Corporate climate policy engagement: A briefing for board directors

Conducting corporate climate policy engagement (also known as advocacy or lobbying) positively and appropriately is critical to creating the conditions that will enable a company to achieve its net zero transition. This briefing, produced by the Climate Governance Initiative in collaboration with the global think tank InfluenceMap, highlights the key issues that board directors should be aware of.

The Climate Governance Initiative enables board directors to serve as effective advocates for the adoption of a comprehensive corporate climate transition strategy consistent with the goal of reaching net-zero carbon emissions by 2050 or before. This strategy should align with the goals of the Paris Agreement, in particular, keeping average temperature increases within 1.5°C above pre-industrial levels, as reiterated in recent reports by the Intergovernmental Panel on Climate Change (IPCC). To support this, board directors can promote responsible lobbying efforts on climate and ensure that the policy engagement of their companies aligns with, and supports, the delivery of their respective corporate climate transition strategies.

This briefing should be read alongside the range of additional resources produced by the Climate Governance Initiative, which have been produced to support board directors in their climate transition efforts, including the World Economic Forum’s Principles for Effective Climate Governance and guidance on core topics such as risk management, strategic planning, remuneration, reporting, human capital and stakeholder engagement.

Climate Policy Engagement – Background

What is climate policy engagement? In 2014, a group of UN agencies published the UN Guide for Responsible Corporate Engagement in Climate Policy. This defines policy engagement as consisting of a broad range of corporate activities beyond what is conventionally considered lobbying. These range from advertising, social media, public relations and sponsoring research, to direct contact with regulators and elected officials, funding of campaigns and political parties and participation in policy advisory committees. All are part of a strategic corporate effort to influence government policy around climate change (or any policy area) and the public discourse in which it is formed.

The way corporations influence government policy is variously described as “advocacy”, “policy engagement” (used in this briefing) or “lobbying”. These processes are typically carried out by sections of the company termed “Government Relations”, “External Relations”, “Public Affairs/Relations”, “Legal”, and “Communications”.

What is at stake? The UN’s climate science body, the Intergovernmental Panel on Climate Change (IPCC), has been unequivocal about the need for strong and binding policy on climate from governments. The IPCC’s special report Global Warming of 1.5°C (2018), noted that moving towards 1.5°C pathways implies “stringent and integrated policy interventions.” The IPCC’s Mitigation of Climate Change report (2022) identified “opposition from status quo interests” and “incumbent” fossil fuel interests “exerting political influence” over the policymaking process as a key barrier to progress towards delivering the Paris Agreement’s goals. This finding has also been identified by international organisations, such as the OECD in its 2021 report Lobbying in the 21st Century, and by political leaders, including Barack Obama, former Executive Secretary of the UNFCCC Christiana Figueres, and the current UN Secretary-General Antonio Guterres. While overt climate denial from the fossil fuel sector is largely in the past, modern-day tactics to delay regulatory change and confuse the public narrative continue unabated.

