Why Companies Need to Lobby for Climate Policy

In recent years, thousands of companies worldwide have made net-zero commitments to meet the urgent challenge of climate change. Many are investing in product and business model innovation or in supplier engagement programs to drive down emissions. But all too often, one of the most powerful tools a company has at its disposal is ignored by corporate leaders who are serious about sustainability: lobbying.

The huge social and environmental challenges we face will not be solved without effective public policy — and business has an indispensable role to play in making that happen. As Alberto Alemanno, founder of The Good Lobby, has argued, “The misalignment between what companies say and lobby for” is possibly the major factor preventing advances on major societal issues. Harnessing the political power of the thousands of companies that have committed to reducing their own greenhouse gas emissions to lobby for stronger climate policies has the potential to be transformative.

A CEO or CFO might agree in principle that their company should be lobbying for climate action, but allocating serious resources to the effort is where it gets tough. In 2022 alone, the oil and gas industry spent an estimated $124 million on lobbying the U.S. federal government, resulting in, for example, concessions to the industry in the 2022 Inflation Reduction Act. While exact figures aren’t available, companies in other sectors with much to gain from a successful transition to net zero aren’t investing anywhere near that kind of money in pro-climate action lobbying.

Why not? The World Resources Institute (WRI) has identified seven barriers to business leadership on climate policy, some of which are internal (related to organizational structure or technical capacity, for example) while others are external (the role of trade associations or the threat of a political backlash, for example). During a recent workshop with leaders from companies that already invest in some advocacy on sustainability issues, the Volans team that I’m part of asked participants to rank the barriers based on their experiences. The one that most companies ranked first was “competing priorities.” Here’s WRI’s explanation of the problem:

Climate change is not a top advocacy priority for most companies. Many companies see climate policy as “not in our lane” if they are not major emitters, energy-intensive users, or clean energy producers. Instead, they prioritize their advocacy efforts around other issues (for example, tax or trade policy) considered to be more material. A sense of having limited political capital exacerbates this dynamic.

Creating the Business Case

The current scenario points to the need for a stronger business case for investing in advocacy and lobbying on climate and other sustainability issues — one that focuses on value and risk, not just virtue. The business case will look different for each company. However, based on dozens of conversations with companies at the forefront of this emergent field, the Volans team has identified three main value propositions that recur across different organizations in different sectors: growing the market for their products and services, converting the company’s sustainability performance into a stronger source of competitive advantage, and mitigating systemic risks.

Which of these value propositions is most applicable at any given company depends on the nature of the products and services it sells, the quality of its environmental and social performance relative to peers’, and its level of exposure to risks that cannot be diversified away. Companies that have begun to invest seriously in sustainability advocacy tend to fit into at least one of three categories: solution providers, industry leaders, and residual risk bearers.

Solution providers. These companies have a direct and obvious material interest in speeding up the transition to a sustainable economy, such as renewable energy developers and cleantech companies. Solution providers can use advocacy to grow the market for their products and services. For example, Vestas, the world’s largest manufacturer of wind turbines, and Ørsted, the biggest offshore wind farm developer, lobby for policies that will accelerate the energy transition in key markets. Both companies have been vocal in their support for the European Union’s Fit for 55 agenda and have been engaged in ironing out the details of key policies, such as the EU’s Renewable Energy Directive. They also lobby governments to speed up the approval process for new wind farms — a prime example of solution providers backing reforms that serve both their own self-interest and the wider public interest.

Industry leaders. These companies are ahead of both regulatory requirements and most of their competitors in reducing their negative impacts and/or increasing their positive impacts on the environment. These companies can use advocacy to make their sustainability performance a stronger source of competitive advantage. For example, consumer goods companies like Unilever, Nestlé, and Ferrero supported the EU’s regulation on deforestation-free supply chains, which came into force in June 2023. These companies have invested over many years in reducing exposure to deforestation-linked products in their supply chains. As a result, they recognize that rules designed to level the playing field will benefit themselves as well as the planet. They will face lower compliance costs than competitors that have failed to take meaningful steps to tackle deforestation and improve supply chain traceability.

Similar dynamics are at play in the automotive industry. Volvo Cars, for example, pivoted earlier and more aggressively toward producing electric vehicles (EVs) than most other carmakers. The company has backed up this strategic decision with advocacy in support of government-imposed end dates for sales of new internal combustion engine vehicles and opposition to exemptions for such vehicles that can run on e-fuels. The more successful its political advocacy on these topics, the more the bet on becoming a leading manufacturer of EVs will pay off.

