24-09-2024
Dieter Zinnbauer, Advisor, The Good Lobby
Lobbying matters. What companies do in the political realm, that is how they seek to influence policies and public opinion, is at least as consequential, and very often much more consequential, for society and the planet, than their efforts to green or otherwise ESG-ify their operational footprints. This premise animates The Good Lobby’s mission and many of its projects, such as The Good Lobby Tracker or The Good Lobby Business Associations’ initiative, that is REBASE.
If evidence supporting the claim that lobbying matters abounds, it is still astounding to see how strongly, often dramatically this recognition now pushes to the fore both in research, policy and business ‘strategery’. Examples:
Research: policy, not climate drives corporate political engagement
A brand-new paper provides the first big data analysis of corporate political conduct at firm level in the US when it comes to the climate crisis. It finds that only transition risks, i.e. policy risks, not physical climate risks are correlated with firm-level lobbying intensity. In short: the battleground for shaping the energy transition is the policy arena. There is no automatic link between rising physical climate risks and pro-climate corporate lobbying. In fact, this link remains absent. Companies affected by physical climate risk don’t lobby on the green side, but companies affected by potential transition policies do spring into action. So it is not very far-fetched to conclude that the ones that can benefit from obstructing effective transition policies are still dominating the scene.
Corporate ‘strategery’: from individualistic ESG-ing to collective political action
A new discussion note by a leading ESG think tank quite dramatically declares conventional firm-level ESG as a failed project as the centripetal forces of profit maximisation are simply too strong for individual firms to stray too far into being good. They will be crushed by the competition or brought back in line by shareholders. One might want to take issue with the definitive and sweeping nature of this claim but the conclusion is very interesting:
The new leitmotif according to the paper should now be an ambition of “competitive sustainability”, corporate leaders using their company’s lobbying muscle to help create the regulatory landscape and market design that forces everyone onto a fair playing field, internalizing climate damage and other externalities and setting a compulsory, enforceable floor for social and other standards. In other words, if you as a company are serious about ESG impact start lobbying and forging collective action initiatives that create the policy environment to make all this possible. Going it alone as an average company with conventional corporate governance set-up – you will just be crushed by the profit and competition imperative.
Fiduciary ownership: the superior ROI of responsible lobbying
To what extent universal owners can justify a strong ESG engagement at their portfolio companies as a fiduciary duty for long-term maximisation of returns is somewhat contested. Yet a new, hard-nosed analysis makes one thing very clear. While pushing individual companies into deep ESG territory might at firm level cause more harm than good (see above). But the one thing that universal owners can do with a clear and strongly justifiable return on investment is – you guessed it – demand from their investee companies to focus their political engagement on helping create a sustainable, just world.
And a message from all: there is no way around substance
Three disparate, yet strong signals that lobbying matters and effective ESG work requires a strong focus on positive corporate political engagement.
And all three encapsulate one other really important point: responsible lobbying is much more than procedural varnish, it is not just about transparency, board oversight and a rhetorical commitment to good faith engagement. Responsible lobbying must be grounded in a clear, substantive, trackable commitment to actively help identify and advance the very public policies that are necessary to make ESG-forward conduct possible, that protect the planet and help societies flourish. The endgame is sensible policy and the responsible, meaningful engagement by all required to get us there.
Cao, Xun, and Lingbo Zhao. 2024. ‘Do Firm-Level Climate Risks Drive Firm Political Actions in Climate Change?’ paper presented at 2024 American Political Science Association Annual Meeting, Philadelphia.
Gosling, Tom. 2024. ‘Universal Owners and Climate Change’. SSRN Electronic Journal. doi:10.2139/ssrn.4713536.
Hooper, Lindsay, and Paul Gilding. 2024. Survival of the Fittest: From ESG to Competitive Sustainability. Cambridge Institute for Sustainability Leadership. https://www.cisl.cam.ac.uk/files/from_esg_to_competitive_sustainability.pdf (September 20, 2024).