logo

Wake up daily to our latest coverage of business done better, directly in your inbox.

logo

Get your weekly dose of analysis on rising corporate activism.

logo

The best of solutions journalism in the sustainability space, published monthly.

Select Newsletter

By signing up you agree to our privacy policy. You can opt out anytime.

Leon Kaye headshot

Why Lobbying Disclosures Are the Next Frontier in Transparency

By Leon Kaye
When it comes to lobbying activities and their disclosures, investors at the annual Ceres Conference have made it clear that investors are watching and want action, not just words.

When it comes to lobbying activities and their disclosures, investors at the annual Ceres Conference have made it clear that investors are watching and want action, not just words.

The day before this week's annual Ceres Conference kicked off in San Francisco, I had an opportunity to take a long walk, which ended at the Golden Gate Bridge Plaza. The scenery is beautiful, but gazing at a massive cargo ship (shown above) was a reminder of not only how many goods are transported to and from this region home to over 7 million people, but also the emissions that result from all of those ships, tankers and barges. Add the emissions associated with the area’s traffic and power generation—and tally up similar scenarios around the world—and the math makes it clear that energy companies have to be part of the climate action conversation.

It appears they increasingly want to be. Last month, for example, Royal Dutch Shell generated plenty of headlines when the oil giant announced it will cease membership in the American Fuel & Petrochemical Manufacturers (AFPM) by 2020 due to the lobbying group’s stance on climate change.

As noted by leaders at the annual Ceres Conference, Shell is still a member of various trade and lobbying groups including the U.S. Chamber of Commerce, the American Petroleum Institute and the National Association of Manufacturers, all of which have taken stands on climate change that are often at odds with their corporate members.

Nevertheless, Shell says it has put the trade associations to which it belongs on notice. 

“Shell must remain at the forefront of the drive for greater corporate transparency. We will continue to be more open about what we do and why we do it,” Shell Chief Executive Officer Ben van Beurden said in a public statement. “We want to help people better understand Shell’s performance, values and principles. These reports outline our approach and activities in the crucial areas of sustainability and our relationships with industry associations and governments.”

Some stakeholders may question whether Shell's move is meaningful or not. On one side is the argument is that even if the company ditched one trade association, it is still paying dues for others that spend money to lobby against effective climate change policies. The flip side to that argument is that by continuing membership with a trade association, you still have a voice — one that you forfeit if you’re no longer part of that same group.

“Shell’s action is meaningful because it opens up new frame of debate. It matters what associations do, as it’s your company’s money,” said Timothy Smith, director of ESG shareowner engagement at Walden Asset Management, a sustainable, responsible and impact (SRI) investment firm based in Boston. Smith explained to an audience at the Ceres Conference that by retaining membership within a trade organization, even if a company disagrees with the group’s policy, it retains a seat at the table and can work to change that organization’s stance on important global challenges.

A case in point is the U.S. Chamber of Commerce’s evolution on climate change. Long known as a lobbying behemoth opposed to any meaningful climate action legislation, the leading U.S. business lobbying group has evolved to a more nuanced stance on the private sector's role in fighting climate change. “Inaction is not an option,” is one of the U.S. Chamber’s new tag lines.

Tough stance, evolved stance, nuanced stance or no stance, the sense at Ceres is that companies must harness their influence in order to push lobbying associations to take a more proactive approach on challenges such as climate change. As Smith explained, the argument of “’I’m just a member; I’m not actively involved in that group’—that doesn’t matter anymore.”

The same goes for the explanation that companies have many other reasons to join lobbying groups such as the U.S. Chamber that may have nothing to do with climate change. Responses such as “we disagree with them on energy, but they offer valuable services” also no longer pass muster, Smith said. At a minimum, companies have reached the point at which they need to disclose their lobbying spend and activities to stakeholders. “We’re urging them to take responsibility for what that association does,” he added.

One tactic that could convince companies to remove opaqueness around lobbying costs would be to factor lobbying spends into various sustainability rankings. Earlier this spring, Austin Reagan and Victoria Mills of the Environmental Defense fund noted that only one of the major corporate sustainability indexes recognizes businesses for lobbying on behalf of climate-friendly policies.

In the meantime, Smith made it clear that investors are watching and want action, not just words. “Trade associations need to know we’re patient, but we won’t be patient forever,” he said as he wrapped up his thoughts at the Ceres Conference.

Image credit: Leon Kaye

Leon Kaye headshot

Leon Kaye has written for 3p since 2010 and become executive editor in 2018. His previous work includes writing for the Guardian as well as other online and print publications. In addition, he's worked in sales executive roles within technology and financial research companies, as well as for a public relations firm, for which he consulted with one of the globe’s leading sustainability initiatives. Currently living in Central California, he’s traveled to 70-plus countries and has lived and worked in South Korea, the United Arab Emirates and Uruguay.

Leon’s an alum of Fresno State, the University of Maryland, Baltimore County and the University of Southern California's Marshall Business School. He enjoys traveling abroad as well as exploring California’s Central Coast and the Sierra Nevadas.

Read more stories by Leon Kaye