Fellows

In the latest installment of the Salzburg Questions for Corporate Governance, policy advocate Shreya Bose explores how organizations can help amplify the conversation on climate change and educate consumers

This article is part of the Salzburg Questions for Corporate Governance series, facilitated by the Salzburg Global Corporate Governance Forum

The COVID-19 pandemic continues to bring simultaneous national lockdowns, disruptions in domestic economies, and shifts in the global political order. Still, this temporary pause has also demonstrated the resilience of the human spirit and an ability to change habits and make more cautious and conscious choices. The latter will be beneficial when discussing climate change issues and related risks, especially highlighting the glaring dissonance between identifying risks, developing mitigating response strategies, and the lack of general understanding of the acute impact climate change can have over our lives.

While there is a robust conversation around how the pandemic has accelerated our awareness of the need to be prepared for climate change, there is a strong fear we may undo some of the progress made in attempts to restore fledging economies. During this period, Forbes reports some governments have suspended environmental regulations, lowered vehicle emission standards, and delayed major international environmental summits. Meanwhile, consumers have been repeatedly careless with the disposal of personal protective equipment and have increasingly contributed to the growing carbon footprint of e-commerce.

The pandemic's unprecedented jolt has encouraged companies and the financial sector to reduce their carbon footprint and commit to climate action. Even governments have rolled out bailouts, with some tied to societal needs, including climate change. However, we can only achieve long-term momentum if consumers drive constant commitment through responsible corporate practices and more effective domestic regulations.  

Having an educated consumer base is also beneficial for different industries, as consumers have the power to influence individual companies to behave more responsibly and follow stricter environmental regulations. In highly developed countries where the disparity between the rich and the poor is low, and consumers possess a certain level of environmental awareness and can pay a higher premium for sustainable and ethical products, consumers often prefer to make responsible choices in their purchases and pay the requisite premium. In effect, these actions influence domestic companies to be more compliant with the laws as their consumer base is conscious of the labels and the fine print on the products they purchase. While in developing countries pricing is a dominant factor, as countries rise above poverty, we can expect an educated consumer base to push for stricter environmental restrictions and compliance.

If the triple bottom line of sustainability - people, planet, and profit - is to be fulfilled, we should integrate climate risks and sustainable practices throughout business operations. All departments within a company, including the financial, operational, transportation, and CSR teams, should work toward the same sustainable climate strategies and outlook and conveying the same message to its consumer. This approach would also include effective due diligence in supply chain management and working with subsidiaries in other parts of the world.

There has been a paradigm shift in the private sector with associated climate risks placed at the forefront of sector developments. Still, one must heed that every country's climate concerns and economic reality are different, and "one-size fits all" may lead to impractical, unfeasible models, benchmarks, and standards. The second important facet is whether the consumer base can understand these models, labels, benchmarks, and standards that products carry?

In some countries, where climate advocacy is more prominent, consumer awareness regarding climate-associated risks is higher, and consumers' choices are more well informed. Still, they should not be the template for assessing the awareness of a broader worldwide consumer base. The noticeable gap in knowledge, information disseminated through the fine print, and the "onus" being passed along between different stakeholders, namely the consumer, government, and the private sector, can have disastrous impacts on the climate change movement. With globalization, products are no longer localized, and therefore, the consumer base constantly keeps expanding across the world.

In the wake of the pandemic, the technology boom can be an option that companies and governments can use to educate their consumers and employees. Nestle made its human rights training for employees' available to all in 2019. Similarly, companies can have short pieces of training elaborating on their products for their consumers. The website Good On You rates fashion brands on ethical and sustainable standards (people, planet, and animals) and provides a detailed explanation for the reader's rating for the consumer. Although concerns of the digital divide still exist, with increased usage of mobile apps, governments and companies could participate in multi-stakeholder initiatives to raise consumers' awareness.

Many developing countries also have parallel economies of formal and informal sectors enmeshed in their ecosystem, supplied by small and big business operations. Therefore, bringing forth climate-associated risks across the ecosystem would require behavioral change through nationwide sensitization and capacity building of consumers and interested stakeholders. Moreover, governments often advance specific environmental concerns, such as expanding to and managing renewable resources, improving energy efficacy. Less often do they advocate a comprehensive plan that also addresses resources and time paucity for smaller businesses to work on technology, research and development, and research on acquiring sustainable and ethically sourced supplies for all operations sizes. Facilitating all smaller operations with resources and research in developing countries is critical. Consumers heavily reliant on informal sectors will not make the same informed choices as those who understand and have the finances.

Finally, if the cost of products is higher because the company has decided to incorporate physical risks and transitional risks of climate change like extreme weather events and the global transition to a low-carbon economy, such price breakdown should be explained to consumers in easily accessible documents. Responsiveness to such risks has often been considered limited, owning to its far-reaching consequences. However, with the pandemic, there is a noticeable shift in concerns, and this is the time for companies and governments to step in and set climate priorities while there is still an increased level of interest and consciousness to avoid such occurrences in the future.

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Shreya Bose brings over five years of experience in public and private international law, dispute resolution and transactional law, international and domestic human rights law, international development, and gender studies. She is interested in developing strategic partnerships and alliances between the private, public, and development sectors, exploring how businesses can be operationally sustainable while respecting human rights, and conducting effective human rights impact assessments. She is currently working on policy issues exploring the nexus between development and conflict. She has professional experience as a lawyer, program lead, and policy advocate with international and national organizations, UN agencies, a law firm, and the international criminal tribunal in Cambodia. She has worked in the US, Switzerland, and countries in the Asia-Pacific region and has worked with clients from the Middle East, Asia-Pacific, and Africa. She has also served as a legal counsel and researcher for governments in Afghanistan and India. She holds a Master's degree in law from the University of Michigan in the US and a dual Bachelor's degree in Law and Social Sciences from NALSAR University of Law, India. She is a Fellow of Salzburg Global Seminar.

The Salzburg Questions for Corporate Governance is an online discussion series introduced and led by Fellows of the Salzburg Global Corporate Governance Forum. The articles and comments represent opinions of the authors and commenters, and do not necessarily represent the views of their corporations or institutions, nor of Salzburg Global Seminar. Readers are welcome to address any questions about this series to Forum Director, Charles E. Ehrlich: cehrlich@salzburgglobal.org To receive a notification of when the next article is published, follow Salzburg Global Seminar on LinkedIn or sign up for email notifications here: www.salzburgglobal.org/go/corpgov/newsletter