more carbon dioxide than is

saved by using it as an alternative fuel. There are also concerns that algae will compete

for fresh-water sources as the ponds evaporate and have to be topped up’30.

There is worse. Not only are biofuels unviable as an aviation fuel, the claims made on

their behalf as a fuel for road transport face mounting criticism. (Indeed, between this

article’s submission in summer 2007 and its final edit in spring 2008, these have

intensified into a clamour).

3 Biofuels vs. the biosphere

For all four of our companies, biofuels are an important part – and in some cases the key

plank – of their climate change mitigation strategy. These four are not exceptions but

belong to a fuel revolution. McDonald’s in Britain is converting its fleet of trucks to run

on bio-diesel. Auto-manufacturers, including Volvo and Volkswagen, are heavily

involved, as are agribusinesses like Tate and Lyle. Political authorities encourage and

direct the process. In his January 2007, State of the Union speech, President Bush

proposed a law to mandate a petrol mixture of 20% ethanol over the next ten years. In the

same month, the European Commission presented its biofuels blueprint, which proposed

that 10% of transport (excluding aviation) across the EU should be biofuelled by 2020.

The Commission also plans to direct substantial funds towards biofuels research and

development. For its part, the British government wants 5% of all transport fuel to be

produced from crops by 2010. In his final budget as Chancellor, Gordon Brown

announced he would extend tax rebates for biofuel until 2010. He has personally urged

train operators to switch to biofuel31.

Biofuel’s detractors attack it at a number of levels. To start with the most obvious, its

production competes with food crops. In 2006, more than one-third of the entire US

maize crop went to ethanol for fuel, a 48% increase over 2005. In 2007 and 2008, the

shift to biofuels contributed to spikes in food prices that sparked rioting in cities across

the world, prompting World Bank president Robert Zoellick to voice criticism of the dash

to biofuel, while Jean Ziegler, the United Nations rapporteur on food rights, went so far

as to call biofuel production ‘a crime against humanity.’ These problems could well

worsen. If the EU fails to scrap its target of 10% biofuel in transport, fuel would require

10 G. Dale

the equivalent of 20–40% of Europe’s farmland. A study conducted in 2006 by Sarasin, a

Swiss bank, placed ‘the present limit for the environmentally and socially responsible use

of biofuels at roughly 5% of current petrol and diesel consumption in the EU and US,’

well below the targets of the EU and many governments (Monbiot, 2007). Furthermore,

many biofuel feedstocks are heavy consumers of water; and their large-scale cropping

leads to biodiversity loss, soil erosion and nutrient leaching. More pertinent to this article

is that biofuels actually exacerbate climate change. Some feedstocks like as maize, can

emit more CO2 than they save because processing consumes huge amounts of energy.

Others, notably sugar cane and palm oil, accelerate CO2 release through deforestation and

soil desiccation. As Doug Parr, chief UK scientist at Greenpeace, argues, ‘If even 5% of

biofuels are sourced from wiping out existing ancient forests, you have lost all your

carbon gain’ (Holt-Giménez, 2007). Palm oil planting is the major cause of tropical

deforestation in both Malaysia and Indonesia: much of the land being cleared is peat

wetlands, which release carbon as the peat burns. A study by the Dutch scientific

consultancy Delft Hydraulics found that the decomposing of peatland can release 70–100

tonnes of CO2 per hectare per year (Corporate Europe Observatory, 2007). The report

shows that European use of Southeast Asian palm oil would generate upto ten times more

CO2 than the equivalent emissions from fossil diesel. Indonesia alone is home to 60% of

all tropical peatlands, and most of these are predicted to be drained in the coming decades

as a by-product of its plans to increase palm-oil production 43-fold32, releasing over

40 billion tones of carbon – the equivalent of around six years of global fossil fuel

emissions. Malaysia, the world’s largest producer of palm oil, has already lost 87% of its

tropical forests and continues deforesting at a rate of 7% per year (Holt-Giménez, 2007).

Similar is taking place in Africa. Forests covered 40% of Uganda in the 1970s, a figure

that has slumped to 20% and is now in free fall. Sugar producers are lobbying (and

allegedly bribing) the government to sanction the destruction of swathes of ostensibly

protected rainforest. Protestors seeking to prevent this have been shot dead by Ugandan

police33. In Brazil, sugar cane is mainly grown at some distance from the rainforest – and

Tesco cites this to justify its reliance upon Brazilian ethanol – but the exponential

increase in sugar plantations pushes other land users into the forest, while soya, Brazil’s

other major biofuel crop, is grown on a vast scale in cleared forests, including the

Amazon (Institute of Science in Society, 2006). Half of Tesco’s bio-diesel is derived

from palm oil and from soya, a crop that has directly caused the destruction of 21 million

hectares of forest in Brazil and 14 million in Argentina. According to Dr Philip

Fearnside, a researcher at Brazil’s National Institute for Amazon Research (GRAIN,

2007), soya cultivation impacts on deforestation.

“by consuming cleared land, savannah and transitional forests, thereby pushing

ranchers and slash-and-burn farmers ever deeper into the forest frontier.

