Accused of failures, people often respond with justifications or appeasements. So do companies. For industries like ours under pressure over climate issues increasing faster than adaptation, the natural starting point is to emphasize or even distort past successes. As a result, many in our industry may have become guilty of greenwashing. It is not necessarily evidence of disingenuity or mere virtue signaling; it does, however, indicate we can no longer ignore the pressures on us.
Years of growing pressure initially met muted responses—probably a better strategy than making idle promises. But the early pressures did not fade. They recruited pressures from other corners, and concern for climate issues has only deepened and broadened in the investment community. Climate Action 100, for example, has grown continuously since organized by investors in 2017 to put pressure on top emitters. Official membership now sums more than $50 trillion under management, and corporate sustainability reports have become the rage. Now, rating agencies, accounting standards, and securities regulators are all working to tighten the quantitative obligations of companies around climate change.
As firmer pressure teed up, voluntary corporate and national commitments to net zero emissions—more aggressive than the Paris Accord promises—have grown exponentially. Though public understanding of the underlying causes constitutes a mere majority in the US and lags understanding in most of the world, still a supermajority of Americans supports risk-mitigation action on, for example, regulating carbon dioxide as a pollutant. All these dynamics portend continued pressure on companies across the board.
Major oil companies have announced changes of direction even while keeping oil, to various degrees, under the umbrella. Automakers have uniformly turned their faces toward electric drivetrains. Cement makers, chemicals plants, natural-gas utilities, and any number of other industries are being held to account as well. And the same public opinion that successfully addresses corporate behavior will likely turn to the behavior of the public. The most diffuse, most personal, and most intransigent segment of the problem is also the most important.
Virtue signaling alone is not a viable strategy. However, virtue signaling best leads to “virtuous” behavior. A company motivated only by appearances will face forces to keep up appearances. Even if we do not accept the virtue in our hearts, the rest of the world will continue to put pressure on us—even as it enjoys our currently growing profits—to operate more cleanly and to keep the promises we’ve made concerning our corner of the emissions puzzle.
Early in my career as a petroleum engineer, what had previously been called merely “occupational safety” became the buzzwords “health, safety, and environment.” Some dismissed HSE initiatives as mere appeasement or virtue signaling, but those initiatives shortly became and remain today standard operating practice. The virtues have been largely endogenized to operating practices, and the world is a better place for it. Environment, social, and governance issues seem to be following the same trajectory.