Residual risk bearers. Finally, these companies or financial institutions are highly exposed to the costs of social and environmental systems degrading. They can use advocacy as a tool to mitigate systemic risks that cannot be adequately handled via diversification or divestment, such as climate threats to the global food supply and the increasing vulnerability of coastal cities worldwide. Consider the case of Aviva Investors, a U.K.-based investment management firm with more than $250 billion in assets under management. Aviva Investors has pioneered the concept of macro stewardship, which it defines as “engaging with regulators, governments, and other entities to ‘change the rules of the game,’ in favor of … businesses … providing solutions to sustainability problems or supporting the transition to a sustainable future.” Aviva Investors recognizes that the likely impact of runaway climate change on investment portfolios cannot be diversified away and that it therefore has a duty to mitigate the systemic risk to its assets via other means. Global food and drink companies like Nestlé and Danone are also residual risk bearers in that their supply chains are highly exposed to physical climate risks. Supplier diversification can mitigate this risk only up to a point. That is why these companies advocate for policies to support a transition to more sustainable and resilient farming practices.

Individual companies might fall into more than one of these categories. Volvo Cars’ pro-EV advocacy is about both strengthening its competitive advantage and growing the market for its products. The point is not to shoehorn companies into one or another of these categories but to emphasize that any investment in advocacy should align with at least one of the three value propositions described to go beyond just virtue signaling.

Notwithstanding the examples above, companies that invest in sustainability advocacy are the exception rather than the norm, and even leaders in this field have not yet developed particularly sophisticated ways of evaluating the return on their investments in advocacy. For companies to step up their sustainability advocacy efforts, it is vital that they develop a robust business case for doing so. The We Mean Business Coalition’s Responsible Policy Engagement Framework can be a useful place to start.

From Business Case to Strategy

Having a clear business rationale for investing in sustainability advocacy is only the first step toward developing a winning advocacy strategy. Once the rationale is clear, companies can set concrete objectives and time horizons. These should then inform the selection of issues, tactics, and partners — as well as how success will be measured and evaluated.

One framework that can be useful in this process is the policy funnel, originally developed by climate policy think tank E3G and subsequently adopted by a range of companies and nongovernmental organizations (NGOs):

1. First, an issue starts to surface in public consciousness.
2. Next comes public debate about what to do.
3. Then come concrete policy proposals.
4. Finally, a specific text is negotiated and agreed upon.

If an issue is near the start of the funnel, relevant tactics might include engaging with an audience through media and social media, sponsoring research, and deploying advertising campaigns. At the policy process and policy decisions stages, other interventions become relevant too, such as engaging directly with policy makers; activating key trade associations to do the same, with aligned messaging; and participating in consultations and policy advisory committees.

From Strategy to Execution

When it comes to implementing a winning advocacy strategy, two factors are important: building the right internal capabilities and cultivating relationships with the right external partners.

Internally, sustainability advocacy rarely sits neatly within a single department. It requires close collaboration among teams responsible for sustainability, government affairs, public relations, strategy, and finance. While responsibility for setting strategy should sit with a relatively tight-knit group, companies might also seek to create the conditions for employees at all levels across the business to get involved in amplifying advocacy messages. For example, cosmetics group Natura &Co educates employees on the importance of protecting the Amazon and how to discuss it with friends and colleagues, and it points them toward opportunities to make their voices heard by signing petitions and joining movements. For multinationals, it is essential to have champions in different regions who can translate your global advocacy goals into local campaigns and engagement.

As for the external dimension, advocacy wins are almost never the result of going it alone. It takes a coalition — typically spanning both business and civil society — to achieve real policy change. The archetypal example in the sustainability space is the We Mean Business Coalition, which played a critical role in helping to get the Paris Agreement over the line in 2015. The Business Coalition for a Global Plastics Treaty, which brings together NGOs and businesses from across the plastics value chain, aims to have a similar impact on ongoing negotiations over the details of a United Nations treaty to end plastic pollution.

People responsible for advocacy at large companies told us about the importance of forming partnerships with unlikely bedfellows. If a coalition is perceived as representing too narrow a spectrum of interests — a group of “usual suspects” — its message is more likely to be dismissed. Collaborations that are uncomfortable are often the most effective. The relationships that require work to build trust are often the most fruitful when it comes to doing collective advocacy.

Brazil’s Amazon soy moratorium is a case in point. In April 2006, Greenpeace activists targeted McDonald’s to raise awareness of how soybean production was driving deforestation in the Amazon rainforest. Instead of going on the defensive, the company agreed to collaborate with Greenpeace to push for an industrywide solution, working in conjunction with the Brazilian government. The resulting moratorium was agreed on within four months and has remained in place ever since.

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In summary, lobbying for supportive policies helps establish a virtuous cycle for companies that are serious about making a positive impact on the environment. When the ambition and effectiveness of government climate policies increase, they can enhance the value of existing and planned investments in reducing negative impacts and innovating to create products and services fit for a low-carbon future. The more favorable the policy context, the further companies can go toward achieving their climate objectives and setting more ambitious goals.

The Environmental Defense Fund describes political influence as “the most powerful tool companies have to fight climate change.” We can’t afford for them not to use it — and use it well.