Soybean farming also provides a key economic and political impetus for new

highways and infrastructure projects, which accelerate deforestation by other

actors”.

Concerns at these problems have prompted biofuel boosters to express concern or to

switch tack. In April 2008, EU trade commissioner Peter Mandelson held firm to the EU

strategy on biofuels, but advocated a certification scheme to ensure that only

‘sustainable’ feedstocks are used. This solution, although widely advocated, is a chimera,

for certification cannot address the fact that increased demand for ‘sustainable’

feedstocks raises prices, encouraging increased sales of ‘unsustainable’ feedstocks to less

‘Green shift’: an analysis of corporate responses to climate change 11

scrupulous bidders. Others place their hopes in jatropha, a plant that does not require

chemical fertilizers and need not compete with food crops (for it can be grown on

marginal land), or to ‘second generation’ biofuels, notably cellulosic ethanol. Sourced

from woodchips (or ‘biomass waste’), using trees instead of food crops such products, it

is argued, do not compete with food supplies. Jatropha’s advocates, however, ignore the

fact that it is a toxic, invasive weed, the yields of which are far higher when grown on

prime, irrigated land – there have already been reports ‘of farmers being dispossessed of

fertile land by companies wanting to grow jatropha’ (GRAIN, 2007). As for wood and

‘biomass waste’34, cellulosic ethanol has yet to demonstrate any carbon savings. To

become viable, major breakthroughs in plant physiology are required that would permit

the efficient breakdown of cellulose and lignin. If these succeed, the monoculture tree

plantations that result will still compete with food crops, deplete the soil and reduce

ecological diversity.

Investments in biofuels by BP, Virgin, Tesco et al. will contribute to, and not

ameliorate, global warming and the degradation of the biosphere. If this is their effect, the

question arises: whence, then, their recent popularity? To begin with, it is worth recalling

that the drive to biofuels kicked off in the early 1970s, not over climate change, but as a

means of addressing the challenges of energy security and price. A second, greater, effort

came in the late 1990s and 2000s, again for motives of energy security: i.e. to find

methods of continuing ‘business as usual’ whilst lessening the need to source oil from

potentially hostile regions. Geopolitics remains of paramount importance. In recent years,

Washington has created an alliance with Brazil around the ethanol industry that is

designed to counter Venezuela’s oil-based influence in Latin America. A key figure in

the US–Brazil alliance is Jeb Bush; he directs the Inter-American Ethanol Commission,

an organisation charged with boosting the consumption and production of bio-ethanol.

For industrialists and politicians keen to be seen as green without directly addressing

the need to reduce emissions, biofuels offer a quick fix. They are assisted in this by the

terms of the Kyoto agreement, for it allows industrialised countries to claim that their use

of biofuels reduces greenhouse gas emissions because the gases emitted during their

production are largely released in countries of the South where Kyoto caps on emissions

are absent (GRAIN, 2007). For some sectors, the ‘green’ appearance of biofuels is seen

as justifying their continued expansion. A paradigm case is the automobile industry, for

which biofuels offer the perfect pre-text for escaping the pressures that might otherwise

emanate from regulators and public opinion to lower CO2-emission criteria for passenger

cars or to produce fewer units. In the EU, vehicles firms have been central to the political

drive towards biofuels. Despite assurances of multiple stakeholder representation, the

bodies invited to advise the European Commission are dominated by industries with

biofuels interests: automobiles, oil, energy, biotech, foods and forestry. These

organisations include the Advisory Research Council for Biofuels (BIOFRAC) and the

European Biofuels Technology Platform (EBFTP). In the membership of BIOFRAC, the

automotive industry was represented with more members than any other industry, while

car companies, alongside oil giants, have the highest representation on EBFTP’s steering

committee. Its mission is ‘to contribute to the development of cost-competitive world-

class biofuels technologies, to the creation of a healthy biofuels industry and to accelerate

the deployment of biofuels in the European Union’35. As reported by the Corporate

Europe Observatory (2007),

12 G. Dale

“Volvo’s Anders Roj chaired BIOFRAC and is now vice-chair of the EBFTP

Steering committee. Volvo affirms its support for a greenhouse gas reduction

target of 30% by 2020 for developed countries and for an EU greenhouse

reduction commitment of 20% by 2020. Yet, at the same time it creates

vulnerability within the EU economy by threatening relocation: ‘the

competitiveness of in particular the energy intensive industry must be followed

to avoid the possible moving out from the EU to third countries’. It also

supports a binding target for agrofuels of 10% of all vehicle fuels by 2020. This

is a common corporate strategy, on one hand paying lip service to

environmental measures while on the other warning that if those measures hit

their pockets … they will move away from Europe taking their jobs with

them”.

According to the newsletter of the EBFTP, the absence of broad representation is

deliberate: ‘an adequate balance of industry vs. research/public centres was established in

order to preserve the Platform as an industry-led body,’ and it defines its stakeholders as

‘organisation[s] whose commercial or business activities’ are affected by biofuels

development36.