Key considerations for board directors

A supportive policy environment will make it easier for companies to realise their climate transition strategies. Climate change is inherently systemic in nature, and therefore does not lend itself well to being assessed and managed by boards in the same way as many other business risks. Unless the policy environment evolves positively to enable and reward significant changes in technology and business practices, and conversely to penalise business-as-usual practice and minimise the disruptive effects of poorly-managed change, boards and companies’ individual efforts will not succeed in delivering the enhanced resilience and commercial success that even the soundest climate transition strategy seeks to achieve.
Board directors should ensure that their companies, whether large or small, adopt a proactive, transparent and constructive voice in public policy-making and broader societal engagement, when acting both individually and through business associations and other collective initiatives. This will serve to ensure convergence between the organisation’s net-zero goals and the enabling environment needed to deliver these outcomes.
Board directors should ensure that their companies’ policy positions, as well as those of their membership organisations and external corporate coalitions, are conducive to achieving a supportive environment for high priority climate policy interventions^[1]. In its special report Global Warming of 1.5°C, the IPCC outlines the policies needed to support mitigation pathways that can hold temperature rise to 1.5°², and projects such as Climate Action Tracker highlight the enabling conditions across key sectors that are in line with this³. This provides useful context for boards when considering which policies and initiatives are most relevant for the delivery of their companies’ climate transition goals.
A growing number of climate-ambition initiatives highlight the critical role of responsible corporate lobbying in reaching positive climate outcomes. For example, the updated Race to Zero criteria require members to “align their lobbying and advocacy activities with net zero by proactively supporting climate policies at the subnational and national level”. Likewise, the UN Secretary-General´s expert group on net-zero commitments of non-state entities recommends: “non-state actors must align their external policy and engagement efforts, including membership in trade associations, to the goal of reducing global emissions by at least 50% by 2030 and reaching net zero by 2050”.
Reflecting the increasing scrutiny of climate engagement as part of a company’s overall net-zero strategy, a new Global Standard on Responsible Climate Lobbying– created by institutional investors in consultation with investors, companies and civil society groups – has been launched to drive a step-change in investors’ and organisations’ commitment to responsible climate lobbying. The 14-point Standard calls on companies “to make formal commitments to responsible climate lobbying, to disclose the funding and other support they provide to all trade associations involved in climate change-related lobbying and to take action if lobbying activity undertaken by them, or their trade associations, runs counter to the goals of the Paris Agreement.” Investors supporting the Standard commit to “championing responsible lobbying activity, while engaging – potentially including the filing of shareholder resolutions – with those companies whose lobbying practices do not align with the Standard.”
Despite rising corporate climate ambition, it is not unusual for companies to make ambitious climate commitments that are then inconsistent with, or actively undermined by, the lobbying policies of the trade associations of which they are members. Sometimes this inconsistency resides even within their own public affairs or government relations departments, especially if they operate globally in highly diverse policy environments. In fact, research by InfluenceMap, analyzing around 200 of the world’s most influential industry associations shows that their activity is often at odds with that of many of their more climate-ambitious corporate members. Boards should have clear oversight systems to avoid such misalignment, as it can pose significant risks to companies, including:
- Reputational risk: scrutiny by the media, civil society and investors is increasingly focusing on the potential incidence of “greenwashing”, and in this case the risk that corporate communications to various audiences may conflict with positions taken with policymakers. In some markets, escalation tactics exercised by investor initiatives and activist shareholders (for example, resolutions filed at AGMs in the US to pressure companies to be more transparent or change their practices), are increasing year-on-year and attract wide-ranging attention.
- Legal and climate litigation risks: In 2022, a group of investors filed a legal case against Volkswagen after the company refused to reveal crucial information on its climate policy engagement activities. This case shows the legal risks companies may face when championing a ‘green’ transition publicly whilst undertaking lobbying activities that run counter to their climate ambition.
Because of these inherent risks, it is appropriate that the policy engagement agenda be set at board level, with direction from the CEO or Chair. Despite this, InfluenceMap’s research has found that disclosure regarding the policy engagement process or the oversight exercised by their boards, is largely lacking.

What questions do board directors need to ask related to corporate climate policy engagement?
Board directors need to understand their company’s positioning on climate policy, and their oversight role should extend to ensuring that this positioning supports the delivery of the organisation’s climate goals and transition strategy. The following questions provide a useful guide for board directors:

What climate policy engagement has taken place and/or is planned by the company?
Are these policy positions consistent with a climate transition strategy that is aligned with net-zero by 2050, as per the analysis and guidance of the IPCC?
Where are decisions around climate policy engagement taken, and has the company assigned responsibility at board level for oversight of climate policy engagement policies and practices?
Has the board mapped all the different channels of influence through which the company seeks to engage on climate policy, including via policymakers and other key actors in business, academia and civil society, via social media, PR, advertising and sponsorship of research; and does management report periodically on its engagement with such actors? Does the company regularly monitor the policy positions of its membership organisations to ensure alignment? What actions does it take if and when it spots inconsistencies, and how is the board kept informed? Is there an ongoing process of review?
Does the company report to the board on how its public policy activities across all jurisdictions have been executed? What role does the board play in ensuring consistency at group level?
What disclosures does the company make regarding its individual climate policy engagement, its alignment with industry associations, and any remedial actions taken to address potential inconsistencies between the two?

