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Companies favoring action on climate change spend as much lobbying for it as opponents spend against it, study finds

August 29, 2016

For more information, contact: Ben Haimowitz, (718) 398-7642

Senator complains green firms don’t lobby for initiatives, but they do

U.S. Senator Sheldon Whitehouse says he’s perplexed. A strong believer in government action to avert climate change, he doesn't understand why companies sympathetic to this goal don't lobby Congress on its behalf.

"Washington's dirty secret is that even the American companies that are really good on sustainability put net zero effort into lobbying Congress on climate change," he complained in an online post in June. "We are far closer to getting something big done on climate in Congress than most people think, but the good guys in the corporate sector have to start showing up."

As someone who must have his share of dealings with lobbyists, the Senator would seem an authority on the subject. Yet, new research reveals that companies likely to favor action on climate change spend as much lobbying for it as do companies favoring inaction.

A new study in the journal Academy of Management Discoveries finds that, when it comes to climate change "both dirty and clean firms are active in lobbying, suggesting that, while dirty firms lobby to maintain the status quo, clean firms view environmental regulations as a way to gain firm-level advantages."

If those findings come as a surprise to Senator Whitehouse, he is not alone; they also surprised the study's authors, Magali Delmas, Jinghui Lim, and Nicholas Nairn-Birch of UCLA.

Comments Prof. Delmas: "Given the popular view of lobbying as a seamy activity, one doesn't expect heavy corporate spending for something that attracts wide public support. Our findings would seem to attest to the competitive advantages that high-performing firms can derive from lobbying Congress."

Or, as the study notes, "Firms can often obtain private benefits by promoting environmental regulation, which can engender barriers to entry and other sources of competitive advantage. New environmental policies create both losers and winners. Firms with greater capabilities for adapting to new legislation or regulation can use public policy strategically to capture firm-specific advantages over competitors."

Indeed, such strategies are not restricted to climate change, the authors contend, but "are potentially generalizable to performance in other issues. For instance, firms that rely heavily on minimum-wage employees might oppose increasing the minimum wage, whereas their competitors that do not rely on minimum-wage employees (perhaps because they have automated their production process) might seek an increase in the minimum wage, which would give them a competitive advantage. Similarly, firms that are very dependent on high-skilled immigrant labor may support increasing H1-B visa quotas, whereas firms that are less reliant on immigrant labor might seek a competitive advantage in maintaining or reducing H1-B visa quotas. Finally, firms that rely on imports might support free-trade agreements while their competitors that are less reliant on imports might lobby against free-trade agreements to maintain competitiveness."

In short, while members of Congress might deny they have a mandate to pick corporate winners and losers, they have become an inevitable factor in many companies' competitive strategies, the study suggests.

The new research draws on data from the nonprofit Center for Responsive Politics on lobbying expenditures of 1,141 companies. Lobbying related to climate change was identified through a database search for such key words as "climate," "global warming," "greenhouse," and "GHG." The researchers analyzed the relationship between firms' climate-related lobbying spending and their production of greenhouse gases during the four years 2006 through 2009. That span was selected because it included a period prior to the onset of the great recession in December 2007 as well as a subsequent period of heightened climate-related lobbying associated with Congressional consideration of the Waxman-Markey bill, which passed the House in June 2009 but never reached the Senate floor.

Over the period covered by the study, the highest expenditure in a single year was $29 million by ExxonMobil, but close behind was Pacific Gas and Electric's $27.25 million. And, while ExxonMobil's greenhouse gas emissions amounted to 306 million tons, PG&E's was only slightly more than one percent of that. As the study notes, PG&E "openly supported a cap-and-trade system for carbon emissions...and [was] among the most active firms...when the likelihood of new climate-change legislation was at is highest."

Overall, when companies' annual expenditures on climate-related lobbying are plotted on a vertical axis and their greenhouse-gas emissions on a horizontal axis, the resulting graph is U-shaped, with the biggest expenditures at the left and right ends of the GHG axis and the smallest expenditure in between. In the words of the study, "firms on opposite ends of the environmental-performance spectrum spend the most lobbying policy-makers, whereas the middle-of-the-road performers – firms with neither exemplary nor particularly poor performance records – spend the least."

Given this pattern, what accounts for Senator Whitehouse's complaint? Comments Prof. Delmas: "Right now I am not sure what type of climate regulation green firms would lobby for. In the period we studied, there were concrete legislative proposals, most notably Waxman-Markey, but right now there isn't much. As the Senator indicates, green firms supported a strong climate deal in Paris late last year, perhaps choosing to be active where an agreement was in the works and waiting for something specific to lobby for over here.

"In any event," she adds, "our study finds that companies favoring climate initiatives are more than willing to rally 'round the flag, as long as there's a flag to rally 'round."

The study, "Corporate Environmental Performance and Lobbying," is in the summer 2016 issue of Academy of Management Discoveries, a new journal dedicated to exploring management issues at ground level. The Academy of Management, with almost 20,000 members in 128 countries, is the largest organization in the world devoted to management research and teaching. The Academy's other publications are Academy of Management Journal, Academy of Management Review, Academy of Management Perspectives, Academy of Management Learning and Education, and Academy of Management Annals.

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