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Business can fight global warming

Marcela Berrios | Friday, November 2, 2007

Al Gore may have received the Nobel Peace Prize for his environmentalist activism, but movies aren’t the most practical way to address climate concerns, based on what an Oxford professor said Tuesday at Notre Dame’s Hesburgh Center.

Europe has made strides in its fight against global warming and carbon emission through revised accounting practices for global corporations and the maximization of the European political structure, said Gordon Clark, head of Oxford’s School of Geography and director of the Oxford University Centre for the Environment.

“Around the year 2050,” he said, “we’re going to be faced with millions of people displaced” as a result of climatic changes caused by modern industrial and manufacturing systems.

But the European Union (EU) has sought to mitigate these effects, he said, through legislation for corporations, taking full advantage of the EU as a standard-setting body that supersedes the individual countries’ politics and therefore reduces the pressure of corporations on local politicians – a barrier the U.S. still faces.

“The countries can blame the EU for new regulation regarding the reporting of carbon footprints, so they don’t have to deal with local politics and business,” Clark said.

Carbon footprints refer to the total amount of carbon dioxide a corporation emits through its operations. There is no set process to quantify a company’s carbon footprint, but across the EU, firms and corporations – rather than politicians – are the ones leading the debate on how to arrive at a method to calculate a company’s impact on the environment, Clark said.

And the reason why some companies are pushing to make carbon footprint disclosures a requirement by law in every corporation’s annual report is entirely driven by business itself.

It’s good for a company’s reputation to be at the forefront of the fight against carbon emissions and global warming, he said, so businesses that don’t usually have to deal with these problems too much – like financial firms – have partnered with NGOs, the United Nations Environment Programme (UNEP) and the European Commission to develop principles for responsible investing.

“It’s important for investors to value and appraise a company’s worth, taking into account its impact on the environment, both short- and long-term,” Clark said.

In 2003, the European Commission passed legislation that forces companies in the EU to disclose in their annual reports their carbon footprints and other environmental risks and liabilities.

This requirement, which “forces companies to broaden the scope of their reporting to society,” doesn’t simply apply to a corporation’s operations in Europe, but rather to its operations worldwide, Clark said.

“So the corporation that’s present in 60 countries has to report what it has been doing around the world, in Africa, in Singapore, everywhere.”

Clark said this type of legislation immediately distinguishes green corporations from the rest, creating a list of “good and bad companies that investors and customers can pick from.”

And if a company wants to be on the good list, it will have to erase – or at least blur – its carbon footprint.

“Of course strong public consciousness is vital to encourage companies to want to make those changes to their operations,” Clark said.

Customers’ and investors’ marked preference for companies that report small carbon footprints, he said, puts pressure on the corporations that have more environmental liabilities. He said he’s generally found only 20 percent of any given audience he speaks to is environmentally conscious when it makes purchasing or investing decisions.

In Europe, however, that percentage may be higher due to the proximity of the member nations – and their subsequent sharing of natural resources – as well as past environmental disasters that have directed the public’s attention to these issues.

“Perhaps it’s Chernobyl. Perhaps it’s the Rhine River turning different colors in different countries,” Clark said.

He praised Gore’s ability to mobilize young people and get them interested in environmental issues. Still, he favored tangible solutions, like legislation, to reduce the rate at which global warming is spreading.

In 2006, the British Parliament passed the Companies Act, which requires the board of directors of corporations to take on additional responsibilities regarding the company’s operations, including their impact on the environment.

“The Act places significant responsibility on the board of directors,” Clark said. “Before, they usually didn’t know too much about what went on with the company and its operations around the globe, but under the act, they’ve had to become informed and really understand the long-term effects of carbon emissions and the roles they can play in reducing these practices.”

The Companies Act, he said, is modeled after the European Commission’s 2003 legislation and furthers the EU’s efforts to promote corporate social responsibility.

“There is growing momentum about this right now,” Clark said. “And that’s promising because the cost of not doing anything to reduce carbon emissions and slow down global warming right now may be astronomical for the children of our children.”