Best practice

Best practice in respect of public policy engagement on climate change can be summarised as follows⁴:

Positive engagement: As part of the company’s application of the Principles for Effective Climate Governance published by the Climate Governance Initiative and the World Economic Forum, boards should ensure that policy engagement activities, rather than being a barrier, are positively aligned with the Paris Agreement’s net-zero by 2050 goal, consistent with the IPCC’s 1.5°C maximum temperature increase and interim targets.
Aligned engagement: All aspects of climate policy engagement should be strategically aligned behind this position. The full spectrum of what constitutes climate policy engagement is contained within the UN Guide for Responsible Corporate Engagement (2014), and covers advertising, social media, public relations and sponsoring research, as well as direct contact with regulators and elected officials, funding of campaigns and political parties and participation in policy advisory committees. Board oversight should ensure that all climate policy advocacy undertaken across the company’s different subsidiaries and regional businesses aligns with the board’s approved climate transition strategy, including on policy engagement. Significant misalignments between companies and their membership associations continue to arise in respect of climate policy engagement. Boards need to be kept regularly informed of the extent to which alignment is being maintained, and of the monitoring and remedial measures being taken, such as auditing of industry group networks, timelines and plans for resolving potential misalignments, and disclosure to stakeholders

Best practice in this area relates directly to the following principles set out in the Principles for Effective Climate Governance:

Climate Accountability: Taking responsibility for the company’s long-term resilience to climate risks
Strategic Integration: Ensuring that management factors material climate-related risks into the company’s strategy
Reporting and Disclosure: Transparency around material climate related risks including to investors and the public
Exchange: Staying informed on current best practice in climate governance by maintaining dialogue with policy makers and policy influencers

Appendices

InfluenceMap maintains the world’s leading database assessing corporate climate policy engagement (LobbyMap), covering over 500 companies and 250 industry associations globally. Live ranking tables, with access to company profiles that contain company metrics, summaries, industry association membership mapping, and full access to the data underlying the assessments can be found on the LobbyMap website. This datafeeds into the Climate Action 100+ investor stewardship program, the largest in history with 700 financial institutions representing $68Tn in assets.
In addition, InfluenceMap offers the following resources to companies, investors, NGOs, policymakers, and other stakeholders:

LobbyMap’s regional and sector platforms which enable users to track regional, policy or sector-based climate policy engagement trends in real time.

Weekly LobbyMap Updates: Weekly alerts to capture how companies and industry associations are attempting to influence live climate-related policy updates in real- time (available here and by weekly newsletter).

Corporate Lobbying Reviews: Analysis of advance disclosures and reviews produced by companies on their climate policy engagement activities, benchmarked by InfluenceMap against investor expectations, including individual company scorecards (e.g. Toyota), anaccount ofexisting climate policy engagement disclosures from companies, and best practice guidance for companies undertaking reviews.

Shareholder Resolutions: Briefings on companies facing shareholder resolutions on climate policy engagement to inform voting decisions (e.g. Woodside, Volkswagen), as well as voting analysis of past proxy seasons.

Reports and Briefings: InfluenceMap generates timely and topical content on a variety of themes around corporate climate policy engagement focused on specific entities, sectors, regions, and/or issues (e.g. U.S. Chamber of Commerce, Japanese and South Korean Steel Sectors, EU Green Deal vs. Fossil Gas Industry). For example, their 2021 A-List of corporate climate policy engagement is available here.

Appendix B: Initiatives and resources on responsible corporate policy engagement on climate change

