The humanity is currently facing one its biggest problem ever. Indeed, the Earth is warming and consequences might be devastating for the future generations. There is a general agreement among scientists that Earth’s climate is being affected by industrial society. Industry affects global climate by releasing greenhouse gases (GHGs). The most significant GHG is carbon dioxide (CO2). While some GHGs occur naturally, others are released in the atmosphere by certain human activities such as the burning of fossil fuels, deforestation activities and some agricultural practices.
These activities affect climate by increasing the so-called ‘greenhouse effect’. GHGs concentrate in the Earth’s atmosphere and trap heat by blocking some of the long-wave energy the Earth normally radiates back to space. The effect is weather and climate changes. The potential consequences include more extreme weather, dislocation of agricultural and commercial activities, expansion of desert regions, a rise in sea levels, and damaged natural habitats and ecosystems. All of these threaten the natural capital that provides the economy’s resource base.
Mankind pours more than 6 billion tons of carbon dioxide each year. If nothing is done, the total is expected to be 20 billion tons by 2050 . Therefore, we must act now. Since the 1980’s the global concern about climate change has been rising and politics have begun to address the issue through international co-operation. Nation states have set ambitious goals through the Kyoto protocol, but international regulation is not an easy thing and the structure that rules it is perhaps not well adapted for the issue of Climate Change.
Even if the regulations are not yet finalised, some companies recognise business reasons to reduce GHG emissions, which go beyond the obvious concern of protecting the natural environment. The Gilette Company is one of those that have taken measures to use energy in an efficient manner. The first international conference on environment and development was the ‘Rio Earth Summit’ in 1992, where the United Nations Framework Convention on climate Change (UNFCCC) was created. Today, 181 governments and the European Union (EU) are parties to the Convention.
They meet regularly at the annual Conference of the Parties (COP), where they review the implementation of the Convention and continue talks on the way to tackle Climate Change. The Convention divides countries into 2 groups: the industrialised countries who have contributed the most to climate change, and developing countries. The result of the Rio Summit was a recommendation, a non-legally binding aim. The aim was for industrialised countries to return their GHGs emissions to 1990 levels by 2000. But at COP1 in 1995, the Parties decided that the commitments were not adequate.
After 2 years and a half of intense negotiations, the Kyoto protocol was adopted at COP3 in December 1997. The Kyoto protocol set ambitious goals, legally binding targets. The objective is an average of 5. 2% reduction of carbon dioxide emissions to below 1990 levels by 2012. For instances, the US committed itself to a reduction of 7%, the EU 8% and Japan 6%. The treaty is planned to be ratified by 2002 and will enter into force after 55 countries have ratified it. These countries must represent at least 55% of the emissions of industrialised countries.
But questions remained unanswered about what mechanisms had to be implemented to reach the Kyoto target. Thus, the Parties committed themselves to find an agreement on this issue at COP6 in November 2000. COP6 took place in The Hague, The Netherlands. This summit was very important as, for most parties, the decision to ratify the Kyoto Protocol was greatly dependent on its output. Three main issues had to be addressed. The first one was whether or not countries could take into account ‘carbon sinks’. Basically, some countries want to be allowed to reduce their GHG emission target by planting trees, as trees absorb CO2.
The second issue was on the use of tradable emission permits and the third one on the penalty for non-compliance. A significant number of delegates want no financial penalties. Instead, their scheme would allow nations not in compliance by the end of the first phase (2008-2012) to increase their second-phase target by the amount they missed their phase-one target. Parties were divided on these issues and we could identify three main clans. First, the ‘Umbrella group’, which includes the United States, Japan, Canada, Russia, Australia, New Zealand, Norway, Iceland, and Ukraine.
Their credo is to set up a worldwide market of GHG emission rights. They also want importance to be attributed to ‘carbon sinks’. The second clan is the European Union, who contests this position. For the EU, emission rights should only be a supplement to a real effort by the countries to reduce their emissions. It also opposes the Umbrella group on the importance to be given to ‘carbon sinks’, which might play a smaller role than previously thought in the absorption of carbon. The third clan is called G77 and is composed of 133 developing countries.
