Net Zero and the Need for New Leadership in Corporate Climate Advocacy

Addressing decades of climate policy obstruction by the fossil fuel sector is emerging as one of the most pressing climate issues.

Understanding the corporate climate policy engagement landscape is important for:

• Corporations that are repositioning their business and capital investment in response to the climate crisis, which require science-based policy to deliver this transition.

• Investors for whom corporate climate policy engagement as an indicator of management readiness for the energy transition. Initiatives like the Climate Action 100+ process are demanding governance reforms to ensure companies and their industry associations are aligned with science-based guidance on delivering the Paris Agreement's goals.

• Voters, of which a significant majority (71%) globally believe companies should support and push governments to act decisively on climate change, as shown in major analysis by polling company GlobeScan in January 2023.

Climate policy advocacy is becoming a mainstream sustainability and governance issue and is being codified by initiatives such as the The Global Standard on Responsible Climate Lobbying. However, given its relatively nascent stage, a true set of corporate leaders in this space is yet to properly emerge.

Using InfluenceMap's world-leading database for tracking and assessing corporate climate policy engagement, and extensive interactions with corporations and investors on the issue, this article proposes five steps that companies can take to shift to true leadership in climate policy advocacy.

InfluenceMap's upcoming 2023 A-list report, due for release early Q2 2023, will identify the most active and progressive companies in their climate policy engagement globally. In advance of this, this briefing identifies five key areas of best practice captured across InfluenceMap's LobbyMap database.

In 2022, UN Secretary-General António Guterres called for "zero tolerance for net-zero greenwashing." His warning anticipated a growing tide of concern for weak corporate climate commitments from shareholders, civil society, regulators, and the public.

Many companies and financial institutions are now arriving at a crossroads. Some are searching for pretexts to step back from their climate commitments, a phenomenon dubbed “green-hushing.” Others are internalizing and acting on what it will mean to achieve their net-zero targets in the real world.

The Intergovernmental Panel of Climate Change (IPCC), the UN body responsible for representing the global scientific consensus on climate change, has made it clear for years that what is needed to achieve net-zero by 2050 is far-reaching, ambitious policy intervention on behalf of the world's governments. By now, companies should understand that their climate commitments will remain immaterial without such policy frameworks in place.

The IPCC's April 2022 Mitigation of Climate Change report identified “opposition from status quo interests” and “incumbent” fossil fuel interests exerting political influence as a key barrier to progress on global climate goals. The issue of corporate influence has also been flagged by international organizations such as the OECD in its 2021 report “Lobbying in the 21st Century”, and by political leaders including President Barack Obama, former Executive Secretary of the UNFCCC Christiana Figueres, and the current UN Secretary General Antonio Guterres.

Corporate interests holding back climate progress represent only a fraction of the overall economy. While many companies have made high-level commitments supporting climate policy, most of the corporate sector has been slow to exert its political and economic clout in favor of robust government intervention on climate. Well-meaning sign-on letters are rarely accompanied by strategic engagement on detailed policy and regulation.

InfluenceMap’s policy trackers inAustralia, Europe, Japan, South Korea, and the US all show that the majority of engagement on key climate policies is still undertaken by a minority of vested, oppositional corporate interests from the fossil fuel value chain. Even worse, some of these companies seem to use their net-zero commitment as a PR cover while they lobby to block or delay the necessary policy pathways.

To tip the scales and ensure viable pathsways toward net-zero, companies representing a range of sectors will need to step forward with positive, active advocacy programs in support of IPCC-aligned climate policy.

InfluenceMap recommends the following five steps toward true corporate climate policy leadership. These steps are drawn from and reinforce various standards and recommendations that have been formalized on this issue, such as the Global Standard on Responsible Climate Lobbying instigated by a wide coalition of investors in 2022.

Step One: Ensure climate policy engagement plans have C-suite buy-in

All companies know how to lobby when the issue at hand is business critical. However, companies generally only prioritize a small number of regulatory areas. To effectively advocate on climate policy, climate needs to be one of these.

Climate change is often the responsibility of corporate sustainability teams. However, it is the regulatory and government affairs departments that have expertise with policy and regulations. Strategic corporate engagement on climate change policy requires these teams to be in lockstep. It also means allocating the appropriate resources to ensure climate policy is a top company priority. None of this will happen without C-suite direction, sign off, and, ideally, active participation.

Without such coordination, corporate climate policy engagement is typically limited to high-level sign-on letters, a tactic that does not stand in the face of highly strategic, well-resourced, and persistent campaigns from sectors with a vested interest in blocking climate progress.

Step Two: Use Science-based Benchmarks

Net-zero is facing a credibility crisis. While the concept has seen a tidal wave of corporate support, meaningful follow through has remained both challenging and rare. Companies can, however, make sincere efforts to deliver a net-zero future by ensuring their advocacy is underpinned by science-based benchmarks.