The biofuel sector, furthermore, offers new areas for business expansion. For

agribusiness, suffering from low profit rates, government subsidies and mandated targets

for biofuels are the perfect remedy (Holt-Giménez, 2007). Agribusinesses like Cargill are

heavily involved. British Sugar is too; and it influenced EU policy through its

membership of BIOFRAC. The biotech industry is also a major investor in biofuels.

Genetically modified varieties of several crops now used as biofuel crops – maize, soya,

oilseed rape – have met strong resistance to their use as food. The industry hopes that by

promoting them as biofuels, and by helping to develop breakthrough ‘second generation’

technologies, their products will gain acceptance. Monsanto, Syngenta and others are

investing heavily in biofuels. Again, biotech firms are policyshapers in the EU: the main

European biotech lobby group, EuropaBio, was a member of BIOFRAC and is an active

member of the EBFTP (Corporate Europe Observatory, 2007). Finally, for all this

investment, finance is needed. Banks, financiers and investment funds are piling into the

biofuels sector – amongst the pioneers were Goldman Sachs, Barclays and George Soros.

Together with the other firms listed above, these form a powerful lobby pushing

governments to support biofuels expansion.

4 Explaining the green shift

A recent survey of 350 of the world’s top 500 firms (rated by market capitalisation)

reveals that ‘climate change and the various regulatory, policy and business responses to

it are driving what amounts to a worldwide economic and industrial restructuring.’ That

restructuring, it continues, ‘has already begun to redefine the very basis of competitive

advantage and financial performance for both companies and their investors’37. Although

there is no shortage of rhetoric on climate change from PR departments and company

directors, the flurry of activity in the boardrooms is not entirely cosmetic. Some

executives are worried that climate chaos will adversely affect business, for example

through higher insurance premiums or higher crop prices. Some are concerned about its

impact on long-term growth, and with the instability that it will catalyse, through

starvation, water shortages and resource wars. Such concerns are undoubtedly genuine.

When, for example, Tesco’s Terry Leahy counsels that ‘if we fail to mitigate climate

‘Green shift’: an analysis of corporate responses to climate change 13

change, the consequences for all of us will be severe,’ he means it; (although the

seriousness with which climate change is treated is variable: a Branson, whose epiphany

failed to check his activities promoting aviation, space tourism or even the Keep

Concorde Flying campaign, is not an Al Gore).

Corporate leader’ recognition of the dangers climate change pose to profitability and

humanity is not the only reason behind the green shift. Another is alertness to the

openings associated with it. These divide into two categories. First, there are business

opportunities associated with climate chaos and its mitigation. ‘The transition to a low-

emissions global economy,’ the Stern review points out (2007),

“will open many new opportunities across a wide range of industries and

services. Markets for low carbon energy products are likely to be worth at least

$500bn per year by 2050, and perhaps much more. Individual companies and

countries should position themselves to take advantage of these opportunities”.

Some companies are developing crops resistant to extreme weather, renewables, or

biofuels. Further down the line, others will find revenues in relocating, reconstructing and

resupplying flooded or storm-damaged cities, or constructing flood defences. In business,

first-mover advantage is considerable – witness, for example, the lead over rival electric-

fuel vehicles established by the Toyota Prius. Similarly, states that rapidly incentivise

investment in low-carbon technologies are likely to see ‘their’ businesses reap large

rewards. Secondly, as concern over climate change advances, opportunities associated

with green branding swell. That a green image boosts sales has long been a staple in

business-studies literature. ‘The environment is the vehicle to greater profits in the

1990s,’ Managing Service Quality told its readers over a decade ago (Denton, 1996);

“organizations should comply with customer demands, [for], recent surveys

show, consumers are willing to pay more for environmentally-friendly

products. [Conversely], surveys by Gallup suggest that about half of their

respondents in a 1990 poll stopped buying particular products because of the

poor environmental image of the company … The message is clear: companies

need to make environmental concerns a top priority because consumers report

that the environmental attributes of a product or service play a significant role

in which products they buy and which they avoid. … Companies which see the

environment as a cost, rather than a chance to gain a competitive advantage, are

missing the best opportunity of the 1990s”.

Other surveys have suggested that a sizeable proportion of consumers are sufficiently

committed to environmental goals that they are willing to pay a premium of at least 10%

for ‘green’ products.

Knowledge of such trends is, of course, ABC in company boardrooms. As Terry

Leahy (2007) frames the matter, if Tesco becomes ‘a leader in helping to create a

low-carbon economy’ and gains recognition ‘as a centre of expertise in how to run

a green business, … [it] will be rewarded with more custom and more loyalty and as a

result will grow stronger.’ It is safe to predict that these tendencies will strengthen. ‘The

branding of nature,’ a recent article in Marketing Intelligence and Planning goes so far as

to forecast, is ‘a promising direction for research and practice. In societies in which

nature experiences are becoming scarce while life becomes increasingly ‘virtual’ … the

consumption of green products may serve as a substitute for real contact with

nature’(Hartmann and Ibáñez, 2006).

