Are Your Favorite Companies Eco-Friendly? Even They May Not Know

Corporations around the world love to promote their environmental bona fides, touting their at-times Herculean efforts to minimize their carbon footprint.

But desiring to be environmentally friendly and truly accomplishing that goal are two different things, as illustrated recently by Amazon’s acknowledgement that its carbon footprint grew 15% last year despite efforts to curb its impact on climate change.

As it turns out, the details about many companies’ eco-friendly accomplishments are often enveloped in mystery, in some cases even for the businesses themselves.

“The Amazon situation is just an example of the bigger problem surrounding corporate claims of environmental responsibility,” says Rajat Panwar, Ph.D., an associate professor of Sustainable Business Management at Appalachian State University.

“Most global corporations now make such claims, but the reality is that half of the carbon emissions since the industrial revolution have happened within the last 30 to 35 years. It seems that corporate environmental disclosures hide more than they reveal.”

Why is it so difficult for many companies to achieve their goals of reducing their carbon emissions or otherwise limit the damage they do to the environment? Panwar says one problem is corporations often outsource much of their work, which not only reduces their control over the environmental impact they have, but also their very knowledge of that impact.

Panwar says one study analyzed reports that 1,300 firms submitted to the Securities and Exchange Commission. That study revealed 80 percent of those firms could not even determine the country of origin of their products, much less any information about their carbon footprint.

“My research has found that firms that are more socially and environmentally responsible tend to perform their functions themselves rather than outsource those functions to third-party vendors,” he says.

For companies that truly desire to have a positive impact, Panwar says three issues are critical:

• How companies measure emissions makes a difference. Companies’ carbon commitments and pledges should be about absolute emissions, not emissions per unit of revenue or sales, Panwar says. But too often companies link their emission-reduction goals to how much money they are bringing in, at least partially negating what should be the ultimate goals.
• Eco-friendliness can’t stop at the corporate door. Carbon commitments should encompass all operations across supply-chains. In the case of companies such as Amazon, the majority of emissions actually happen offsite and can be reduced only through concrete steps taken at the supply chain level. “This is a serious issue because many companies don’t even know who their downstream suppliers are.” Panwar says. “Companies like Amazon can gather applause for their pledges, but the actual impacts are hidden in the supply chains.” Consumers who want a true reckoning of how well a company is reducing emissions need to ask companies to provide those numbers,
• Supply networks should not be far-flung. In late June, Amazon announced creation of a $2 billion Climate Pledge Fund to invest in companies that make products and technology that help protect the Earth. But the details of how such a plan will play out are important, Panwar says. A good approach, he says, is to promote local supply networks so that emissions are minimal, visible and monitorable.

“I am glad that we are beginning to see through the discrepancy between corporate pledges and corporate environmental impact,” Panwar says. “When it comes to emissions and especially the effects of a global supply chain, I believe we are entering a new era in which transparency has to be made more transparent.”

Rajat Panwar, Ph.D., is an associate professor of Sustainable Business Management at Appalachian State University. He previously was an assistant professor at the University of British Columbia. He also has been an Affiliate Faculty member in the College of Forestry at Oregon State University, and with the Governance, Environment, and Markets program at the School of Forestry and Environmental Studies at Yale University. Panwar holds two doctorate degrees, one in Corporate Sustainability from Grenoble École de Management in France, and one in Forestry from Oregon State University.