IPCC research provides a strong basis to understand the necessary technology shifts and potential policy pathways to limiting warming in line with Paris. The IEA’s Net Zero by 2050 Roadmap likewise provides detailed lists of policy steps needed to meet this goal. These resources can be used by companies to plan science-based approaches to advocacy on key climate policy issues.

While decarbonization is complex, the IPCC and IEA findings present common themes. Policy levers such as electrification, the rapid scale-up of renewable energy, green hydrogen, fossil fuel subsidy removal, and regulations to reduce fossil fuel use are most likely to facilitate the transition.

For example, to limit warming to 1.5C, the use of coal, oil, and gas in 2050 is projected to decline 95%, 60% and 45% respectively. Without carbon capture, these projections for fossil fuel phaseout are even higher. Committing to advocate in line with science-based guidance means supporting policies toward this aim, such as bans on fossil gas use in new residential buildings, methane regulations, and the integration of fossil fuel phasedown into infrastructure policy, such as energy permitting reform.

Critically, the science says that a range of policy measures need to be implemented in tandem to be most effective: one action alone will not deliver emissions reductions at the speed and scale required. In other words, companies don’t get credit for cherry-picking certain solutions over others.

Step Three: Review and Disclose

Companies are now facing growing scrutiny over their climate change policy engagement. Some of this pressure comes from investor processes like Climate Action 100+ (CA100+), a voluntary initiative of 700 investors responsible for over $68 trillion in assets under management, working to ensure the world's largest corporate greenhouse gas emitters take necessary action on climate change. Through CA100+ as well as various other investor initiatives, shareholders have been requesting enhanced disclosures from companies on the topic of climate policy engagement and industry association membership.

In 2022, 26 shareholder resolutions were filed on climate policy engagement. Most of these resolutions ask companies to review and disclose their engagement activities, including their own positions on climate policy, how they currently approach climate advocacy, as well as their links to industry associations that lobby on their behalf.

Given the critical role for government policy, corporate policy engagement is increasingly seen by investors as an important indication of management thinking on the climate crises. Negative or inconsistent approaches to corporate advocacy signal either that a company isn’t ready for the transition or does not yet have the adequate governance mechanisms in place to manage it.

On the contrary, strategic, coordinated, and highly supportive policy engagement is a clear indication of a company at the forefront of addressing the transition in its industry.

Comprehensive reporting by companies can lay the groundwork for meaningful action on climate policy engagement. Such reviews can help companies identify the best opportunities for policy impact, and guard against risks of being linked to misaligned third-party lobbyists.

Step Four: Address the critical issue of powerful trade associations

While many companies don't actively engage on climate, most have links to entities that do. InfluenceMap research shows that many powerful cross-sector industry associations like the US Chamber of Commerce, BusinessEurope, and Japanese Federation of Business (Keidanren) remain actively opposed to Paris-Aligned climate policy.

While companies might be positive in their own advocacy, their industry associations wield more power over policy, touting huge sectors of the economy among their membership. Given the relative power of these organizations, any dues-paying company lending credibility to an obstructive industry group is running a huge deficit on climate policy influence. In other words, even the most positive companies can be “net-obstructive,” with their own advocacy easily outweighed by the activity of the groups acting in their name.

Companies can take any number of steps to address the issue, from engaging within the group to reform its positions to ceasing membership. In response to investor pressure, nearly 60 companies have published enhanced disclosures on the topic. To have meaningful impact, however, these disclosures need to be followed by a robust program to address any misalignment between a company and its industry associations, including steps the company will take to evolve the group’s positions.

Step Five: Deploy the full definition of policy engagement

Corporate climate policy leadership means utilizing the whole range of tactics to support robust and ambitious climate policy – from PR campaigns to drive political support for policy action, to detailed technical input to ensure an ambitious and effective end result.

The UN’s 2013 Guide on Responsible Climate Policy Engagement provides a sound overview of tactics companies might deploy in favor of climate policy. None of these alone are sufficient, but instead must be leveraged as part of consistent campaigns that provide policymakers with ample evidence of business buy-in for ambitious climate policy outcomes. Below are some examples of tactics that might be utilized to help drive climate policy.

Since 2015, InfluenceMap’s leading platform for tracking and analyzing corporate climate policy engagement has captured the best and worst examples of corporate climate policy influence around the world.

Utilizing the core metrics and assessments that underpin this platform, in 2021 InfluenceMap released its A-List of Climate Policy Engagement report, identifying the top leaders in climate policy engagement globally. The results show a small concentration of companies engaging in true corporate climate policy advocacy.

The table below provides recent examples illustrating how each of the '5 steps to corporate climate policy leadership' are being practiced by companies globally. A company meaningfully implementing all 5 steps is more likely to exhibit positive scores on InfluenceMap's platform for assessing corporate climate policy engagement. These core metrics are the basis for InfluenceMap's assessment of whether a company is deemed 'an "A-list' corporation.