The standard explanation of the corporate green shift is that environmentally

concerned consumers buy green, and because marginal differences in image translate into

14 G. Dale

large differences in turnover, rendering companies highly accountable to their customers,

‘going green’ becomes a vital brand asset. For this mechanism to be environmentally

meaningful, however, customers must recognise ‘green’ behaviour, and there are grounds

for doubting that they do. To give one example of fooled consumers that stands for many,

some German utilities are tapping into a rapidly growing eco-conscious market simply by

relabelling the electricity which they have for decades supplied from hydroelectric

stations as ‘special green energy’ – which consumers, understandably but falsely, assume

to derive from new investment in renewables. A recent report by WPP suggests that

although 80% of consumers believe it is important that companies act in an

environmentally friendly way, their understanding of what it means to be green is

‘shallow, confused and easily swayed by company messages’38. The same survey found

that the top 20 ‘green brands’ included many surprising names, none more so than Shell,

whose operations have in recent years become markedly more carbon intensive due to

investments in Albertan tar sands and Chinese coal mining.

An alternative reading argues that the green shift is mostly ‘greenwash’. Perhaps the

most sophisticated version of this case has been elaborated by Heather Rogers. Given the

severity of the contemporary ecological crisis, she observes, cultivating a green image

becomes more demanding. Opinion polls show that while consumers are more likely to

buy a product from a company that is known to have environmentally friendly practices,

most will be guided primarily by cost and few will research a company’s environmental

record. The upshot is that although corporations profit from a green image,

“because fewer consumers actually buy eco-safe products, and an even smaller

number delve into the reality of a company’s practices, there is no need to truly

transform production. Firms can cash in by merely jumping through the right

hoops, which today include environmental claims certified by a third party,

corporate investment in ‘green’ projects in partnership with non-profit

environmental organizations, and offering eco-oriented consumer products”.

Eco-commerce, Rogers concludes (2007), ‘is a means for capital as a whole to avoid truly

remaking itself, while giving the opposite impression. This misperception helps capital

continue cultivating the ideology of individual responsibility linked to a market-based

solution, pre-empting government regulation.’

The pre-emption – or influencing – of government regulation provides a further clue

as to the nature and timing of the green shift. In early 2007, two articles in the US

business press highlighted the changing attitude of US corporations to climate-change

regulation. Companies are ‘coming to the bargaining table for many reasons beyond the

science,’ reported Business Week (Carey, 2007);

“On Apr. 2 the US Supreme Court ruled that the Environmental Protection

Agency can regulate CO2 as a pollutant. That could bring legal challenges and

EPA-imposed mandatory curbs. ‘The fear that the next Administration’s EPA

would have its hand on the lever is a great motivator,’ says Natural Resources

Defense Council attorney David D. Doniger. Plus, a growing patchwork of

state carbon-emissions limits has prompted industries to push for a preemptive

national law. And as energy executives face decisions, such as what kind of

power plants to build for the next 40 years, they want regulatory certainty”.

There will be regulation, CEOs recognise, and, before a law is drafted that overly

prejudices their interests, they push ‘pre-emptively’ for business-friendly laws. The

second piece, from The Wall Street Journal (Murray, 2007), extends the argument.

‘Green shift’: an analysis of corporate responses to climate change 15

Corporate leaders, it observes, recognise that limits on carbon dioxide emissions are now

inevitable;

Indeed, they are already in place in Europe and coming soon to California and

the Northeast. Better to get the federal government on board, they argue, so

businesses can plan for the future. That’s an especially potent argument for

utilities, which have to make investment decisions today about serving

customers 30–50 years down the road. … The 2006 election was a wake-up call

for business leaders, reminding them they won’t always have a business-

friendly government to protect them on this issue. … Business leaders who sign

on early will likely have more influence in crafting the all-important details of

any legislation, which could determine who wins and who loses. … In addition,

CEOs are finding that a green hue helps keep them in good stead with

employees, some activist investors and an environmentally conscious public.

At a time when CEOs rank low in the public’s esteem, many are happy for a

chance to burnish their public profile.

Regulation inevitably privileges some interests over others. Therefore, the more prescient

business leaders are saying, let’s get early to the negotiating tables at which

policymakers, corporations and international civil servants thrash out the rules.

The question is, what sort of framework – nationally and internationally – will govern

the climate change regime? Will it be regulation-heavy? Will it be geared around

taxation? Or will it be ‘regulation lite,’ organised through markets? Survey evidence

suggests that most British businesses see government regulation as the most efficacious

method of reducing emissions. Somewhat fewer believe taxes and tax breaks are key,

while ‘fewer than half thought voluntary agreements and market trading schemes were

effective environmental tools’39. This finding sits uneasily with the fact that the business

sector has lobbied en bloc for a market regime and against heavier regulation. Why is

this? Could it be that the promotion of ‘regulation lite’ arises from the attempt to square

the imperative of tackling climate change with that of increasing profitability? There is

certainly evidence to suggest that once a substantial regulatory framework became

inevitable business leaders spotted a rent-seeking opportunity, a means by which the

threat, while being formally acknowledged, could be reformulated to their advantage.

