Businesses Stepping Up to Tackle Climate Change
While many people view big businesses as the main obstacles to climate action, the truth is that corporations are increasingly being pushed to reduce their carbon emissions. For a long time, environmentalists have painted businesses as harmful to the planet, but this perspective is not entirely accurate.
Over three decades ago, I wrote an article in the Columbia Journal of World Business titled “It Pays to be Green.” My aim was to show that well-managed businesses actually have a strong motivation to adopt environmentally friendly practices. This was during a time before corporate responsibility and the focus on environmental, social, and governance (ESG) issues became mainstream, when companies were just starting to realize their role in serving the public and their employees.
Despite the growing attention to ESG, the advantages of adopting these practices often remain underestimated, particularly for shareholders. This article will focus on how companies manage their energy use as part of their environmental strategies.
It’s true that businesses consume a lot of energy, but they are not thrilled about it. Energy costs can add up in many ways: building and maintaining infrastructure, operational costs, and ensuring everything lasts. Similar to how seniors adjust their home heating in winter, companies are actively looking for ways to reduce their energy consumption.
Many might forget that efficiency—often a significant priority for shareholders—can also lead to less energy use and waste. Being environmentally friendly can directly benefit a company’s bottom line. Many businesses undertake energy audits and implement strategic plans to cut down on energy use, leveraging new technologies and training their teams to be more efficient.
Over the past decade, energy consumption among U.S. businesses has shown little change, despite significant growth in the economy. From 1995 to 2020, the energy used in industries and transportation remained stable, highlighting that companies have found ways to increase productivity without increasing energy use. They are also using more sustainable energy sources, which has a positive effect on the environment.
Managing energy effectively requires minimizing usage, especially for climate control and lighting in buildings. A large amount of energy is consumed in this way, and businesses are looking for new approaches to maximize efficiency. This includes strategies like recycling waste energy into usable fuel, which not only cuts down on waste but also conserves resources and improves energy production efficiency.
The benefits of operating more efficiently are broad and far-reaching. Companies that consume less energy can manage operations more safely, reducing the risk of accidents that can be costly. They can also enhance community relations by minimizing negative effects from excessive energy use. Additionally, companies that manage their environmental impacts better can enhance their reputations, appealing to environmentally conscious consumers and investors. Many companies in the U.S. strive to achieve Energy Star certification as a testament to their commitment.
In conclusion, inefficiencies in business operations can lead to significant environmental damage. However, efficient business practices align perfectly with environmental goals, promoting the idea of producing the most while using the least energy and generating minimal waste. Instead of criticizing the business sector, environmental advocates would be better off encouraging businesses to adhere to efficient practices, which ultimately benefits both the environment and the economy.
Giulio M. Gallarotti is a professor at Wesleyan University and an adjunct professor at Columbia University.
