Sustainable future: A vision for a better world. During the four years of the Trump Administration, it seemed like that vision was never to be realized.
With bold promises to restore the coal industry to its dominant position in the energy sector, the withdrawal from the Paris Climate Agreement, and the dismantling of more than 100 policies designed to protect the environment and safeguard the health of the American public, President Trump created a legacy that will take years to undo.
However, there is hope. In fact, I would argue there is a lot of hope that the United States emerges as the global leader in sustainability through a mix of public policy, business engagement in policymaking, and investor pressure.
Why Public Policy Is Important
Effective public policy is important for two reasons if we are to achieve a more sustainable future.
First, it is critical in setting up the legal framework under which companies operate.
Every country has laws in place that both prevents bad actions (pollution) and incentivizes good actions (investments in clean energy, for example). Second, public policy represents the will of the people. Thankfully, the American public now is taking seriously issues like climate change, social equality, and the importance of protecting the environment – and our policies are beginning to reflect that.
Biden Administration’s Sustainable Agenda
In the early months of the Biden Administration much of the focus has been on using the influence of the U.S. government to address climate change.
For example, President Biden has aggressively addressed the worst of the Trump policies – such as:
- Returning the U.S. to the Paris Climate Agreement
- Elevating climate in defense and national security policies
- Creating a National Climate Task force that will represent 21 agencies across the U.S. government to develop a system-wide “approach to combatting the climate crisis.”
While these initiatives announced by President Biden have attracted a great deal of attention, efforts with the most potential to permanently transform companies into being sustainable are coming from obscure government bodies such as the Securities and Exchange Commission, the Financial Stability Oversight Council (FSOC), the Commodity Futures Trading Commission (CTFC), and the Federal Reserve (the central bank for the United States).
These entities rarely make front page news in the United States, but their work is critically important – they oversee how businesses operate from a financial standpoint. Because the FSOC, CTFC, and the Federal Reserve are beginning to push hard for companies to understand how climate change is impacting their business and their ability to generate a profit, companies have to listen. Companies are facing the prospect of either taking aggressive action on their own or dealing with government regulation that will force them to address climate change.
Business Engagement in Policymaking
Similar to every other region of the world, businesses in the United States are slowly changing their methods of operations to become more sustainable and to lessen their impact on the climate. As is the case with any transition, there are both leaders and laggards.
Even a few years ago, the Business Roundtable – which represents the CEOs of the biggest companies in America – argued strongly against government regulation on any number of issues related to sustainability. Doing so, the Business Roundtable asserted, would limit the ability of companies to be profitable. Today, it has changed its tune by telling its CEOs to not only focus on making a profit, but also to create value for the so-called stakeholders in society – such as employees, customer, and residents in communities where companies operate.
Also consider the American Petroleum Institute (API) – which represents over 600 energy companies in the United States. For decades API aggressively worked to stop important initiatives to address carbon dioxide emissions. The organization even refused to acknowledge climate change. Now, it is considering support for setting a price on carbon emissions to help achieve the Paris Climate Agreement.
Investors Making Their Voice Heard
One of the most consistent – and vocal – voices in support of policies to create greater transparency by companies when it comes to their sustainability efforts has been investors, such as investment banks, asset managers, and pension funds. Often during the Trump Administration the investor community was the most influential voice in the United States on sustainability issues, and that is continuing under the Biden Administration.
The head of US SIF: The Forum for Sustainable and Responsible Investment recently published an article detailing clear steps the Securities and Exchange Commission must take to hold companies more accountable to achieve measurable impact their sustainability efforts. Investors of all kinds are gearing up for proxy season where many will use the shares they own in companies to push for sustainability to be placed high on the corporate agenda.
More Work to be Done
While these developments are inspiring, we must keep in mind a lot more work must be done – and questions remain.
For example, will these policies actually lead to meaningful reductions in greenhouse gas emissions year after year? Will companies finally begin to treat nature as an asset and something to be valued rather than a provider of free resources needed to make their goods and services? Will the American public continue to vote for elected officials who support sustainable policies?