5 Carbon trading: of lemons and low-hanging fruit

Climate change policymaking since the mid-1990s, Matthews and Paterson (2005), have

argued persuasively has essentially consisted of ‘attempts to construct policies that create

new sites of accumulation.’ These include renewable energy (stimulating an existing

market) and, more importantly, emissions trading (the creation of new markets and

commodities). In the western USA, the EU, and at the global level, the policy regime

centres on creating markets in emissions. The theory behind this momentous initiative is

that the problem is a consequence of ‘market failure,’ i.e. that scarce resource (like clean

air) will be excessively used or otherwise mistreated in the absence of appropriate

market-mediated price signals. The term ‘market failure’ is predicated on the neoclassical

assumption that the norm is a free market system and laissez-faire government; that if

political intervention is required this should be taken as a signal that markets have not yet

been properly constructed. Hence, the need for market expansion: the right to pollute

must become a commodity; atmospheric pollution requires valorising. One early

Emissions Trading Scheme (ETS) was launched by the EU in 2005, involving some

16 G. Dale

11,500 installations. It connects into two others that were inaugurated following

negotiations at Kyoto: the CDM and the Joint Implementation Mechanism. As these

markets become actualised, growing numbers of corporations recognise their inevitability

and consider how to play them and – for these are highly politicised markets – how to

lobby for favourable terms.

The advocates of carbon trading justify it in terms of efficiency: it allows the cheapest

cost of reducing emissions to be found. The market sets a price for the right to emit one

tonne of CO2 (or other greenhouse gases); if the price is high enough, companies will find

ways to cut emissions. Market schemes thus encourage the development of innovative

abatement technologies – unlike a carbon tax, which, according to Mark Maslin (2004),

‘provides an incentive only to adjust production levels, which generally benefits neither

business nor society.’ But criticisms of emissions trading abound. Problems arise from

the fact that measurements, largely provided by the emitters themselves, are notoriously

‘flexible’. A Christian Aid report in 2007 revealed that Britain’s biggest businesses failed

to disclose almost 200 million tonnes of emissions – more than the entire annual

emissions of Pakistan and Greece combined – significantly affecting the extent of

Britain’s perceived contribution to global warming40. Only 16 of Britain’s top 100 listed

companies currently meet even the most elementary official emissions reporting

guidelines. This is an inherent and general problem of emissions trading. As the

Transnational Institute and Carbon Trade Watch point out (McGarr, 2005), such markets

“in effect privatise the problem of air-pollution. Government and communities

lose control over environmental protections, placing it in the hands of the

polluters. When the incentive to reduce emissions is profit and cost-

effectiveness, there is incredible pressure to cheat by overestimating reductions,

while underestimating emissions.”

Both buyers and sellers of carbon credits have an interest in inflating the number

generated by any given project. ‘With a bit of judicious accounting,’ Lohmann observes,

‘a company investing in foreign ‘carbon-saving’ projects can increase fossil emissions

both at home and abroad while claiming to make reductions in both locations.’ As a result

of the absence of accurate verification, ‘the project-based credit market runs the risk of

becoming what George Akerlof calls a self-destructing ‘lemons market.’’ The quality of

the goods traded being uncertain, ‘lemons’ can be readily off-loaded onto the market ‘and

buyers won’t pay the prices demanded by sellers of higher-quality products’ (Lohmann,

2006).

As with the offsets discussed above, carbon markets enable corporations to earn

credits by sponsoring schemes elsewhere that supposedly reduce emissions. In such

cases, a credit can be earned based on a calculation of the hypothetical difference

between what has happened and what might otherwise have occurred. These credits can

then be used to increase the corporation’s own emissions without facing a penalty. Such

schemes are open to abuse over who decides what would otherwise have transpired and

who performs the resulting calculation. The CDM, writes Paul McGarr (2005), allows a

corporation to

“sponsor a plantation in a poor country, and claim that if this hadn’t been done

more carbon dioxide would have gone into the atmosphere, on the grounds that

trees lock up carbon. Another example could be a corporation investing in

some electricity generation project involving, say, hydroelectric power and

dams, and claiming that otherwise fossil fuels would have been burned and put

more carbon dioxide into the atmosphere.”

‘Green shift’: an analysis of corporate responses to climate change 17

Far from providing real alternatives to fossil-fuel consumption, schemes of this sort

simply sanction emissions expansion.

In Larry Lohmann’s important treatise on carbon trading (2006), a persuasive case is

made that markets do not in fact represent an efficient method of reducing emissions. The

essential flaw is that carbon trading treats every tonne of carbon alike. Leaving aside any

social justice implications (the same price is assigned to ‘basic needs CO2’ as to ‘luxuries

CO2’), this negates efficiency, for savings made by introducing a radical new renewable

technology or way of organising social life that would lead to vastly multiplied future

cuts are deemed equal to those stemming from routine efficiency improvements that

should have been made long ago. The cuts made today will influence the potential for

future reductions, Lohmann points out, but markets reward the cheapest, rather than those

with the most effective long-term consequences. He gives the example of a company that

could either reduce emissions by installing an end-of-pipe technology, necessitating an

initial outlay of 100,000 followed by 1,000 per year in operational costs, or, for 200,000,

re-engineer its entire industrial process in a way that reduces its need for fossil fuels,

generating cost savings of 1,000 per year. The latter solution would be better for the

climate and, over the long run, cheaper. Yet a company choosing the former would

benefit most from a trading system, by selling permits cheaply during the initial years.

