How Should Boards Respond to Climate Change Pressure?

Nicholas J Price
5 min read

Increasing pressure from investors and customers around climate change continues to plague boards of directors. In recent years, employees have been joining the ranks of groups that are placing pressure on boards to engage in sustainability efforts. Some employees are making strong statements about it by participating in activism to persuade their employers to make positive environmental and social governance (ESG) changes. Many companies are finding that it's good for business to comply with such requests.

The trend is greater in the tech industries, where skilled workers are already in high demand and the vast majority of activist employees are on the younger end of the employment spectrum.

Companies Making Greater Commitment Toward Sustainability

Many of the major companies have taken steps to demonstrate their commitment toward green technology and sustainability, either on their own or at the urging of investors, customers and employees.

For example, the retail giant Walmart is building a large new headquarters complex in Bentonville, Arkansas. The new offices will boast large windows with natural lighting. Parking decks will feature solar panels with ample parking for the 20 or more buildings that are projected to be built. The buildings will be framed in timber, which uses fewer fossil fuels. Walmart executives had the new complex designed to be a climate-friendly building that will be attractive to the next generation of career-seekers.

Amazon employees joined forces to form a group called Amazon Employees for Climate Justice. In 2019, the group wrote an open letter that was signed by several thousand employees to company executives, asking them to use renewable sources of electricity for 100% of their operations. The group also noted its disappointment over the fact that Amazon had just ordered 20,000 delivery vans with diesel engines.

Amazon officials responded to the charge several months later, stating that the company had made a commitment to 100% renewables over the next 10 years. The company also placed the largest order for electric delivery vehicles in its history. Amazon rejected the allegation that they'd made these decisions in response to the group's petition. The company claims that these changes were part of long-time strategic planning, as opposed to a direct response to the petition.

Salesforce is a company with a reputation for speaking out on social issues. Despite its reputation in support of social issues, the customer relationship management company was criticized in 2018 for doing business with US immigration authorities after the media reported that they'd separated migrant families at the southern border. The contract with the government remains in place for the time being. In response to public criticism, in 2019, Salesforce hired Paula Goldman, an ethicist, to make decisions on social and political issues. Goldman's job is to ensure that the company is developing products with an ethical mindset.

Guns are another issue that a Salesforce employee brought to the attention of company executives. Goldman responded by taking action to establish a corporate policy that disallows clients from using Salesforce's products to sell military-style guns to private citizens.

The leading gas and oil companies are always under pressure from climate activists and investors to reduce emissions and global warming. The 2015 Paris climate goal limits global warming to below 2'?C from pre-industrial levels. BP's CEO, Bernard Looney, wants to revamp the entire company. In 2019, the company produced around 2.64 million barrels of oil equivalent per day. Looney stated that the company would cut emissions to net-zero, down from about 415 million tons of carbon dioxide equivalent per year. Scope 3 of his plan would also cut emissions in half by all other products it sells. Skeptics doubt that BP will follow through with its goals because the company sustained huge losses in the early 2000s after it had set major goals. Looney hasn't disclosed exactly how the company will reach its goals but stated that new details could be coming in the fall of 2020.

BP is projected to produce fewer barrels of oil by the year 2050. Some activists are encouraged by the announcement, but others feel that 2050 will be too late to do any real good. In 2019, BP invested about $500 million in low-carbon technologies within its overall budget of $15.2 billion. BP made investments in electric vehicle battery charging systems, wind power and solar power.

In other industries, companies purchased renewable energy in record numbers. According to the Renewable Energy Buyers Alliance, they sold 9.3 gigawatts of renewable energy, which is about half the average demand on the New York State power grid. The tech industry takes the lead in buying electricity from wind and solar farms. Amazon, Facebook, Microsoft and Google were the top seven highest buyers of renewable energy. In recent months, Microsoft and Google made climate pledges in answer to employee activism.

Recent Uptick in Employee Activism

It's becoming more common for the workplace to become a forum on issues as employees are more likely to be vocal about social and political issues than in the past. Today's employees aren't afraid to call their employers out on climate change issues and to hold them accountable for their actions ' and inaction. About four of every five companies expect employee activism to increase within their company, and climate change remains a top issue.

The HR departments of large companies are recognizing that younger employees are eager to work for companies that are willing to cut greenhouse gas emissions and to buy green power. Promoting these issues is a viable approach to recruiting younger workers.

Boards' Response to Climate Pressure

Today's board directors need to be aware that it's not only investors and customers that have strong viewpoints on ESG issues. Today's employees are pursuing work with companies that share their values. Amazon, along with many other companies, makes it a violation of their employment for workers to speak out against the company. By contrast, Hewlett-Packard allows, if not encourages, their employees to speak out. In looking at the future of their workforces, boards will need to reevaluate their policies on social and political issues and whether they will allow employees to speak out.