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There are hopes that sustainable business will weather the storm as an unpredictable new president sweeps into the White House
One thing is certain: Donald Trump is unpredictable – he’s neither followed a typical trajectory for those in political office (he has no previous government experience), nor has he toed the party line of the US Republicans (he has changed party affiliations five times since the 1980s). And big business, as a general rule, likes predictability. So how will a Trump presidency affect businesses and their plans for sustainability?
Trump’s intention to cut corporate taxes, and his general dislike of red tape (not to mention his penchant for stocking his Cabinet with lobbyists and loyal outsiders), may turn out to be a boon for business. The US stock market has so far reacted favourably. As far as overall sustainability is concerned, many companies are like big ships – difficult to make a 180-degree turn – and none has said publicly that it will curtail sustainability goals. So sustainability may plod ahead; not leaping forward, though not stalling. However, the uncertainty created by the president-elect’s outsider approach also fosters apprehension for US companies, and over time the momentum to get them to make and stay committed to long-term sustainability goals may falter.
Climate change is thought to be behind events such as this year's Louisiana floods (credit: National Guard)
Climate change denial
During his presidential campaign, Trump was brash and abrasive. He flaunted non-progressive ideals with his racist, sexist, and anti-Islamic hyperbole and tried to intimate – though he later said it was a joke – that climate change is a hoax perpetrated by the Chinese. All of these positions are troubling for social equity goals, but it is the last position, around climate change, that could have the most dire consequences. To many, the changing environment is an indisputable fact, evidenced by extreme weather events such as the catastrophic Louisiana floods in August, and Trump’s stance is a turn away from the scant progress that has been made globally in controlling emissions, stabilising climate, and working on mitigation.
Shel Horowitz, author of Guerilla Marketing to Heal the World, counsels business leaders and sustainability advocates to stay the course. “Social entrepreneurship will flourish even under a Trump administration,” Horowitz says. While he admits federal dollars – such as clean energy tax breaks – may dry up, Horowitz says he believes businesses will simply get more creative with products and services that create social and environmental benefits.
While large US companies may enjoy the increasing tax breaks and decreasing regulation of a Trump era, many are on a sustainability trajectory. Thirty-two percent of US and Canadian companies track their carbon emissions, according to a 2016 Carbon Disclosure Project report. CDP estimates that approximately 85% of companies that track also have set emissions reduction goals.
It seems that a Trump administration could be positive for short-term business growth and US domestic economics. The downside is that this growth may come at the expense of weakened societal stability and environmental equilibrium, as well as unpredictable results in the global trade arena.
Trump's presidency may cause weakened social stability (credit: A Katz)
North American conservatives are feeling pleased that the Republicans now control the US presidency, the Senate and the House. This gives incoming President Trump more political capital and leeway in pushing through his plans than outgoing President Obama had, though it is frequently difficult to ascertain at a detailed level what Trump’s plans are. Pundits have described Trump as “transactional”, meaning that he is always looking to make a deal in terms of win/lose, and without benefit of ideology or history. Perhaps this could be a positive in terms of how the US government, which has only become more polarised, gets things done in future.
President-elect Trump won over his US voting base by promising to ease the pain of working-class Americans who have seen their wages stagnate and their American dream falter. He has promised these voters relief, and plans to provide it by cutting the corporate tax rate from 35% to 15%; by reducing the regulations and oversight on businesses; and by repairing America’s sub-par infrastructure. He hopes these measures will have a trickle-down effect. It’s an idea that former US President Ronald Reagan tried in the 1980s and isn’t a concept many in big businesses argue with, as it increases corporate profits. However, the devil may be in the details, and there’s no agreement among economists that this version of trickle-down economics will work.
In terms of infrastructure, for example, Trump isn’t planning direct investment in new roads, ports, bridges, and airports. Instead, according to analysis by the Economic Policy Institute, Trump’s plan is to provide investment tax credits up to $137bn and equal to up to 82% of the equity investors commit to financing projects. EPI sees a number of potential problems with this, including a system that could hand tax breaks to projects that were already going to be built.
Trump’s plan also has (so far) no mechanism to ensure that really important improvements, like lead-free water pipes for Flint, Michigan, become a reality. In addition, relying on private financing means projects that ensure a return – toll roads, toll bridges – become more likely, while necessary but less revenue-generating big-ticket projects languish. Lastly, trickle-down economics’ track record has been to make the national deficit swell.
Republicans now control the Senate and the House
One area where the economic benefit to business may be less certain is Trump’s promise to kill the possibility of the Trans-Pacific Partnership and to renegotiate the North American Free Trade Agreement. Trump’s “America first” trade talk could spark trade skirmishes – he has suggested a 45% tariff on imports from China, for example – and make US corporations that do business abroad less competitive. It’s also a recipe for trillions more dollars added to the national debt, according to a report from the non-partisan Committee for a Responsible Federal Budget.