Emissions trading even provide incentives for those polluters for which introducing

emissions-reducing technological changes are more expensive not to reduce emissions:

the rational choice for them, rather, is to buy permits. The effect is to discriminate against

costlier forms of innovation, even if they are more effective. A further drawback is that

the accounting procedures in carbon trading actually set up perverse incentives for carbon

project proponents to emit more greenhouse gases today in order that their projects

appear to save more tomorrow.

In practice, the record of carbon trading has been dismal. The EU ETS was the first

fully functioning trading scheme and, given the advantages that accrue to ‘first-movers,’

Brussels is a keen proponent of the universalisation of such schemes. However, already

in its early stages, only a minority of companies believed that it would result in any

emissions reductions, and they were right (Lohmann, 2006). Lacking the political will to

tackle big emitters, the European Commission over-allocated carbon permits. British

firms, for example, were given the rights to emit as much as they had in the previous five

years (Lohmann, 2006). The price of permits went into free fall.

The biggest gains from the EU ETS have been scored by corporations with large

allocations which can effect emissions cuts and sell permits when the price is high, and

then expand emissions when it falls. The system, Michael Dorsey has revealed,

‘financially rewarded companies – mainly petroleum, natural gas and electricity

generators – that disproportionately emit carbon dioxide. … In fall 2006, a Citigroup

report concluded that the continent’s biggest polluters had been the winners, with

consumers the losers’41. In particular, energy companies benefited, because they

incorporate the market value of permits – which they receive gratis – into the price of

their product. A 2005 report by IPA Energy Consulting found that Britain’s six electricity

generators stood to earn some £800m in each of the first three years of the scheme, while

the EU’s four biggest power firms, according to Germany’s Environment Minister,

profited from the first round of the ETS to the tune of €6–8 billion. The next round of the

ETS looks no more promising than the first. By 2012, utilities in Britain and four other

European countries stand to gain windfall profits of up to €71bn, despite investing

heavily in new coal-fired power plants (Gow, 2008). The irrationality of the ETS has

18 G. Dale

been demonstrated by a number of recent studies, the most striking of which, by Ben

Schlemmermeier, director of the LBD consultancy in Berlin, and Professor Hans-Peter

Schwintowski, Director of the Institute for Energy and Competition Law at Humboldt

University, showed that, in 2005, German consumers paid €1100 for each tonne of CO2

saved through the ETS, a figure that was projected to rise in 2007 and 2008 to over

€2000. An equivalent volume saved by investing in renewable energy, the same report

demonstrated, costs only €5742.

When one turns to the global level, i.e. to the Kyoto schemes, one discovers criticisms

that are similar and no less serious. To begin with, the targets are set very low: the cuts in

emissions that Kyoto envisages, even if fully implemented, will do virtually nothing to

halt global warming. Kyoto does not include aviation emissions, and allows forest and

agricultural land to be counted as carbon sinks, which may save some forest from

destruction, but at the price of sanctioning the principle that such practices are valid – and

profitable – alternatives to emissions reduction. As with the EU ETS, Kyoto’s rules allow

corporations in developed countries to exceed emissions targets by buying carbon credits

or investing in offset schemes which – as in the case of Jindal discussed above –

frequently reduce only hypothetical emissions. In theory, a country will ‘be able to meet

100% of its Kyoto reduction commitments through purchasing credits in the market

rather than reducing climate change emissions at source’43. A further problem with this

and other ETS is their operating costs. Pace Maslin, the same or superior effects could be

achieved at far lower administrative expense through a tax on non-renewable energy. A

carbon tax is seen even by many neo-liberal economists, such as Martin Wolf of the

Financial Times, as a more efficient means of encouraging businesses to develop low

carbon emissions technology44.

There is growing recognition that the carbon trading experiment has failed. Quoting

Tom Burke of environment lobby group E3G, a recent Reuters report (Lovell, 2007) puts

it starkly:

“The policy instrument of choice pretty well everywhere is a price for carbon,

and it is not going to work, … the vital incentive is supposed to be provided by

achieving a high price for carbon, from which all else would follow. Neither

has happened and time is running out”.

Oxford University economics professor Dieter Helm concurs (Lovell, 2007): ‘The price

of carbon has had virtually no effect on the market so far and virtually no effect on

climate change.’ Together, the EU and Kyoto schemes have generated a global carbon

trade worth billions of dollars but have had a negligible effect on emissions. Evidence

collected by the Guardian (Davies, 2007) suggests that, to date,

“both markets have earned fortunes for speculators and for some of the

companies which produce most greenhouse gases and yet, through a

combination of teething troubles and multiple forms of malpractice and

possibly fraud, they have delivered little or no benefit for the environment”.

Yet the problem lies deeper than teething troubles and fraud. Quite simply, as Jim

Watson of Sussex University’s Energy Group points out, ‘If you rely too much on the

carbon price you give people the option of buying their way out of it.’ The oil price

shocks of the 1970s, he adds (Lovell, 2007), ‘didn’t wean us off oil, so why should we

believe that a high carbon price will wean us off carbon?’