This group includes countries threatened by the rising seawater and poor countries that want rich nations, the major polluters, to make the main efforts. The developing countries are willing to make efforts but want financial and technical aids. The OPEC countries are also part of this group and they want to get compensation, as their economies are threatened by the Kyoto Protocol. Then, what was the output of COP6? Nothing. Indeed, the divergences between the clans were too important and no agreement at all was found. It is said that the main reason of this failure was the unrealistic target of Kyoto.
In fact, since emissions have increased 10 to 12% in the US since 1990, emissions would have to be cut by about 25% by 2008. And many other countries have the same problem. But it might not be the root cause Then what are the real causes of this clash? The first reason could be very well a crisis of multilateralism. Indeed, The Hague is already the second big clash after the recent one in Seattle for the WTO summit. In fact, the world is increasingly integrated and connected and the framework that was established after the Second World War no longer seems capable of finding solutions to the global problems.
The international superstructure that is supposed to enhance global governance  is creaking’ (Larry Elliot, Nov. 2000). It has certainly something to do with the growing power of corporate capital and the decreasing effectiveness of politicians. The second reason of the COP6 clash might be the issue of the redistribution of the wealth of the world. The fact that only 38 developed countries are bound by the protocol is the most contentious issue for Americans. Indeed, while the industrial capacity of developed countries would decline, the industrial capacity of developing countries would increase.
The Americans are fairly afraid of loosing their hegemony at the profit of countries like China or India. At last the third, and certainly the principal reason of this failure, could be the Global Governance issue. Indeed, first the UN would be able to dictate the fossil fuel energy that a developed nation might use. Second, the UN would have the authority to enforce compliance, using sanctions. During the COP6 summit, Jacques Chirac, president of France and representing the EU at that time, held a speech in which he insisted on the fact that the protocol is an important step toward ‘authentic global governance’.
He should have been perhaps more moderate as it is precisely what the US does not want to hear. Actually, the issue of empowering the UN has become more important than reducing emissions. At last, it is not possible to talk about environmental politics without mentioning non-governmental organisations (NGOs), of which role is primarily to raise and publicise issues. They have made a considerable impact on world environmental politics, and are now granted observer rights at UN conferences.
However, NGOs, like Greenpeace or Friends of the Earth, are more and more disappointed by the hypocrisy and slowness of inter-state co-operation. In fact, ‘they often regard the nation state as part of the problem’ (John Vogler, p244), and they therefore prefer to encourage community action. However, even though the international regulation on Climate Change is slow and contentious, many individual companies have already begun to implement some programmes to reduce GHGs emissions, by investing in more Energy Efficiency programmes and Green Power.
Indeed, energy efficiency in business can lead to many competitive advantages. Measures can be implemented in several areas: building and facilities; production processes; end-use products; and transportation. These sectors provide many opportunities for cutting costs, increasing profits and enhancing the image of companies. Some ways to save energy include installing efficient lighting, capturing and reusing waste heat, insulating buildings and computerising heating and cooling systems. These kinds of programmes are almost risk-free and can provide high returns.
Moreover, benefits can be easily measured, calculated and forecasted. In fact, energy efficiency is one of the most effective means to reduce costs and add value to a firm. There are several examples of benefits in taking energy-efficiency initiatives. First, it reduces direct costs: for some industries, gas and electricity represent a large share of operating costs, reducing energy consumption can therefore greatly diminish expenses. Even for companies that do not consume much energy, any energy savings influence directly their bottom line.
Second, it improves utility rate negotiation: Indeed, electricity rates are often higher during peak periods. Thus, if a company uses less electricity during peak periods, it obtains more bargaining power to negotiate a lower unit price per kilowatt-hour. Third, it improves worker productivity: Energy-efficient building design can often produce great benefits in higher worker productivity, lower absenteeism and few errors. For instance, it has been demonstrated that daylighting can have a significant impact on productivity, increasing worker effectiveness.
