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Why IT companies lead on proactive climate action

Lily Hsueh

In the months leading up to the 2015 United Nations climate change conference in Paris starting November 30, global businesses have pledged to do their part for proactive climate action. To “capture and catalyze” these commitments, the UN Framework Convention on Climate Change, in conjunction with the government of Peru, launched the Non-State Actor Zone for Climate Change (NAZCA). NAZCA is an online portal that showcases commitment to action by companies, investors, cities and subnational regions to address climate change. To date, more than 2,000 companies—from Baosteel Group Corporation to Exxon Mobil Corporation to Taiwan Semiconductor Manufacturing to Wal-Mart Stores, Inc.—have made voluntary commitments to reduce emissions, increase energy use efficiencies and invest in renewable energy sources.

IT sector stands out 

Proactive action by businesses to combat global climate change is not new. Over the past decade, businesses have increasingly engaged in voluntary climate action to share best practices, network, promote market mechanisms, and set greenhouse gas emission reduction targets. Despite this, not all businesses are eager participants. My recent paper on the role of the Global 500 companies in transnational climate governance shows that, after controlling for political economic and institutional factors at the country level, global businesses operating in the information technology (IT) sector are twice as likely as other firms to engage in proactive climate action. Next to the consumer staples sector, the IT sector has the highest share of global companies engaging in proactive climate action compared to the energy, health care, industrials, materials and utilities sectors.

Among the notable IT companies worldwide that have taken proactive climate action, including public disclosures of their carbon emissions, are Apple Inc., Google Inc., Hitachi, Ltd., LG Innotek, Microsoft Corp., Ericsson and Telefonica.

There are several reasons why IT companies are in a better position than other corporations to play a proactive role in climate change mitigation. First, IT companies, as a sector, tend to be wealthier, not only in terms of asset holdings but also profitability. They also employ a larger number of workers than other companies. Large and well-endowed corporations are better able to afford the costly investments necessary for deploying renewable energy and for undertaking carbon emissions management. According to my findings, wealthy corporations that employ a large number of workers have two to four time higher odds of proactive climate action than companies with smaller asset holdings and employee base.

Complementary capabilities

Second, my research also shows that, more often than not, when a company demonstrates a commitment to sustainability through complementary capabilities and competencies, namely investments in environmental R&D and/or certification with the ISO 14001 environmental management standard, the odds are higher that the company also engages in voluntary climate action and carbon disclosure. For example, a larger share of companies in the IT sector (75 percent) are certified with the ISO 14001 environmental management standard than Global 500 companies excluding IT (54 percent). A similar pattern, albeit less pronounced, is also true of investments in environmental R&D by IT companies compared to other global companies (56 percent versus 48 percent).

Wealth endowment and complementary capabilities aside, IT companies are more likely than other Global 500 companies to have an in-house managerial- or executive-level sustainability officer. Close to half of all IT companies have formally created a position of a vice president of sustainability or a chief sustainability officer compared to about 40 percent of other global businesses. These in-house champions of sustainability policies and initiatives play a critical role in helping to align corporate vision and allocate the necessary resources toward sustainability efforts.

Among the world’s largest companies by revenue, Apple Inc. (rank 15th)is a leader in proactive climate action: Apple has pledged to “maintain 100% renewable energy in datacenters… [and] maintain carbon neutrality of purchased electricity for U.S. corporate facilities achieved in 2014 through renewable energy purchases and onsite generation and procurement.” In 2014, Apple hired Lisa Jackson, a former administrator of the U.S. Environmental Protection Agency as its vice president of environmental, policy, and social initiatives, reporting directly to CEO Tim Cook. Along with Jacky Haynes, Apple’s senior director of social and environmental responsibility who specializes in supplier responsibility, Jackson has brokered a relationship with the Beijing-based Institute of Public & Environmental Affairs to train Apple facilities workers as part of Apple’s new Environmental, Health, and Safety Academy and to proactively publish emissions data of Apple’s supplier facilities in China. By committing to voluntary climate action, Apple and other corporations signal to consumers that they are socially responsible companies, not only to preempt public scrutiny but to gain an advantage in the “market for virtues.”

Apple and Microsoft Corp. are the only two private sector entities that earned the U.S. Environmental Protection Agency (EPA)’s Green Power Partner of the Year award in 2015, which recognizes leadership in green power use and overall strategy and impact on the green power market.

Other IT companies, such as Autodesk, BT, Infosys, Salesforce and SAP have recently joined forces with Aviva, IKEA, Starbucks, Walmart, Marks and Spencer, Johnson & Johnson, among others, as part of RE100, a collaborative initiative of businesses, to set long-term target on powering their operations entirely with renewable energy.

Living up to promises

The fact that so many companies are recognizing the dangers of climate change and setting ambitious climate action goals is laudable. The biggest challenge will be seeing that they live up to their promises, especially given the voluntary nature of initiatives such as NAZCA. To thwart greenwashing, national governments and global governance organizations have an important role to play to keep the IT sector and other businesses accountable. The first step that NAZCA has taken is to invite “partnerships with others who would…make assessments of this type.” A significant next step would be to publish guidelines and best practices for third-party monitoring and verification in order to strengthen the link between pledges for proactive action and ultimate follow-through by corporations. IT companies, as leaders in proactive climate action, should be at the forefront of working to establish best practices for adherence to voluntary commitments for mitigating global climate change.

Author

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Lily Hsueh

Lily Hsueh is an assistant professor at the School of Public Affairs at Arizona State University and a Senior Sustainability Scientist at the ASU Julie Ann Wrigley Global Institute of Sustainability. Contact her at Lily.Hsueh@asu.edu.