The question of how Trump will bring the economic benefits he promises to working-class Americans can be seen in current battle waging with Carrier, an air-conditioning and furnace manufacturer with plants in Indianapolis, Indiana. Earlier in 2016, Carrier announced its plans to move those factories to Monterrey, Mexico, displacing as many as 2,000 US jobs. At a rally prior to his election, Trump claimed a 100% chance of keeping the Carrier plant in the US. After negotiations with Carrier, owned by United Technologies, last month, Carrier announced it had a deal with Trump to “keep close to 1,000” jobs in Indianapolis. Trump enticed Carrier not to move its plant with $7m in tax credits, and a promise to pursue tax relief so that United Technologies might repatriate some of the estimated $6bn in profits the company has stashed overseas. The Carrier deal gives Trump an early victory that is underwhelming in its economic effect, but highly significant in its psychological result. The company still plans to move one Indiana plant and almost 1,300 jobs to Mexico.
Trump has suggested a 45% tariff on imports from China (credit: vector_brothers)
Throwing a wrench into Paris
Trump has said he wants to kill the Paris climate agreement; axe the US Clean Power Plan (CPP) before it gets started; change the mandate of the US Environmental Protection Agency; go for more oil drilling and pipelines; and revive Big Coal. This is not a pretty picture for progressives. The CPP calls for greenhouse gas cuts of 32% in the electricity sector by 2030 (2005 benchmark), and is an important portion of US GHG reduction promises connected with the Paris Agreement. The utility sector has already begun transformational carbon-cutting work: US emissions last year were an estimated 21% lower than 2005 levels, due to a transition to natural gas and away from coal-fired generation, according to Jeffrey C Peters of Stanford University. Peters says continuing to phase out coal is of utmost importance, and doubts that Trump’s plan to halt the so-called war on coal can actually change the market forces making natural gas cheaper.
There are many ways for Trump to throw an important wrench into the carefully negotiated Paris climate agreement, however. According to John Upton of the non-profit group ClimateCentral.org, he can use a provision in the agreement after one year to withdraw the US without any legislative approval. Alternatively, Trump can simply refuse to fund the UN Framework Convention on Climate Change Programmes.
So far, businesses that were committed to the Paris Agreement have stayed firm – a group of 360 companies, including Kellogg Co., IKEA North America, and Levi Strauss & Co sent a letter to President Obama and President-elect Trump restating their commitment to building a low-carbon economy.
One other area that Trump has said is a high priority for him is reducing business regulations, as well as loosening enforcement of existing rules. This would likely usher in a new era of short-term profits over long-term sustainability, though the risk of another financial crisis looms. The mortgage meltdown and crisis of 2008 was global, yet originated in the US. Rules that evolved after the crisis were to help avoid a similar future scenario, and many of them are contained in the Dodd-Frank Wall Street Reform and Consumer Protection Act. Trump has said he wants to repeal Dodd-Frank, leading observers such as former representative Barney Frank to predict a return to the “good old days” in which financial entities enjoyed a free reign but risks of economic fluctuations or crashes grew.
Trump wants to revive Big Coal (credit: Rudmer Zwerver)
For the time being, no company has publicly declared that a new Trump administration is changing its sustainability plans. Take GOJO Industries, maker of Purell sanitizers and headquartered in Ohio. GOJO is a private company, with no requirement to report on internal sustainability initiatives. Yet global sustainability marketing director, Nicole Koharik, says stakeholders drive GOJO’s goals. After a 2015 materiality analysis, GOJO made an industry-first goal to cut its chemical footprint by 50% by 2020.
“Why our goals will not change going forward is that they are driven by our purpose, and because they are smart business,” Koharik said, adding that responding to stakeholder concerns is what lets GOJO know it on the right track. And while GOJO doesn’t have a specific carbon emissions reduction goal – it reduced operational emissions by 46% by 2015 based on a 2010 baseline – it does plan to install a solar array on its distribution centre by 2020. GOJO’s approach lends support to the view that low oil prices and the clean energy evolution taking place can’t be stopped by Trump’s plans for a wholesale fossil fuel/coal revival.
Kelly Vlahakis-Hanks, CEO of Earth Friendly Products, headquartered in California, says nothing will change for her company’s deep-green approach. “We don’t know what policy changes the Trump administration will implement,” Vlahakis-Hanks says, “but we’ll continue to support the longstanding policies that have been good for the environment and for health.”
Trump doesn't display a penchant for philanthropy (credit: Igor Sh)
Scant CSR credentials
Predicting the future by plundering the past is tricky. In the case of President-elect Trump, this is made more difficult by his lack of a coherent political ideology, his unpredictable approach, and his well-documented penchant for lying. What is known is that Trump doesn’t display much of a penchant for philanthropy or sustainability. He is often referred to as the least charitable billionaire, and the sustainability credentials – such as LEED certifications or reporting – of his real estate holdings are thin. This will likely have reverberations throughout the business community. Renowned sustainability consultant, John Elkington recently said he thinks the uncertainty from both Brexit and a Trump administration will cause some companies to “tread water or even drift backwards”.
EFP’s Vlahakis-Hanks says she thinks successful companies will be those that stay steadfast in sustainability action for the long-term.
“Even if US leadership doesn’t make calls for sustainability,” she says, “the global market will still be demanding more sustainable options, and smart businesses will work to meet that demand.”
This is issue 1 of our top 10 issues that shaped sustainability in 2016. To see the full list, click here.