As to how this sorry situation could arise, the answer lies in part in prevailing neo-

liberal assumptions: that the response to market failure is market expansion, that

‘Green shift’: an analysis of corporate responses to climate change 19

addressing climate change requires commodifying the right to pollute. But it also results

from corporate support for market solutions. In this, BP’s John Browne was a pioneer.

His environmentally conscious image notwithstanding, he was ever careful to warn that

investing too heavily in green processes and products would be foolhardy – ‘Business is

about doing business, it’s not a surrogate for government or public service’ (Anon. 2006).

Climate change, he foresaw, would bring money-making opportunities. In 2000, BP

pledged to reduce its carbon emissions by 10%, and introduced an internal trading system

to this end. This did help the company make the easy one-third of the cuts required

relatively cheaply but, in attempting to make the more difficult cuts, it found it cheaper to

avoid more radical change through offsetting. By 2002, Lohmann reports (2006), ‘the

company expected half of its so-called ‘emissions reductions’ to come from credits

bought in from outside. At no point was there any move toward genuinely innovative

technology.’ In spite of this unpromising experience, BP has strongly supported the

generalisation of emissions trading to the global system. The reason for this, one cannot

but suspect, is venal: carbon trading systems offer a fertile ground for rent-seeking, i.e.

harvesting values through manipulation of the economic environment, with investment in

lawyers, lobbying, PR campaigns and accountants (because emissions-trading regulators

must rely on private firms for information) rather than producing and selling commodities

(Lohmann, 2006). The outcome for BP and for other big polluters, has been a triumph.

As Homan Jenkins reports, in the Wall Street Journal,

“General Electric, DuPont, Alcoa, Caterpillar and other industrial pigpens this

week endorsed cap-and-trade limits on carbon dioxide, which would turn their

established habit of using the atmosphere as a free waste disposal into a

property right, worth billions. Talk about a low-hanging fruit. They are

accustomed to treating carbon dumping as a gimme. Now they’d at least be in a

position to get paid for dumping less. Their hero is retiring BP chief John

Browne, who turned his little oil company into a big oil company, engaged in

cost cutting (which he called ‘emissions cuts’) and set about using public policy

to get his shareholders compensated twice for these cuts”45.

As emissions markets become generalised, vested interests build up in support of them,

forming obstacles to radical reform. ‘The trouble is,’ Burke laments (Lovell, 2007), ‘there

are a lot of people out there making a lot of money out of carbon trading and who want to

perfect the market rather than press for the changes that are actually needed.’

6 Conclusions

In recent years, elite thinking on climate change has been transformed. The dominant

strategy for many years was denial, masked as ‘scepticism,’ and was committed to

preventing the formation of an effective policy regime. It is now eclipsed by a new

approach. Exemplified by the likes of BP, M&S and Virgin, corporations are investing in

renewables, biofuels, offsets, waste reduction and/or carbon labelling, and are influencing

public policy through advising, lobbying and campaigning. Amongst the reasons for this

‘green shift,’ I would include the dawning awareness of many corporate executives that

global warming is a major problem, one that may adversely affect business prospects and

will certainly generate social problems and political instability. As recognition grows of

the business opportunities associated with climate chaos and with attempts to mitigate it,

of the benefits of green branding and securing a better position at negotiating tables on

20 G. Dale

environment-related policy, a critical mass is reached when large numbers of companies

perceive a strong need to be seen as green.

The green shift has taken on its distinctive contours due to the attempt by soi-disant

green CEOs – Branson, Rupert Murdoch and their ilk – to square their concern for the

environment with the need to perform for shareholders. The shift has enabled corporate

and political elites to co-opt and control discussion on climate change, and to construct a

policy framework that does little to reduce emissions, but provides them with further

opportunities. The ‘black’ in Leahy’s slogan – ‘green is the new black’ – references not

only environmental vogue, but also the colour of the company’s accounts. The argument

of this article is that narrow financial considerations act as trump cards, keeping climate-

change mitigation strategies to those that are compatible with ‘business as usual.’ On

closer examination, these were shown to be far less impressive than they appear,

frequently guilty of spin or barefaced deception, and in many cases actually harmful – or,

as with carbon labelling, marginally helpful but contributing to counterproductive

phenomena like the individualisation of ecological problems. Too often, green rhetoric

obscures quite different motives: How can we steal a march on rivals?, What enzymes

can we patent that might be crucial for second generation biofuels? and the like. For

corporate executives and politicians alike, the mentality involved is too often a

complacent faith in technology: the problem can be solved through new or improved

products or energy saving (A representative example is Tony Blair’s justification of the

expansion of long-range air travel: ‘I think we need to look at how you make air travel

more energy efficient, how you develop the new fuels that will allow us to burn less

energy and emit less. … for example … the new frames for aircraft, they are far more

energy efficient’46). But, the most egregious example of narrow business interests

trumping ecological rationality occurs in the engineering of a policy framework that has

fashioned the Earth’s carbon-cycling capacity into property rights that are awarded to the

corporate sector, including the most high-polluting corporations. The undignified

spectacle of competitive rent-seeking witnessed in the EU and Kyoto trading schemes has

enriched the big emitters but does nothing to prevent climate chaos. The current market-

centred policy regime is counterproductive. A more effective and more just strategy

would involve concerted state intervention focused upon investment in public transport,

housing and renewable energy, coupled with regulatory measures to radically reduce

fossil-fuel use.

