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Striving for More than the Bare Minimum in Corporate Environmental Leadership

By Sanjana Bajaj

There has been a growing need for environmentally conscious business decisions; however, we mostly only see companies trying to get away with less than the bare minimum. In an unprecedented move, Patagonia has gone above and beyond in its mission to protect the environment and do no harm, changing the company’s entire structure. This leaves all companies across the world with the responsibility of providing a greener future to their shareholders.

In recent years, there has been a growing recognition of the need for a more sustainable approach to economic development, with a greater focus on protecting the environment. This was a much-needed step due to the ever-growing complex and exploitative relationship between the environment and capitalism. Capitalism has been a major driving force behind environmental degradation and pollution due to its inherent culture of profit maximisation, often at the expense of the environment. However, as the world becomes increasingly aware of the devastating effects of harming the environment and climate change, companies are under pressure to operate in an environmentally responsible manner. This includes reducing their carbon footprint, investing in renewable energy, reducing pollution, and promoting sustainability. 

This is called corporate environmental leadership, where companies implement policies that reduce their negative environmental impact. Many corporate leaders have taken a public stand on environmental issues like climate change and encouraged other companies to take action. They try to reduce their impact by developing new ways to use less energy, incorporate recycled materials into the product and reduce waste and emissions. 

While some companies intend to make a genuinely positive impact, others seek to capitalise on the growing public concern about environmental issues. They may make false green claims or exaggerate their products’ environmental benefits. Others may charge premium prices for “environmentally friendly” products that are not better for the environment than conventional products. One of the most common ways of this is seen through greenwashing. Greenwashing refers to companies presenting products or service information to make consumers believe it is environmentally friendly. Greenwashing is a severe problem as it can lead consumers to believe that they are making environmentally responsible choices when, in reality, they are not. It can also discourage consumers from supporting truly environmentally friendly products and practices.

To look at the arguments in detail, we will examine the positive impact of one company – Patagonia. Setting a new example in environmental corporate leadership, the billionaire owner of Patagonia, in an unprecedented move, is giving the entire company a uniquely structured trust and non-profit design to pump all of the company’s profits into saving the planet. While this may surprise many, some know the positive social impact the company continues to have as it grows. Patagonia is a company that has been deeply involved in environmental and social issues since its founding. Patagonia has given 1% of its sales to environmental groups since 1985 and has donated over $89 million to different environmental causes. In 2012, Patagonia became certified as a B Corporation, which meant the company met rigorous social and environmental performance standards. It has also committed to using 100% renewable energy and reaching net-zero emissions by 2025.   

Now in 2022, it has created a new for-profit company called the Patagonia Works Company that will manage all of Patagonia’s business operations with the sole purpose of funnelling its profits into the Patagonia Environmental Grant Fund. A board of directors will govern this fund to give away 100% of its profits to environmental causes. This will also ensure that the profits are not going to the shareholders, who will continue a profit maximisation culture. This move by Patagonia’s founder was in response to the Trump administration’s rollbacks of environmental regulations, setting a new standard for corporate environmental responsibility. Since taking office in 2017, the Trump administration has attempted to repeal several ecological rules. Repealing the Clean Power Plan, which would have restricted power plants’ carbon emissions, and the Paris Climate Agreement withdrawal are two significant rollbacks. Additionally, the government has tried to reduce wetlands and river safeguards and decrease fuel economy regulations. 

Patagonia’s journey inspired other companies to establish themselves as benefit corporations. Benefit corporations are not charities, and their status does not exempt them from tax. Instead, the designation provides a legal framework for these companies to balance the needs of shareholders and stakeholders. Benefit corporations have been around since the early 2000s, but they have gained popularity recently as more consumers and investors look for brands that align with their environmentally conscious values.

Closer to home, MNCs in India have stepped up to protect the environment and take responsibility for our surroundings. Seeing the increase in Corporate Social Responsibility schemes in India, there has been an increase in government involvement regarding green policies in the country. This resurgence in interest has led to a rise in green economic growth, which is a principle that advocates the use of resources effectively and sustainably. Green economy policies rely on public and private investments, which have created various jobs that have reduced our reliance on fossil fuels. 

Many businesses are still hesitant to be more open to implementing regulations. The advantages of corporate responsibility for the environment and the industry are underappreciated. Much learning still has to be done by corporations and the general public about environmental and social responsibility. By encouraging corporate responsibility and offering rewards to businesses that implement environmental protection measures, the government may help with this. 

Sanjana Bajaj is a third-year student at O.P Jindal Global University majoring in economics.

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