CEOs’ outcry? It’s good business
Corporate criticism of Trump’s move boils down to bottom lines.
Leaders of industries haven’t historically been leaders on climate change.
Then why would Tim Cook, Elon Musk, Bob Iger and Jeff Immelt — a veritable who’s who of Fortune magazine cover models — so vocally criticize President Trump’s move to withdraw the U.S. from the Paris climate accord?
Leave politics and platitudes about saving the planet aside, experts say, because the companies’ positions on the Paris accord boil down to their business interests.
“It’s all about who their stakeholders are,” said Shon Hiatt, a professor of business administration at USC. “For multinational enterprises, they need to represent stakeholders, not just in the U.S., but all over the world.”
Mirroring their opposition earlier this year to the White House’s travel ban, the nation’s leading corporations are saying the president’s stance is bad for their bottom lines. That’s especially the case now that economic momentum for renewable energy appears to be irreversible.
When a company such as Facebook criticizes abandoning the Paris accord and pledges to power its data centers entirely with renewable energy, it does so with the knowledge that it makes good sense both from a public relations standpoint (5 out of 6 American voters say the U.S. should stay in the Paris agreement, according to a Yale University survey) and from a business perspective.
“Most corporate strategies that integrate climate change are based on market forces,” said Don Reed, a managing director in PwC’s U.S. Sustainable Business Solutions practice.
Among the biggest market forces undergirding the high-profile opposition to Trump’s climate policies is the recent embrace of clean energy.
Though renewables made up just 10% of total U.S. energy consumption in 2016, they represent nearly two-thirds of the growth in the utility sector last year.
That’s because power produced by wind and solar is increasingly cheaper than virtually all other sources of electricity generation, including fossil fuels such as natural gas and coal, which at its cheapest and dirtiest costs about 6 cents a kilowatt-hour.
By comparison, wind power now costs 3.2 to 6.2 cents a kilowatt-hour; solar 4.6 to 6.1 cents and natural gas 5 to 8 cents, said Mark Cooper, senior research fellow for economic analysis at the Vermont Law School’s Institute for Energy and the Environment.
By Cooper’s count, 22 states with 55% of the nation’s gross domestic product and 40% of the carbon emissions can comply with the Paris agreement. And 61 mayors have voiced their commitment to clean energy.
That could “neutralize” the effects of the Trump administration’s decision to withdraw from the agreement, Cooper said.
“The revolution is here,” he said. “It’s happening. The dominant interests that are being replaced understand what’s happening and are just trying to resist.”
Executives aren’t exactly straying from the mainstream when they say global warming is a problem. About 70% of Americans believe climate change is real, according to the Yale Program on Climate Change Communication.
When Musk, the head of Tesla, counters Trump by quitting two of his advisory councils, he knows he has the vast support of a customer base that feels strongly enough about pollution to splurge on luxury electric vehicles.
That’s not to say Musk’s public stance is devoid of risk — his ventures require government support in terms of subsidies and regulations. But for the most part, Musk stands to gain by aligning with science and the values of his customers.
In the past, those disagreements may have been hidden from public view given the inherent risk chief executives face choosing sides.
But the stakes of today’s debates, be they over immigration or climate change, are making it harder for executives to stay silent in the face of public outrage.
“What makes this particular period in American history unique is that there are so many divisive issues forcing these individuals to speak out,” said Arvind Bhambri, a business professor at USC. “This phenomenon of disagreeing with a president has always existed. What’s different is taking a public position while being the CEO of a large and visible company.”
Given the business community’s influence on society, Bhambri said executives and their companies should not be afraid to take a stand.
Already, corporations have weighed in to support less restrictive immigration policies and LGBTQ rights, and pushed for boycotts, such as when North Carolina tried to enact a discriminatory bathroom bill — though none of those stances were on par with defying a sitting president.
To find similar instances, one has to go back as far as the Industrial Revolution, when tycoons such as railroad magnate William H. Vanderbilt had the power and sway to be outspoken against presidential policy, said Michael McGerr, a history professor at Indiana University.
The fact that corporate executives have spoken out so forcefully about Trump’s decision to withdraw the U.S. from the Paris climate accord reflects these leaders’ future-forward thinking, he said.
Responding to climate change is “both economically smart and socially wise,” McGerr said.
The current feeling on climate change is similar to corporate executives’ shift in views on same-sex marriages, he said: “They’re both a genuinely felt reading of what’s good for the company, and they become an openly held set of values.”