09/06/2005 12:36 am ET Updated May 25, 2011

If Kyoto Is So Dangerous, Why Are Some U.S. Companies Complying?

Rubén Kraiem and Stuart Eizenstat, partners in the law firm Covington & Burling, have asked a simple but powerful question in the September/October issue of Foreign Policy magazine (free registration required). It's a message that's gained increased urgency in light of the catastrophic recent events along the Gulf Coast:

If Kyoto is so dangerous, why is corporate America already playing by its rules?

“Many U.S. multinationals are already complying with Kyoto’s emission targets because they are subject to the agreement in key markets where they operate,” they explain. For example, “Europe’s emissions caps apply to more than 12,000 industrial facilities, many of them owned by American companies.” These companies have the choice, of course, of operating less-efficiently in the U.S. and other countries that aren’t party to Kyoto’s limits. But that’s not what’s happening, they say. ”Global business leaders are not waiting for environmental mandates to be handed down from Washington.”

You might be surprised to find partners in a major law firm making a case for companies to be more environmentally proactive. Indeed, mention “lawyers” and “climate change” in the same sentence, and you’re bound to conjure up images of Gucci-shod lobbyists laboring to protect large polluters from the harsh wrath of government regulations. You probably won’t bring to mind major law firms helping their clients find proactive means of voluntarily reducing their climate impacts.

But Covington is one of a small but growing number of law firms finding value -- for their clients and themselves -- in a somewhat more enlightened approach. And along the way they are making a lie of the Bush administration’s contention that responsibly addressing climate change is an unaffordable folly that will render U.S. companies uncompetitive in global markets and shed millions of American jobs.

“I think there's been a lot of change,” Kraiem told me recently. “It's not as though we're in a brave new world, but there are some real developments over the past few years. Increasingly, there are people in companies that are not compliance people, not EHS [environment, health, and safety] people. They're people who are transactional, strategy, and finance types who are coming to terms with specifically climate issue and the possibility of carbon constraints.”

Kraiem and others thought it made sense to combine the skill sets of a number of groups in their firm “to see if we could be helpful to those companies in moving them in the right direction.”

They were a little surprised by the response, says Kraiem, who has been a trustee of the Natural Resources Defense Council for the past 12 years. “We discovered that many of our existing clients have sophistication around climate change and carbon constraints issues. Some are looking at CDM [Clean Development Mechanism] opportunities, though they are very tentative. Some are looking at trading opportunities in both Europe and emerging markets in this country. And we have done some serious research in issues such as disclosure trends, disclosure requirements, the exposure clients would have, or underwriters and issuers of securities would have, and what kind of disclosure at this stage is appropriate.”

These aren’t trivial questions, and while plenty of companies remain dug in, fighting climate rules tooth and nail, smart companies are figuring out how to get ahead of Kyoto or any other rules that could some day come down the pike. Indeed, contend Kraiem and Eizenstat -- the latter headed the U.S. delegation to the Kyoto Protocol negotiations for President Clinton -- “Eventually, Wall Street will factor the costs of complying with emissions targets into the price of corporate debt and equities.” It’s not simply a matter of “doing well by doing good.” It’s a matter of survival of the cleanest.

As they conclude in their Foreign Policy piece.

American businesses that refuse to accept that we live in a carbon-constrained world are living on borrowed time. Soon it will no longer be economical for the holdouts to view the United States as a regulatory safe haven. Compliance with the Kyoto Protocol will likely spur countries such as Japan and Britain to subsidize renewable energy and other emission technologies, forcing U.S. companies that might have been market leaders to become consumers of new technology developed by others. There is little chance the Bush administration will suddenly reverse course and endorse Kyoto. Fortunately, a growing number of U.S. businesses are not waiting to take their cues from Washington.