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Sustainability

U.S. withdrawal from Paris Accord creates geopolitical uncertainty

U.S. President Donald Trump stunned the world on June 1, 2017 when he announced the United States is withdrawing from the Paris Climate Accord, agreed upon by leaders of 195 nations in December 2015. By pulling out of this agreement, the United States joins a small and infamous group of two, Syria and Nicaragua, becoming the world’s third nation refuting this massive effort.

Reasons cited for Mr. Trump’s controversial decision include:

  1. A desire to dismantle Obama-era negotiations that are perceived to hurt American business, especially that which is in the oil and gas sector and thought to have made CO2 the world’s environmental villain
  2. Claims to protect the American worker and put America on a level playing field with other nations
  3. A focus on keeping campaign promises to “Make America Great Again”
  4. Disbelief in climate science predictions and the damage caused by greenhouse gas emissions, as summarized in a statement by Mr. Trump that reduction efforts would “only produce a two-tenths of one degree Celsius reduction in global temperature by 2100. . . . [a] tiny, tiny amount.”

The decision, and confluence of factors that led to it, have left the private sector with a difficult choice: pursue climate change under their own leadership or revert to days of decision-making in an unregulated environment.

Early indicators show that business leaders are leaning toward the former. They seem aware of the conventional wisdom that suggests:

“Globalisation has multiplied the links between peoples, nations, cultures and markets, and those links need not only ‘regulation’ but . . . an overall structure of cohesive and coherent governance. Lack of effective governance creates instability. Crises can be tracked down to the lack of governance in particular sectors.”
Globalisation and Natural Resources Law: Challenges, Key Issues and Perspectives; Blanco, Elena

Reaction to the U.S. withdrawal

CEOs of large, multinational organizations and many country leaders have already voiced their opinions on the U.S. withdrawal from the accord. Barack Obama, Mr. Trump’s predecessor, expressed dismay at the decision saying, “I’m confident that our states, cities, and businesses will step up and do even more to lead the way, and help protect for future generations the one planet we’ve got.”

Jeff Immelt, General Electric’s CEO, shared his disappointment echoing what Obama suggested when he said, “Industry must now lead and not depend on government.”

Industry advisors are also pointing to the need for public/private partnership. Mark McDivitt, managing director and head of ESG Solutions, State Street Global Exchange, suggests that, “The Paris Agreement, unlike Copenhagen, Kyoto and other COP gatherings, drove home the point that the private sector, partnered with individual country INDCs, will be the impetus needed to start to limit overall global warming to less than 2 degrees Celcius.”

Elon Musk, CEO of Tesla Motors, announced he will remove himself from participation in the White House Advisory Council under Trump, tweeting, “Am departing presidential councils. Climate change is real. Leaving Paris is not good for America or the world.” Walt Disney CEO Bob Iger also expressed his dissatisfaction and similarly withdrew from the President’s Council.

Energy major Exxon Mobil, from where Secretary of State Rex Tillerson hails, supported the accord. CEO Darren Woods said, “We need a framework like that [the Paris Climate Agreement] to address the challenge of climate change and the risk of climate change.”

The list of executives expressing discontent in Trump’s decision includes other distinguished leaders such as Marc Benioff, Salesforce CEO; Lloyd Blankfein, Goldman Sachs CEO; Tim Cook, Apple CEO; Sundar Pichai, Google CEO; Brad Smith, Microsoft president; and Mark Zuckerberg, Facebook CEO, to name a few.

Zuckerberg posted, “Withdrawing from the Paris climate agreement is bad for the environment, bad for the economy, and it puts our children’s future at risk.” His post continued to talk about Facebook’s commitment that every new data center it builds will be powered by 100% renewable energy and that stopping climate change is something we can only do as a global community.

Climate science takes a second punch

Last Thursday’s announcement is part two of Trump’s one-two-punch on climate science, which began with his earlier decision to revoke the Clean Power Plan that sought to reduce GHG emissions from coal-fired power plants. These moves put a new and different pressure on business leaders. They remove the political and environmental burdens associated with GHG-regulation compliance and put the decision-making power in the private sector regarding how to stop the advancement of global warming in the absence of the Conference of Parties mandates.

Although the prospect of this may seem daunting, it could bring new opportunities and outcomes. The challenge will be for today’s leaders to find the time to make this a priority and find the right governance structure and partners with which to work to make it a reality.

The benefits of a green business outlook

A recent GHG report issued by Thomson Reuters, Global 100 Greenhouse Gas Performance: New Pathways for Growth and Leadership, shows there is a strong correlation between sustainable business practices and financial performance. It underscores the fact that companies, even in carbon-intensive sectors, have the ability to develop and implement successful business strategies while also having a commitment to environmental health and protection.

Tim Nixon, managing editor of Thomson Reuters Sustainability, said, “This is not a choice between economic growth and being green. In fact, having a sustainability strategy integrated into your business model is a growth and innovation driver.  We see this in many leading companies, including carbon intensive businesses like Enel, NRG and Xcel Energy. Those firms, cities, and nations which don’t capture this opportunity are building unnecessary economic risk into the future.”

Top 30 of Global 100 Emitters of GHG

Using a proprietary methodology, Thomson Reuters analysts in conjunction with our KPMG partners identified organizations with the highest GHG emissions and showcased a year-over-year comparison in the ranking.

Table outlines the Top 30 of Global 100 emitters of GHG, including source, company name, ghg emissions in tons, ghg index, revenues and decoupling index
Source: Global 100 Greenhouse Gas Performance report from Thomson Reuters and KPMG

 

Dennis Whalen, leader of the Board Leadership Center at KPMG, which collaborated with Thomson Reuters on the report, said, “Early movers that invest now in staying competitive in a low-carbon future could gain significant advantages as they integrate lower cost, lower risk and more resilient business models.”

Frank Melum, manager of Global Carbon Research, Thomson Reuters, supported this saying, “Before and after the U.S.-withdrawal announcement, stakeholders were reiterating their support for the Paris Agreement. This includes other large emitters like China, Russia and the EU. But also large companies in the fossil fuel industry. The strong support of the agreement highlights the investment opportunity it provides.”

The sustainable path forward for business leaders

The exact outcome of the U.S. withdrawal from COP21 is still to be determined. Just as there is now a leadership gap in the global environmental arena with the U.S. leaving the accord, there will be leadership gaps – and opportunities – in the private sector as well.

From a business leader’s perspective, it is in times of such uncertainty that the need for trusted news, data, tools and solutions is even more apparent. Whether it be to find new partners and investment opportunities or to better understand the latest regulatory mandates and supply chains (both to “Know Your Customer” and “Know Your Supplier”), trusted news and information is a must. If you’re looking for trust, Thomson Reuters has it. We are here to understand your concerns, answer your questions and contribute to building a pathway to success.


Thomson Reuters on Climate Change

At Thomson Reuters, we know that our business does not operate in a vacuum. Our ability to have a positive impact on the world starts with the way we conduct our own business. See how at tr.com/climate-change.

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