A version of this post appeared on Forbes.com.
2015 was a roller-coaster year for business and sustainability around the globe, with Google, Unilever, Tesla and Shell making headlines. Momentum built from the pope's call for swift action on climate change, through the Sustainable Development Goals and ended with the groundbreaking Paris Agreement on climate. Here are our top five stories from 2015 illustrating the wild ride.
1. VW topped the List of Irresponsible Corporate Actors
Hot on the heels of the Petrobas corruption scandal in Latin America, the news that VW had installed software to allow some of its vehicles to cheat on U.S. emissions tests was a surprise, though not without precedent in the automotive sector. While the 2009 Toyota accelerator crisis and the 2014 GM ignition switch recall came before, the VW case was a new low for the sector. Coming from a company that aimed to position itself as a green leader, this dented the public’s confidence in companies’ environmental claims.
The disparity was uncovered not by government or the private sector, but through research from West Virginia University and the International Council on Clean Energy. VW’s share price dropped from $250 in March 2015 to a low of $111 in October. Like Toyota and GM after their crises, VW appears to be making a slow recovery, but the brand may not fully overcome the tarnish for decades.
2. Hundreds of Companies Acted Together Responsibly
This was the year companies made public commitments on sustainability.
Over 150 U.S. firms — companies as diverse as Target, Kellogg’s, Goldman Sachs, Cargill, PG&E and Portland General Electric — signed the American Business Act on Climate Pledge, voicing their support for a strong Paris outcome and their own commitment to climate action.
- One hundred fourteen companies signed a commitment to set science based targets (targets for emissions cuts that are on a trajectory that would avoid more than 2 degrees C (3.6 degrees F) of temperature increase over pre-industrial levels. By year’s end, 10 had already set those targets, including NRG energy, Proctor & Gamble, Sony and Enel.
- Seventy-four companies committed to set an internal price on carbon. In June, six oil and gas companies — BP, Shell, Eni, Total, Statoil and BG Group — published a letter sent to the UN, calling for carbon pricing.
- And it’s not just carbon and climate. Hundreds of members of the Consumer Goods Forum committed to halve food waste within their operations and at the consumer level by 2025. This includes companies like Unilever, Nestle and AB InBev.
These commitments across multiple sectors set the framework for companies to work together for solutions across value chains.
3. U.S. Trade Associations Were Increasingly Isolated on Climate
2015 saw the remaining trade associations that are obstructing action on climate change become increasingly isolated.
Leaving an organization is not the only way to achieve change, but it indicates deep disagreement, as when Apple and Exelon left the U.S. Chamber of Commerce over its climate stance as long ago as 2009. This year, BP left the American Legislative Exchange Council over climate and Volvo and SKF left the National Mining Association. Volvo characterized the association’s climate lobbying efforts as “quite crazy.”
Unlike some trade groups outside the United States, the U.S. Chamber of Commerce’s Stephen Eule, Vice President for Climate and Technology, characterized the Paris Agreement as “lots of promises and lots of issues still left unresolved.”
By contrast, the Federation of Indian Chambers of Commerce and Industry said in advance of the Paris Agreement: “Businesses across the country are also realizing that there are clear economic wins if they take action on climate.” Carolyn Fairbairn, Director-General of the Confederation of British Industry, said, “The Paris deal heralds an exciting opportunity for business. We now have a climate deal agreed by the world’s leaders that puts us on a sustainable low-carbon path and which can provide the framework for business to invest with confidence.”
4. Water Was Cited as the Number 1 Risk Facing CEOs
In the World Economic Forum’s Global Risks 2015, environmental risks featured more prominently than economic risks. Among them, water crises were cited as the single highest impact risk facing CEOs.
In California and Brazil, for example, water shortages are having significant impacts on business. Campbell Soup CFO Anthony DiSilvestro had firsthand experience of the impact of California’s record setting drought contributing to a 28 percent decline in the profits of one of the company’s divisions in the first quarter of 2015. One of South Africa’s biggest sugar producers, Illovo Sugar, closed a key sugar mill for the year-long 2015 milling season, blaming significantly below-average rainfall. Coca-Cola was forced to forego a new $81 million bottling plant in southern India due to public concerns over sufficiency of groundwater supplies.
5. Innovative Companies Grasp Opportunities
To finish on a positive note, in 2015 we continued to see innovative companies leverage opportunities and set themselves up for success in a resource constrained environment. For example:
Goldman Sachs and Bank of America both made commitments to dramatically expand their investments – a $150 billion expansion for Goldman Sachs; $125 billion for Bank of America — by 2025. Tesla announced a potentially transformative move into the residential battery market to accelerate the use of renewable energy. Batteries are being manufactured at Tesla’s new net-zero-emissions Gigafactory in Nevada and are already being sold through utility companies.
There will be no shortage of financing for innovative ideas. The Global Apollo Program launched in 2015 brought developed nations together to provide $150 billion in funding over the coming decade to make carbon-free electricity less costly than electricity from coal by 2025. Mission Innovation launched just before COP21 with private investors in the Breakthrough Energy Coalition, combining their funding with a commitment from 20 counties to double their respective funding for clean energy research and development.
What to Watch in 2016
In 2016 governments need to put into practice what they agreed in the Paris Agreement. Watch to see how companies carry through the commitments they made on the global stage to support implementation at a national level.
As companies dig in to issues of land, water and energy, interdependencies between those issues will emerge, prompting companies to consider the trade-offs within sectors, across sectors and across value chains.