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Road to to Copenhagen - Part 4: A New Social Contract

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As we approach the climate conference in Copenhagen, politicians are balking and diplomats are burning the midnight oil, deprived of sleep. But we can take heart. Some unlikely new heroes may come to the rescue.

One prospective hero is The Citizen-Consumer. Consumers are not the first group that pops to my mind when I think about environmental leadership. Unbridled consumption without regard for consequences has much to do with the mess we're in.

Then came a poll by TIME magazine over the summer. It found that nearly four of every 10 American consumers over age 18 regularly and deliberately choose products made by "socially responsible" companies. If conspicuous consumption got us into this mess, can it be that conscionable consumption will get us out? Maybe. Based on its poll and several other factors, TIME concludes:

In America, we are recalibrating our sense of what it means to be a citizen, not just through voting or volunteering, but also through what we buy...We are seeing the rise of the citizen consumer - and the beginnings of a responsibility revolution.

We might be tempted to assume these green consumers - TIME calls them the "responsibles" - come from the liberal wing of America's vast customer base. We'd be wrong. According to TIME's poll, "responsibles" are almost equally divided between people who classify themselves as conservatives, moderates and liberals.

The second unlikely hero is The Corporation. New evidence suggests that companies around the world are beginning to discover that "green" is golden. A significant number of companies apparently are committing to social responsibility and sustainability.

For example, after interviewing more than 200 corporations that represent 75 percent of the $36 trillion equities market in the United States, Siemens and McGraw-Hill Construction concluded that "corporate America's embrace of sustainability has more than doubled in strength in the past three years with 76 percent of the largest U.S. firms reporting efforts and commitments that exceed those required by law."

After surveying nearly 1,600 business leaders around the world, the Boston Consulting Group (BCG) reported this fall that 92 percent of the respondents said their companies are addressing sustainability in some way. Corporate interest in sustainability has remained strong even during the recession, BCG found, and there was a strong consensus among the business leaders it interviewed that companies "will play a key role in solving the long-term global issues related to sustainability."

McKinsey & Company reports that in its annual survey of business leaders last year, "executives for the first time were more likely to view addressing social and political issues as an opportunity than as a risk."

This view - social issues as opportunities -- continued in this year's survey (subscription may be required). McKinsey found:

The financial crisis has increased the public's expectations of business's role in society. Most companies have maintained or increased their efforts to address sociopolitical issues, and many have already derived better-than-expected benefits from doing so...

The 2009 survey supports their views: at companies with clear criteria about the business goals of their sociopolitical agendas, executives report a variety of business benefits, including access to new markets and improved operational and workforce efficiency.

Most executives polled by McKinsey believe that of all issues concerning the public, including health care and executive pay, climate change and other environmental issues are the most likely to attract the public attention and to affect shareholder value over the next five years.

In an interview with McKinsey the CEO of Unilever, Paul Polman, describes the business case for becoming a "values-driven" company:

It is very clear that this world has tremendous challenges. The challenges of poverty, of water, of global warming, climate change. And businesses like ours have a role to play in that. And frankly, to me, very appealing. We have every day, in our business, about two billion consumers that use our brands, and so [there is] a tremendous opportunity to touch many consumers. And if we do the right thing, leveraging that tremendous skill, we can actually make major progress in society....

And we see the consumer asking for this, to be honest, in today's environment. Again, the consumer's trust in business, unfortunately, is lower than we would like it to be. And the standards that the consumer sets--the expectations, her own proactiveness and influencing with her purchase decisions, and her own beliefs--are only going to increase as we move forward, I believe. So, companies with a strong social mission will be companies that are more successful long term.

The evidence of a growing green marketplace is accumulating so fast, TIME believes we're seeing "a new social contract among consumers, business and government". I don't know whether that contract really exists, but I am certain about one thing: It would be a very good thing if it did.

So let's write one. Let's invite corporations, governments and citizen-consumers to sign a win-win-win commitment. Its obligations would include these:

Government : Two of government's biggest roles in building a green economy are as consumer and regulator. The federal government is so large a consumer of energy and products, ranging from battleships to paperclips, that it has the power by itself to create large sustained markets for green products. President Obama has flexed that power in his Oct. 5 executive order, which requires federal agencies to reduce their carbon emissions, use less energy and water, and comply with new sustainability requirements. Every state and local government in the United States should follow suit.

Governments at all levels should follow Wal-Mart's example by greening their supply chains - i.e., requiring suppliers to comply with progressive standards that reduce their environmental footprints.

Federal, state and local governments can create their own social responsibility and sustainability plans and report progress annually with third-party verification. Among other things, these plans would detail how state and local governments are using their substantial existing authorities to promote sustainable practices in buildings (through building codes), power production (through utility regulation), transportation systems (through regional planning and the investment of federal transportation money) and urban design (through zoning, tax policies and infrastructure development).

Corporations: Despite the positive news from the business sector, corporations have a long way to go. The majority of respondents in the BCG survey said "their companies were not acting decisively to fully exploit the opportunities and mitigate the risks that sustainability presents." More than 70 percent said their companies have not developed a clear business case for sustainability.

Contradicting the Siemens' survey, BCG found that among the companies it surveyed, most sustainability actions are the minimum required by law. TIME's poll found that 40 percent of the 1,000 largest companies in the United States have not created publicly available environmental policies; fewer than 8 percent use third parties to verify progress on their corporate social responsibility policies.

In the new social contract, every company hoping to earn the loyalty of green consumers would create and regularly publicize its corporate social responsibility and sustainability policies. Companies would set clear stretch goals for reducing their greenhouse gas emissions, improving their resource efficiency (including water and energy), using recycled content in their products, and replacing high-carbon with low-carbon energy.

In addition to setting environmental standards for their suppliers, certifying their progress and reporting annually, corporations would develop green labels that disclose the life-cycle environmental footprints of their products. They'd avoid green-washing by following the Federal Trade Commission's Green Guides on labeling.

And here's a big one: Corporations would promise to adhere to the same environmental standards overseas that they use in the United States.

Citizen-Consumers: Consumers would favor green and socially responsible companies not only in their purchases, but also in their investment portfolios. They would pledge to conserve energy, to recycle and reuse, and to support local investments in mass transit, hiking-biking paths, urban forestation and smart growth.

Who would manage such a contract and how would it be enforced? I have no idea. But the federal government could help by finishing work on a system to track national progress on sustainable development - an exercise that has been underway for years in the White House. That system could include indicators of how government, business and citizen-consumers are meeting the terms of the new social contract.

The cap-and-trade bill being considered in Congress would be a game-changer in the economy, for the first time creating price signals that discourage consumers from purchases that contribute to global warming. We need that, but we need a deeper change, too - a signal that we've changed our world view and consumption ethic as well as our price signals.

We need a global movement in which good government, good business and good citizenship are mutually reinforcing, with verifiable commitments to environmental and social responsibility. That would indeed be revolutionary.