Name	Type	Description
The B Team’s trade group misalignment toolkit	NGO	We Mean Business’s toolkit offers a “menu of options’ for companies to consider in improving the climate policy engagement of their industry associations. Possible steps include developing clear asks for the industry association, and convening with other companies to leverage change.
CLG Europe’s Advocacy Toolkit for Business Climate Leaders	Business Coalition	CLC Europe maintains an Advocacy Toolkit to help companies stay up to date on progressive business practices, current policies, and advocacy opportunities in the EU. The Toolkit provides examples and quotes from companies illustrating best practice, with an emphasis on direct corporate advocacy rather than industry association alignment.
BSR’s Transform to Net Zero Climate Policy Engagement Transformation Guide	Business-led	In July 2022, Transform to Net Zero published their ‘Climate Policy Engagement Transformation Guide’ as part of a wider series of ‘Transformation Guides.’ In the report, the Environmental Defense Fund, Microsoft, and Unilever outline their approach to climate policy advocacy.
AAA Framework for Climate Policy Leadership	NGO	In 2019, 11 NGOS including Environmental Defense Fund (EDF), Ceres, Union of Concerned Scientists, and others jointly launched the AAA Framework for Climate Policy Leadership. According to the AAA framework, companies should: • Advocate: Advocate for Paris-aligned climate policy. • Align: Align the lobbying of their industry associations with the goal of net-zero emissions by 2050. • Allocate: Allocate political giving and funding of third-party organizations with Paris-aligned advocacy.
Race to Zero	NGO/campaign	Race To Zero is a global campaign to rally leadership and support for net-zero from businesses, cities, regions, investors, and other non-state actors. In 2022, Race to Zero introduced a new entry criteria, focusing on policy engagement. This stipulates that within 12 months of joining, companies and other non-state actors must align external policy and engagement, including membership in associations, to the goal of halving emissions by 2030 and reaching global (net) zero by 2050.
Corporate Knights’ Action Declaration on Climate Policy Engagement	Business-led	In November 2022 at COP27, 57 companies signed on to the Action Declaration on Climate Policy Engagement convened by Corporate Knights and the Global 100 Council. The signatories are primarily corporate leaders in sustainability that have already made significant strides in decarbonization. By signing the Declaration, the companies agree to: • Support climate action aligned with the Paris Agreement when engaging with policymakers • Work with their major industry/trade associations to advance alignment with the Paris Agreement • Monitor and disclose climate policy alignment between them and their major industry/trade associations
The Global Standard on Responsible Corporate Engagement on Climate Change Policy	Investor-led	The Global Standard on Corporate Climate Lobbying, launched March 2022, was instigated by investors to drive a step- change in the commitment of investors and companies to responsible climate lobbying. It was developed with the input of more than 150 stakeholders from a range of professional backgrounds and regions. The Global Standard’s 14 indicators cover high-level commitments to align all direct and indirect policy with the goal of restricting global temperature rise to 1.5⁰C above pre-industrial levels, as well as a range of governance and oversight processes to ensure this is being done effectively.
The UN PRI’s The investor case for responsible political engagement	Investor-led	The UN PRI’s 2022 paper sets out the investor case for responsible corporate political engagement. We explain why investors working towards sustainability objectives must ensure that their portfolio companies are conducting political engagement in a responsible manner.
The UN Global Compact and 2013 Guidelines on Responsible Climate engagement	UN-NGO-Corporate Partnership	The UN Global Compact asks companies to engage responsibly in climate policy, including adopting core elements of legitimacy, opportunity, consistency, accountability, and transparency. Specifically, they ask companies to: • Identify the risks, opportunities, and influences on your climate change policies • Align your internal practices and external messages • Report publicly on climate change policy influences The UN’s 2013 Guide for Responsible Corporate Engagement in Climate Policy sets baseline expectations for companies to provide proactive and constructive input to Governments to advocate for the creation of effective climate policies. Core elements of responsible corporate engagement in public policy are laid out in three practical action items; 1) Engage for Legitimacy and Opportunity 2) Align for Consistency and Accountability 3) Report for Transparency.
We Mean Business’ vision paper on responsible policy engagement (RPE)	NGO	WMB released a vision paper on responsible policy engagement at COP27 in 2022. Their aim is to create a new global framework for companies that maps and integrates existing resources and tools businesses need. To deliver this, they have created an RPE Taskforce, made up of the Coalition partners and other expert groups in this field like the UN High Level Champions, InfluenceMap, the Science Based Targets initiative (SBTi) and others.

Appendix C: The Climate Policy Landscape

Figure 1: Climate policy engagement performance of companies (copyright InfluenceMap)

Figure 2: Climate policy engagement performance of industry associations (copyright InfluenceMap)

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References

[1] In the US, for example, although the ambitious Inflation Reduction Act only had a short window for engagement, it garnered support from several major companies including Walmart and Ford.

[2] See Chapter 2, pp 148-151 SR15_Chapter_2_LR.pdf (ipcc.ch)

[3] See the ‘commonly cited enabling conditions’ on pp. 17-20 2022-10-26_StateOfClimateAction2022_kR0sbBZ.pdf (climateactiontracker.org)

[4] InfluenceMap’s benchmarking of the best-performing companies in relation to public policy engagement practices is listed under Appendix A.