Transnational corporations increasingly align business models to support stable planet

Some of the world’s largest transnational corporations are changing their business models to acknowledge their impact on climate and biodiversity, according to a new paper co-authored by Stanford environmental scientist Eric Lambin. The analysis, published in the journal Nature Ecology & Evolution, indicates a significant shift in corporate values. But accelerating these positive trends will require tougher legislation, according to the researchers.

"Given that large transnational corporations have played a central role in environmental degradation for many decades, they also need to be part of today's quest for solutions," Lambin said. "To create transformation at scale, a major challenge is to ensure that solutions are adopted by entire sectors and not just by the few most progressive companies."

The authors collated evidence from previous studies of the dominance of just a small number of transnational companies in industries such as agriculture, forestry and fisheries. These industries drive overfishing, Amazon deforestation and other environmental change. For example, one hundred companies account for 70 percent of the world's greenhouse gas emissions. Four companies control 84 percent of the agricultural pesticides market. Ten companies account for 25 percent of the total paper and board production. And five companies account for 48 percent of global farmed Atlantic salmon.

The authors identified six observed positive signs of change in corporate values and government legislation towards ‘Corporate Biosphere Stewardship’:

1. Alignment of vision. New norms are emerging among some of the largest corporations. Fifty-two percent of a sample of some 450 companies in the food, wood-products and textile sectors that are listed on the twelve largest OECD stock exchanges, use at least one sustainable-sourcing practice.
2. Mainstreaming sustainability. In a sample from 2018, more than 70% of some 730 global companies mentioned the SDGs and 27% included them in their business strategy.
3. License to operate – governments increasingly create legal requirement for large companies to identify and prevent abuses on human rights and the environment along global supply chains.
4. Financing transformations – major pension funds and other institutional investors are beginning to redirect capital away from unsustainable practices and towards biosphere stewardship;
5. Radical transparency
6. “Evidence-based knowledge for action” – science-business collaboration is becoming increasingly common and important to ensure that companies’ sustainability agendas are framed by science rather than the private sector alone, for example the Science-Based Targets initiative for climate which now has over 500 companies on board.

“Sustainability is no longer perceived as a choice among these companies. It is becoming  institutionalized and increasingly recognised as a necessity,” said lead author Carl Folke, director of the Beijer Institute for Ecological Economics.

While positive signals can be detected, the authors emphasise that without stronger regulations, voluntary corporate social and environmental responsibility will only drive slow change.

Related

Climate mitigation could yield trillions in economic benefits

Stanford scientists found that the global economy is likely to benefit from ambitious global warming limits agreed to in the United Nations Paris Agreement.

Stanford Earth Matters

"The big, complex problems humanity is facing today will only be solved through coalitions of public, private and civil society actors," Lambin said.

The researchers also dwell on the risk for market concentration and corporate power to act as roadblocks. Transnational companies have used their power to lobby regulators to weaken environmental and social standards.

“In the face of insufficient environmental agreements and regulations, dominance poses a threat to sustainability. For instance, companies able to set barriers to entry in a sector can stifle sustainable practices and technological innovation in general,” they write.

Global-scale corporate biosphere stewardship they suggest will only be possible if governments provide “a regulatory context that safeguards non-market ecological and social values”.

Lambin is the George and Setsuko Ishiyama Provostial Professor in the Department of Earth System Science within Stanford’s School of Earth, Energy & Environmental Sciences; a senior fellow in the Stanford Woods Institute for the Environment; an affiliate of Stanford’s Center on Food Security and the Environment; and a professor at the Université Catholique de Louvain in Belgium. 

The paper was also led by researchers from the Stockholm Resilience Centre of Stockholm University. This story was adapted from the original press release by Stockholm Resilience Centre of Stockholm University.

Media Contacts

Danielle T. Tucker
School of Earth, Energy & Environmental Sciences
dttucker@stanford.edu, 650-497-9541

Eric Lambin
School of Earth, Energy & Environmental Sciences
elambin@stanford.edu