Business must step up on climate change when governments falter

THE pushing, pulling and fraying of wills and self-interest that went into the G-20 communique on climate change shows how difficult it is to sustain international cooperation on addressing global warming.

Meaningful, steps to avert a global disaster should start with the world's biggest nations. The unfortunate reality is that those nations, and the United States in particular, are not providing the leadership that is sorely needed. In that vacuum, businesses need to step up.

At the recent G-20 summit in Buenos Aires, 19 of the 20 member nations pledged to implement the "irreversible" Paris Agreement on climate change. The notable odd man out was America, whose president continues to deny the causes of global warming and the dire need to slow it down, despite conclusions to the contrary by his own government.

But even among the signing members, friction exists. It was reported that Turkey and Saudi Arabia had held up the final communique over certain objections. Brazil's president-elect, like US President Donald Trump, has indicated an intention to pull out of the Paris pact. Russia has not ratified the Paris treaty.

The difficulty in solving climate change is that the climate is largely externalised by polluters. A factory that spews out thousands of tonnes of greenhouse gases does not have to confront the full cost of its product, because the impact of warming is shared by everyone all over the world.

There are ways to rein in those externalities, through methods such as carbon taxes or outright bans, but the political will to adopt those measures often fall prey to the fear of freeloaders. Country A could impose carbon taxes on its factories, but if Country B does not do so, Country A makes itself uncompetitive, and could lose investments and jobs to Country B, which continues to pollute without consequences.

Given these circumstances, leadership is required to break the impasse, and that leadership must naturally come from the biggest economies, which are often the largest polluters. Without consensus among countries like China, the United States, the European Union, India and Russia, efforts by the smaller countries have little impact on climate change, and may even be detrimental to the smaller countries that take action.

To have a meaningful shot at slowing down climate change, advocates cannot afford to wait for the political climate to change. If politicians are ineffective, then we should look for other avenues.

Beyond the government, businesses are one of the most influential agents of change, especially on cross-border issues. A company can affect the practices not just of its employees, but also its suppliers, customers and investors, wherever they are in the world.

Initiatives such as the Global Compact are reaching out to businesses and providing support and recognition for companies that strive for sustainability. Investors and customers who demand that companies pay attention to long-term sustainability are also applying the right pressure from the demand side. These efforts should be encouraged, and deserve more support.