Pacific Gas and Electric Company transmits and distributes power across a 70,000-square-mile swath of northern and central California that is subject to storm-related floods, rising seas, and wildfires. The San Francisco–based utility has staff to monitor climate-change hazards, including experts in biology, hydrology, and meteorology. And it has Melissa Lavinson.
Lavinson, PG&E’s chief sustainability officer, leads the company’s efforts related to climate change and helps integrate those plans with its business strategy. When the U.S. Department of Energy asked PG&E in April 2015 to gauge its climate-change vulnerability, Lavinson’s team solicited input from across the company, including the science, operations, and emergency management departments. Their report drew upon research PG&E started conducting in 2014 and details the company’s exposure to six key climate-change risks, among them floods, heat waves, and droughts.
PG&E expects the ongoing study to identify gas and electric assets, including substations, that may be vulnerable to extreme weather so the company can develop a response plan.
Across many industries, companies are feeling an impact from climate change, whether through threats to their infrastructure, disruptions to their supply chains, or pressure from socially conscious investor groups and consumers. Some large automotive, energy, food/agriculture, and insurance corporations have in-house climate specialists, but most count on their sustainability departments to manage climate-change issues.
For years, chief sustainability officers were viewed as figureheads focused on philanthropic and community outreach efforts, but in 2011 and 2012, following a string of hurricanes and tsunamis, selecting the right CSO became more important to companies facing activist investors and new government imperatives, says Daniel Kreeger, the executive director of the Association of Climate Change Officers, based in Washington, D.C. “In the past, CSOs were often people who had been at their companies for 20 years, and this was their last job before retiring,” says Ellen Weinreb, who heads a sustainability recruiting firm called the Weinreb Group. “But more recently there’s been a shift to hiring externally and seeking people who have specific sustainability experience.”
Some CSOs at leading companies have advanced degrees in environmental science; others have previously worked in corporate environmental affairs or done jobs at the U.S. Environmental Protection Agency or the U.S. Department of Agriculture. Lavinson, the PG&E CSO, started her career in environmental consulting. Monique Oxender created a program that tracked and reduced the impact of the carbon, water, and raw materials used by Ford Motor Company and its suppliers before becoming Keurig Green Mountain’s CSO. Steve Howard, the Ikea Group’s CSO, has a PhD in environmental physics and ran an environmental nonprofit called the Climate Group before joining the furniture retailer.
Most CSOs make plans in five-year increments to match financial-planning time lines, and they tend to select challenging but practical goals. Under Howard, Ikea has favored bolder commitments. One of his mantras is that “100 percent” targets are often best, as they “create real clarity and unlock a lot of energy in people.” In 2012, for example, Ikea announced that by 2020, using renewable resources, it will produce as much energy as it consumes. The pledge will require multimillion-dollar investments in wind farms and solar installations for the roofs of its stores and distribution centers, on top of the 1.5 billion euros Ikea has already spent on wind and solar since 2009.
Ikea says extreme weather events, such as 2012’s Hurricane Sandy, “validate” its clean-energy projects by showing how climate change disrupts its operations and why companies need to aggressively decarbonize their businesses. Ikea estimates that it lost $9 million in revenue when Sandy-related power outages and flooding temporarily shuttered nine of its East Coast stores.
Climate change is also affecting Ikea’s access to raw materials. Floods in Pakistan, where the company gets 21 percent of its cotton, for example, have damaged local harvests repeatedly in recent years. The company uses a massive amount of natural resources in manufacturing its furniture, bedding, towels, and rugs, including approximately 1 percent of the world’s lumber and nearly 1 percent of the world’s annual cotton supply. These raw materials are often harvested and processed in ways that are not good for the environment and can lead to deforestation and other problems, so since August 2015, Ikea has purchased all of its cotton and half of its wood from recyclers and suppliers certified by nonprofits including the Better Cotton Initiative and the Forest Stewardship Council. One-third of Ikea’s calculated carbon emissions stem from the energy associated with consumer use of its appliances, so the company is also developing energy-saving products. Last August, its stores began exclusively stocking energy-efficient LED lighting.
Ikea’s LED initiative is part of an emerging trend in which companies view climate change as an opportunity for product innovation, rather than just a threat and cost. At Nike, CSO Hannah Jones heads a team that is investigating ways to reduce the company’s reliance on scarce resources such as water. The apparel industry uses 5.8 trillion liters of water each year to dye fabric, and the dye that remains after processing—an estimated 10 to 20 percent—causes pollution when improperly disposed of.
In 2011, Nike said that processing, dyeing, and finishing cotton and polyester for its apparel consumed three billion gallons of water a year. In 2013, Nike adopted a technology developed by a Dutch startup that uses supercritical carbon dioxide (which is a fluid at high temperature and pressure) instead of water to dye textiles. More recently, Jones’s team has been searching for alternative materials to cotton, which is water-intensive to grow.
Howard belongs to Ikea’s nine-member team of top executives and talks with CEO Peter Agnefjäll regularly. “CSOs need to be part of every conversation and have parity with colleagues who are leading business divisions,” he says.