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off?’, Strategic Direction, Vol. 22, pp.21–23.

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Branson, R. (2007b) Losing My Virginity: The Autobiography. London, UK: Virgin Books.

Carey, J. (2007) ‘With the skeptics almost silenced, businesses are fighting over how to cut carbon

emissions,’ Business Week (April).

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(

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)

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AU:

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the inserted

page range in

reference

‘Anon.

(2006)’.

AU:

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provide

complete

details for

highlighted

references.

AU:

The reference

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(2008)’ has

been

provided in

the list but

not cited.

Please check.

‘Green shift’: an analysis of corporate responses to climate change 21

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Service Quality, Vol. 6, pp.26–29.

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Notes

1Guardian 04.05.2007 pp.30–31.

2‘The world in our hands,’ Shell-sponsored section in the Guardian ‘Climate change; Challenging

business’ 27 June 2007.

3Financial Times, 24.05.2007, p.28.

4For a critique of Noble, see Dale (2007).

5Guardian, 04.05.2007.

6www.indymedia.org.uk/en/2007/04/368045.html, accessed 05.05.2008.

7Guardian 27.6.2007; ‘D1-BP Fuel set to extract bio-diesel from jatropha,’ www.icis.com, accessed

14.02.2008.

8www.marksandspencer.com/gp/, accessed 12.09.2007

9Guardian, 04.05.2007 pp.30–31.

10Sunday Times, 29.04.2007.

11www.virgin-atlantic.com/en/gb/allaboutus/environment/bransonpledge.jsp, accessed 05.05.2008.

AU:

Please check

the inserted

volume

number and

page range in

reference

‘Matthews

and Paterson

(2005)’.

22 G. Dale

12www.populuslimited.com/uploads/download_pdf-230407-Populus-Concerned-Consumer-

Index.pdf, accessed 05.05.2008.

13According to Henderson Global Investors, cited in Harris-White and Harris (2007).

14Financial Times, 27.06.2007, p.21.

15Sunday Herald, web edition, 19.07.2007.

16www.terradaily.com/reports/British_Food_Retailers_Carving_Out_Green_Future_999.html,

accessed 05.05.2008.

17For this formulation, my thanks to Eva Barker.

18Guardian 19.06.2007 p.28.

19This paragraph draws upon materials from www.corporatewatch.org.uk and www.turnuptheheat

.org.

20www.turnuptheheat.org/?page_id=13, accessed 05.05.2008.

21news.bbc.co.uk/2/hi/science/nature/3612739.stm, accessed 05.05.2008.

22Letter to Independent newspaper, 14.05.2007, by twelve scientists at the National Oceanography

Centre, Southampton.

23www.realclimate.org/index.php/archives/2007/05/thin-soup-and-a-thin-story/#more-440,

accessed 05.05.2008.

24www.iht.com/articles/2007/02/09/business/climate.php, accessed 05.05.2008.

25www.virgin-atlantic.com/en/gb/allaboutus/environment/bransonpledge.jsp, accessed 05.05.2008.

26www.turnuptheheat.org/?page_id=11, accessed 05.05.2008. I leave to one side Virgin Trains’

much-trumpeted biofuels trial, which was abandoned in 2007 after the group lost its

‘CrossCountry’ franchise.

27ibid.

28ibid.

29‘Branson’s Coconut Airways,’ The Guardian 25.02.2008.

30ibid.

31Financial Times, 08.06.2007, p.4.

32Although some of the land earmarked for plantations is felled for lumber and then not planted

(GRAIN 2007).

33Independent 10.07.2007, p.25.

34‘Biomass waste’ is a misnomer: ‘it is the organic matter that you have to put back after harvest in

order to maintain the soil’s fertility.’ (GRAIN 2007).

35www.biofuelstp.eu/downloads/Steps_to_TP_LCJS.pdf, accessed 05.05.2008.

36www.biofuelstp.eu/downloads/Steps_to_TP_LCJS.pdf, accessed 05.05.2008. See also Corporate

Europe Observatory (2007).

37‘Climate change spurs industry restructuring,’ www.reuters.com, 24.09.2007.

38Guardian, 04.05.2007.

39Financial Times, 5.7.2007.

40Guardian, 19.02.2007. Christian Aid’s calculations refer to basics, like office lighting, and don’t

take account of investment or supply chains.

41Los Angeles Times, 01.04.2007.

42www.energieverbraucher.de/de/Umwelt_und_Politik/Umwelt_und_Klima/site__468/, accessed

05.05.2008.

43Transnational Institute and Carbon Trade Watch, cited in McGarr (2005).

44Financial Times, 15.11.2006.

45‘Decoding Climate Politics,’ Wall Street Journal, 24.1.2007.

46Guardian, 09.01.2006.

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