In a critical year for the policy debate over climate change, consumers may be on the verge of exerting crucial influence. Most of them believe that companies should make commitments to reduce their carbon footprints and become net-zero emitters, and many people say those commitments will influence where they buy goods and services, according to a new survey by the OIiver Wyman Forum.
More than four in five people surveyed across seven major industrial countries say they regard it as important or very important for corporations to commit to reducing their carbon emissions and becoming net zero. Italy leads the way with fully 94 percent of respondents expressing that view while those in China, France, Germany, Spain, and the United Kingdom trail slightly behind. The United States lags at 74 percent, but even there only eight percent of Americans say they regard corporate carbon commitments as unimportant.
Corporations find themselves increasingly on the front lines of the climate debate because their decisions over where to invest, what to produce, and how to bring goods and services to market have such a huge impact on the planet. Environmental and shareholder activists have been stepping up pressure for change, and policymakers are responding. In recent months authorities in New Zealand and the United Kingdom have announced plans to require companies to meet the reporting standards set out by the Financial Stability Board’s Task Force on Climate-related Financial Disclosures, while the Securities and Exchange Commission is seeking market input on whether to impose similar requirements on US companies.
To date, progress on actual emissions is lagging. In Europe, where the climate movement has seen some of the greatest activism, major companies’ actions and commitments to reduce carbon emissions fall far short of what’s required to limit global warming to 1.5 degrees Celsius, the goal of the Paris climate agreement.
But political pressure is increasing. President Joe Biden, who brought the US back into the Paris accord immediately after taking office in January, convened some three dozen world leaders to a virtual White House summit in April to galvanize efforts to reduce emissions. And Prime Minister Boris Johnson aims to get global leaders to commit to achieving net-zero emissions by 2050 when the UK leader hosts the United Nation’s COP 26 climate summit in Glasgow in November.
While our survey suggests a high degree of popular pressure on companies, it also contains a silver lining: Many consumers are more willing to do business with companies that pledge to reduce their carbon footprints. A majority of respondents in all seven countries say such corporate commitments will influence their willingness to buy from those firms. That’s almost a unanimous view among Chinese respondents while just a bare majority of Germans and Americans express a similar opinion.
The power of the purse to influence corporate behavior seems likely to increase because younger consumers in most countries feel more strongly than older generations that companies should commit to reducing carbon emissions, and say that such commitments will influence their shopping.
Our survey suggests that climate is both an opportunity and a risk for companies. The opportunity is to use climate commitments to gain wallet share of the largest demographic in most societies. In the US, millennials (aged between 25 and 40) a few years ago overtook by numbers the so-called baby-boom generation born in the years after World War II. They and Generation Z, born after 1996, now make up more than a third of the US workforce and a growing share of consumer spending. Companies that decline to make climate commitments risk losing those consumers.
What are the best actions or measures for holding companies accountable to their climate commitments? Nearly one in six respondents in our survey say that setting near-term emissions targets – five years, for example – that contribute toward the long-term goal of net-zero would be a good way to provide accountability. Somewhat smaller percentages cite having consistent annual reporting standards on emissions and publishing actual performance relative to stated commitments as ways of enforcing accountability.
Many consumers apparently think companies need sticks as well as carrots. In the six western countries surveyed, the most popular lever for holding companies to account on climate is fines for not meeting emissions targets, a view shared by nearly one in five people surveyed. Chinese respondents ranked fines fourth.