Green power, such as wind or solar energy, which is emerging as a viable energy source for businesses, provides also benefits that are complementary to energy efficiency. First, it provides an incentive for saving energy: Even though green power might be still more expensive, in some areas, than traditional power, if a company couples it with energy efficiency measures, it can diminish its total energy consumption and therefore drives the price of green power down by stimulating the green power market.
Second, it provides a competitive advantage: The companies that choose to buy green power differentiate themselves in a competitive market, and thus set or raise the environmental standard for other firms. Third, using green power enhances corporate reputation: Purchasing green power is a way to retain customers concerned by environmental matters, and it also enhances a company’s reputation as an environmental leader. A good mean to enhance reputation is also to install an on-site power generation system, as it is a visible statement of the company’s environmental commitment.
Gilette is one of these companies that have managed to reduce energy consumption without affecting its economic performance. The Gillette Company today is the global market leader in nearly a dozen major consumer products categories, principally in the grooming, portable power and oral care businesses. During the period 1994-1997, the energy consumption of Gilette increased by an average of 4% per year whereas the business had grown by 10% per year. When Gilette built a new administrative building in Argentina, they regarded energy efficiency as a major factor in its design.
They put an automation system in place that controls the air volume, conditioned air and lighting. They also used advanced-design building materials, including sun visors that neutralise the solar impact. Aware of the issue of Global Warming, Gilette has taken action through its Worldwide Energy and Water Conservation Programs. Although the GHG emissions of the company’s manufacturing operations were 122,000 metric tons in 1997 and 7,000 tons higher than the 1990 levels, it is estimated that it would have been 137,000 metric tons without the conservation program.
In 1997, Gilette wanted to go further and became a partner in the Climate Wise Program. The purpose of this program is to help companies to identify and implement cost-effective projects to reduce GHG emissions. Then, Gilette submitted a Climate Wise Action Plan focusing on energy efficiency programs, supply chain conservation initiatives, co-generation projects, fuel switching, and transportation. The goal was a reduction of the company’s GHG emissions by 23,000 metric tons by the year 2000.
A good example of this is the actions taken by Gilette in Mexico. Indeed, Gilette has important manufacturing and sales operations in Mexico City, where it recently completed a multi-faceted program of warehouse consolidation, shipping route analysis and redesign, truck fleet changes, and revamped operations procedures. The company analysed the environmental impact of these changes and found a 20% average savings in fuel consumption. The fuel savings translated into an estimated 2. 5 million-pound reduction of CO2 emissions from Gilette trucks.
As we saw, the industry is widely responsible for climate change. Some of them have already taken action to reduce their direct or indirect GHG emissions and found competitive advantages by doing so. Nonetheless, these companies are not numerous. Thus, the solution to the problem is to give companies incentives to reduce their emission level. These incentives can come from international regulations, but we saw that they have not been very effective and rather slow so far. The problem is a political problem about global governance.
It is thought that the creation of a World Environmental Organisation (WEO), as a par to the World Trade Organisation (WTO) might be beneficial to the international regulation process. However, it is not done yet, and the Kyoto Protocol is currently threatened. It has been even more endangered with the recent declaration of George W. Bush, saying that the United States will not ratify the treaty. And we know that the US plays an important role in global warming as they emit 25% of worldwide GHGs whereas they only count for 4% of the population on Earth.
The second way to give incentives to companies to reduce their emission is through customer demand for ‘green’ products. In fact, Bush was so odious that the international community condemned its position and since, global concern about environmental issues has never been so strong. Thus, the non-ratification of the Kyoto Protocol by the US will perhaps have an opposite effect of what Bush was expecting for the American economy, as consumers might demand greener products in the near future.
If Bush had taken basic marketing courses, he would know that today, customers are kings and companies are very focused at providing them exactly what they want. Companies are more concerned about customers than politics. By the way, reducing GHG emission might not be as harmful for the economy as Bush thinks, considering examples like Gilette. Thus the solution of the climate change issue might come rather from consumers than politics. That is why NGOs have to play an important role today by publicising the issue to the global community in accord with the famous slogan ‘think globally act locally’.