Auto industry: Ford faces up to climate change

At the prompting of shareholder activists, Ford Motor Company closed out 2005 with a report to address the impacts of climate change on its business and detailing actions the company plans to take to manage both its associated risks and opportunities. It is a first for the auto industry, but some of Ford’s critics question whether the company’s actions match the report’s rhetoric.

Bill Ford, the Detroit auto giant’s chief executive, says his company sees climate change as a business and environmental issue and pledges that it is accelerating its efforts to find solutions. But he asserts that solving climate change problems “will require collaborative action across all sectors of our society”, something that he commits Ford to “do its part” toward.

With the report’s release, the company says it hopes to contribute to public dialogue on “the decisions, tradeoffs and actions required to address climate change concerns”.

Ford says it will work with industry partners, oil companies and policy makers to “establish an effective and more certain market, policy and technological framework” for reducing greenhouse gas emissions.

Internally, the company has committed to reducing greenhouse gas emissions and energy use in its operations, as well as to enhancing its “flexibility and capability” to market lower greenhouse gas emissions products that will be appealing to consumers.

Follow the leader

The Connecticut State Treasurer’s Office, the Ceres coalition and the Interfaith Center on Corporate Responsibility (ICCR) were among the investors behind the since-withdrawn 2004 shareholder resolution that prompted the report. They say that despite disappointment in the lack of specific targets for reductions in greenhouse gas emissions from its products, Ford has taken “an important step”.

The investors are pleased with Ford’s acknowledgement of climate change as a serious business issue and with its call for national policy action to end regulatory uncertainty.

Patricia Daly, executive director of the Tri-State Coalition for Responsible Investment and lead filer of the shareholder resolution for ICCR members, says Ford has “provided an important service” for investors, the auto industry and US citizens by “tackling the complexities and challenges of global warming head-on”. She says Ford’s commitment to take a leadership role in seeking policy solutions is particularly welcome.

Mindy Lubber, president of Ceres, agrees and predicts Ford may be offering a “winning recipe that would allow all US companies to move full-throttle into the clean energy economy”.

As a long-term investor, Connecticut state treasurer Denise Nappier says she hopes that, where Ford leads, others will follow. ICCR and other investors certainly plan to seize on any momentum Ford’s report generates within the industry and say they will be pressing General Motors, beginning with a shareholder resolution, to take similar steps.

Token solutions?

But some environmental groups criticise Ford for not setting more specific targets for reducing emissions and say the company’s actions don’t meet its climate change rhetoric.

The Sierra Club says that Ford appears to be adopting an image of corporate responsibility with its climate change report. But the environmental group also points out that, at the same time, the company is suing to stop efforts in California and other states to enact greenhouse gas vehicle emissions regulations.

Dan Becker, director of the Sierra Club’s global warming programme, warns Ford is “claiming to be responsible, while acting irresponsibly”. He argues that Ford has “failed to adopt more than token solutions” and his group calls the company’s first corporate climate change report “another example of corporate rhetoric trumping reality”.

To drive home its point, the Sierra Club has joined a coalition of other environmental and consumer groups, including Bluewater Network, Global Exchange, the Rainforest Action Network (RAN) and US PIRG. This collective is running adverts that question Ford’s commitment to curbing global warming in light of its opposition to legislation “enacting policies that encourage the very solutions being identified by the company”.

Neil Golightly, director of sustainable business strategies at Ford, says that while the automaker supports tougher standards, it does not back a state-by-state approach, which it says complicates compliance and unrealistically raises costs for companies.

The blog of one RAN member says, however, that a variety of regulations has not stopped Ford from operating in 200 markets around the world or from meeting emissions reductions targets in signatory countries of the Kyoto protocol. Ford has a good team working on the issue of climate change, she writes, but when it comes to government policies, it “lobbies and litigates rather than advances a vision to match the innovative work done on this report”.

For some of the activists, this is another example of a big firm separating its corporate responsibility department from key strategy and lobbying activities.

Hybrid greenwash

Ford has also been criticised about its plans to produce more hybrid-electric and ethanol blend-capable vehicles. Environmental groups have labelled the commitments “greenwashing” and have called instead for action to improve the fuel economy of the rest of its fleet of vehicles.

Golightly defends Ford’s approach, saying the company understands that the future of its business relies on shifting from a fossil-fuel model to more sustainable options. But he stresses that Ford “can’t afford to arrive at that future before consumers are willing to make the leap with us”. Any solution, he says, needs to consider fuel choices and the driving habits of customers.

To begin to change these habits, Ford has also said it will launch a training programme, beginning with its own employees. This will teach drivers fuel saving techniques, such as keeping tyres properly inflated.

Golightly, however, candidly warns that those looking for “eureka” solutions or overnight transformations will not find them in Ford’s report. But he offers assurance that the company sees climate change issues as “important to its long-term business competitiveness” and that it views these challenges with “potential for innovative business opportunities in solving them”.

The most telling indicator of the true impact of Ford’s report and the company’s approach to climate change may well be the pressure it puts on others, including GM and Washington, to take action to reduce greenhouse gas emissions.

With or without the sincerity of action investors and activists were hoping for, as the number three automaker, Ford’s report certainly questions the standard “head-in-the-sand” approach to climate change adopted by many firms in this key industry so far.

The numbers behind the rhetoric

• Ford factories worldwide produced 8.4 million metric tonnes of CO2 emissions in 2004.

• According to the Union of Concerned Scientists, Ford cars and trucks sold in 2003 will produce about 350 million metric tonnes of CO2 over their lifetime.

• The automotive industry is responsible for 20% of greenhouse gas emissions in the US and 12% worldwide.

• Ford has committed to reduce CO2 emissions at its North American plants by 6% and to produce 250,000 hybrids annually by 2010.

• California’s Clean Car law would require a 30% reduction in greenhouse gas emissions from vehicles by 2016.

Useful links:
www.ford.com/go/sustainability
www.ceres.org
www.sierraclub.org