Fancy also mentions that there is an argument to be made for the positive sustainability impact of, for example, “a climate tech venture capital fund or some breakthrough ventures fund. Because if you didn’t invest in it, that fund wouldn’t exist, depriving innovators of the direct, primary funding they need to build the solutions that society needs right now.” There are numerous large corporations that have engaged in funding like this - not least Blackrock with its $100 million grant to Breakthrough Energy’s Catalyst Program. While $100 million is a lot of money, it is equivalent to only 0.01% of Blackrocks overall assets under management.
The companies who signed the Business Roundtable statement supporting pricing carbon could simply obligate politicians to support pricing carbon if they want to receive campaign donations. This would likely have a much greater impact than individual corporations taking voluntary measures to tackle climate change, because it would incentivise or force everyone to take such measures.
That being said, there is a lot that private entities and individuals can do, and are doing - in some instances they might be better equipped than governments. For example, private businesses can have greater freedom in procuring goods and services from suppliers by taking into account social impact, whereas the public sector often has stricter procurement requirements in favouring one firm over the other to prevent those spending public money from engaging in corrupt favouritism.
Nevertheless, there are good reasons to be skeptical of the current approach towards the ESG boom in the stock market and the Business Roundtable statement on stakeholder capitalism. Instead of embracing it, cooperatives and mutuals should seek to challenge it - and make the case that instead of voluntary actions, we need structural change of economic incentives to change behaviour.
For example, Vanguard has not moved towards ESG ETFs anywhere near to the extent as Blackrock. Instead of competing with Blackrock on ESG ETFs, perhaps it could consider a marketing campaign where it warns its customers about dubious claims of ESG ETFs and instead outcompetes Blackrock and other peers on lobbying more aggressively for government measures to stop polluting being profitable. While from a marketing perspective this sort of an approach could go wrong, it depends on the execution. Many might criticize Vanguard for making money from oil companies while supporting measures to move away from fossil fuels. However, if Vanguard’s marketing team would play its cards right, customers might perceive it as more honest and impactful than its competitors. They would also have a more accurate perception on how to effectively tackle climate change - as opposed to their competitors, whose ESG marketing is misleading people into believing what Fancy describes as the “dangerous illusion” of corporate self-regulation being the solution.
Cooperatives have played a pioneering role in lobbying for consumer protection laws in numerous countries. (Theien, 2016, Webster et al. 2020) Perhaps environmental protection laws could be the next area where cooperatives should focus more of their lobbying efforts towards. While this area of legislation might seem less obvious than consumer protection legislation (at least for consumer cooperatives) there is a historical precedent of the movement playing an unique role in other areas of legislation as well. One notable example is labour rights laws in Nordic countries, which are arguably the strongest in the world.
The labour movement in Nordic countries has historically been deeply involved in building a large cooperative sector. It played an important role in organising consumer-owned grocery stores, banks and insurance companies, many of which have developed into large and even leading businesses in their respective industries.
In the early 20th century, the relationship between the labour movement and consumer cooperatives faced a similar choice when it came to labour rights as the environmental movement and consumer cooperatives face today when it comes to environmental protections. Because one of the key goals of the labour movement was to increase wages for workers, many in the movement advocated for grocery store cooperatives to pay higher wages for their workers than the rest of the sector. This represents an approach where an individual enterprise takes voluntary action within the existing competitive circumstances that are derived from laws on wages, working conditions, etc.
However, the labour movement realised that, all else being equal, it would lead to the cooperative stores being at disadvantage compared to its competitors and instead took another approach. The working conditions were made to be exemplary while the wages were set at roughly the same level as those of competitors. Next, the cooperatives would help lobby for wage increases across the retail sector and society. As one very direct manifestation of this, there are many instances of employers firing strikers or other union organisers, only for the organisers to be hired by cooperative stores affiliated with the labour movement. This sort of help played a crucial role in enabling it to implement sectoral bargaining agreements that raised wages across entire industries, reducing income inequality to lower levels than in any other market economies.
It also gave critics an easy opportunity to score shots at the cooperatives for “not practising what they preach”. Nevertheless, it could be argued that the approach fostered structural change that increased wages more than what “practising what they preached” would have. A less competitive and therefore less powerful cooperative branch of the labour movement would have reduced the movement’s ability to increase wages across the society. These wage increases might have far surpassed any that an individual cooperative could alone afford to give to its employees. For exactly the same reason, why voluntary actions by individual corporations are less effective in solving climate change than changing the rules and incentives for every company in the market.
Lobbying for stricter environmental regulations could be done avoiding partisan party politics and ideological associations if that would be more suitable for the cooperative. For example, the “Economists’ Statement on Carbon Dividends” advocates for pricing carbon by taxing it and distributing the proceedings as a dividend to all US citizens, similar to universal basic income. The statement has been signed by 28 Nobel Laureate Economists and nearly every living Republican and Democratic chair of the Council of Economic Advisers.
The cooperative movement could organise something similar, where a bipartisan group of top experts would produce a statement establishing minimum requirements on climate action from politicians that receive donations from cooperatives. Perhaps it could be even combined with a “members council”, where a randomly chosen panel of ordinary members would discuss together with experts on what proposals for environmental legislation the cooperative should support.
There is of course a lot that individual cooperatives can do within the existing regulatory framework to tackle climate change. In doing so, they might have advantages over their competitors - cooperatives have a longer time frame than quarterly profit and have a fiduciary duty to benefit members rather than maximise profits for shareholders, which can give them more flexibility in taking into consideration environmental concerns.
While cooperatives might have some benefits compared to conventional companies in tackling climate change, they cannot solve the key problem of polluting being profitable. They can be forerunners in their respective industries, but the ecological progress a cooperative can make is limited by competitive pressures derived from existing framework of laws, tax incentives, etc. There is plenty of room to manoeuvre within this framework - but not enough for cooperatives to take actions consequential enough to match the urgency that the climate emergency demands. While the primary purpose of the cooperative is not to engage in making policy, cooperatives have often stood out in the history of corporations lobbying for legislation that corrects for market failures. The moral duty to do so is now greater than ever: climate change is the greatest market failure in human history. When it comes to climate action, cooperatives should differentiate themselves with disproportionate focus on lobbying for changing the rules of the game rather than just trying to do their best to act against incentives the existing rules create.
Although ESG ETFs are exploiting consumer preferences for environmental sustainability with greenwashing and marketing, this should not lead us to conclude that those preferences aren’t or couldn’t also be channelled into spending that makes the economy more sustainable. Although there are good reasons to be cautious about the actual impact of announcements around stakeholder capitalism, it demonstrates that even those who have benefited from the conventional shareholder maximising firms the most are now publicly denouncing, not defending, the core principles behind the model.
Cooperatives should be humble and honest when it comes to environmental sustainability and avoid overpromising and underdelivering. It is the most pressing issue of our time, and demands more drastic action than can be expected to be voluntarily taken even by the best-intentioned enterprise within the current set of ill-designed incentives. It is a problem that first and foremost requires regulatory reform, and cooperatives should act accordingly by “outcompeting” their peers by lobbying more aggressively for legislation to make polluting less profitable.