The Dow Chemical Co. and Exxon Mobil Corp. got theirs. So did ConocoPhillips Co., International Paper Co., Weyerhaeuser Co., and Monsanto Co.
Between 2004 and 2006, these companies received resolutions from shareholders pressing them to take better care of the environment. And then between 2006 and 2007, these businesses indeed made at least one eco-friendly move: They shared data with the Carbon Disclosure Project (CDP), a London-based NGO that compiles and publicizes the largest database of corporate greenhouse gas emissions in the world.
These corporations’ tales are part of a larger trend, report Erin M. Reid and Michael W. Toff el of Harvard Business School. “We find that if a [Standard & Poor’s (S&P)] 500 company had a shareholder resolution in its recent past,” says Toffel, “it was more likely to disclose to the CDP.” The researchers also find that shareholder resolutions have a spillover effect: If one firm gets an environmental proposal from a stockholder, the rest of the firms in its industry become more likely to comply with the CDP.
“Most of these resolutions initially lose, and lose big,” notes Toff el. “Managers don’t like to be told how to behave by shareholder activists.” But within a few years, he says, the resolutions seem to exert a sleeper effect, ultimately pushing companies to adopt better environmental practices.
Although anecdotes of shareholder heft are many, Reid and Toffel’s work is one of the first large-scale empirical studies showing that private politics really do influence corporate actions. (Boycotts and protests are other forms of private politics.) In the same article, the authors also demonstrate that public politics—namely, a state’s threat to regulate greenhouse gas emissions—likewise lead the companies headquartered in that state to disclose to the CDP.
Every year, the CDP asks the top executives of the world’s largest public companies to reveal their plans to mitigate climate change and their company’s greenhouse gas emissions. More than 2,000 organizations in 66 countries now voluntarily disclose these data to the CDP—the world’s only global climate change reporting system.
In 2006 and 2007, 44 percent of S&P 500 Index companies shared at least some of the information that the CDP requested. Reid and Toffel wanted to know, What is pushing this growing minority of companies to work with the CDP? Their results show not only that resolutions and regulations goad companies into being greener, but also that “without public or private pressure, firms are significantly less likely to regulate themselves,” says Toffel.
Toffel acknowledges that corporate transparency alone will not halt climate change. Nevertheless, he says, “transparency is an important first step.” He also points out that other social movements, such as labor and human rights, can use the dual engines of public and private politics to speed corporate change.
Erin M. Reid and Michael W. Toffel, “Responding to Public and Private Politics: Corporate Disclosure of Climate Change Policy,” Strategic Management Journal, 30, 2009.
Read more stories by Alana Conner.