Corporate Alignment with Climate Goals Under Scrutiny: LyondellBasell & Bayer demonstrate good practice

London 12 February 2024 – In the face of escalating global climate concerns, in a new report from financial think tank Planet Tracker, corporations are being urged to reassess their affiliations with industry associations that diverge from their stated environmental objectives.

This move is seen as essential to avoid accusations of ‘greenwashing’. The financial markets are increasingly calling for transparency on climate strategies to ascertain alignment with the Paris Agreement and to facilitate more accurate financial forecasting.

Chemical giant LyondellBasell (LYB) has emerged as an example of better practice in this field by proactively addressing concerns over misaligned industry affiliations. The company’s Climate Advocacy Report, released in May 2023, evaluates its memberships in key trade associations, categorising each based on alignment with climate policy positions. Notably, the report identifies the American Fuel and Petrochemical Manufacturers (AFPM) as misaligned with the Paris Agreement, demonstrating a commitment to ongoing evaluation and engagement.

Another example of good practice is provided by Bayer’s (BAY) Industry Association Climate Review (2023) which assesses 63 associations. It discloses the methodology used for assessing alignment as well as an explanation for each evaluation. As this is their third Industry Association Climate Review, the company is able to show changes over time.

Hiding behind trade associations

Corporations, particularly those with significant environmental footprints, are coming under increasing scrutiny regarding their commitment to meaningful climate action. In this context, the membership of companies in trade associations has emerged as a critical area of concern, particularly when corporate management teams claim to be supportive of lowering their carbon footprint but are members of associations that appear to be at odds with the goals outlined in the Paris Agreement.

Previously, Planet Tracker has analysed the climate transition plans and strategies of major corporations in the consumer and chemical sectors¹, which are also members of the Climate Action 100+ benchmark.ⁱ All these companies, with the exception of Danone (BN) and Nestlé (NESN), were found to be members of misaligned trade associations.

Planet Tracker’s analysis exposed a noteworthy pattern. Two or more of these companies were members of trade associations misaligned with the Paris Agreement. Notably, the German Chemical Industry Association (VCI) had seven of these companies as a member, followed closely by the Tennessee Chamber of Commerce & Industry, National Association of Manufacturers (NAM), US Chamber of Commerce, American Fuel & Petrochemical Manufacturers (AFPM), each with five.
 
WRI’s AAA Framework Guides Corporate Climate Alignment

The World Resources Institute (WRI) introduced the AAA Framework in October 2019, advocating for companies to push for federal policies in line with the Paris Agreement and to align their trade associations accordingly. The framework provides a roadmap, emphasising a five-step process:

1. Conduct an Audit: Perform a thorough assessment of trade associations’ positions on climate change compared to internal company positions. Make audit results public and commit to regular re-audits.

2. Develop a Strategy: Armed with information on misalignment, develop a strategy for self-correction. Set explicit criteria for leaving or staying within an association and define success metrics.

3. Speak Out: Publicly express disagreement when a trade association’s stance contradicts company positions on climate. Hold associations accountable for their actions.

4. Leave if Necessary: Consider disassociation if attempts to align with trade associations prove ineffective. Follow the criteria outlined in the company’s strategy.

5. Be Transparent: Publicly disclose positions, actions, outcomes, and all trade association memberships. Transparency is crucial for corporate leadership.

This is now part of the Global Standard on Responsible Climate Lobbying (along with other best practice recommendations from CDP, InfluenceMap, Ceres, and others).
 
Planet Tracker Advocates Timely Action

Acknowledging the potential for corporate executives to drive change within misaligned associations, Planet Tracker emphasises the need for a balanced approach with a clear timeframe. The call for decisive action if progress is not achieved within a reasonable period is crucial to avoid perpetual membership of misaligned associations.

“As companies navigate the imperative to address climate change, there is an increased risk of ‘greenwashing’”, says Ion Visinovschi, Transition Research Analyst at Planet Tracker. “Consistent messaging and diligent trade association oversight should be the norm, and where there is persistent misalignment, an exit from these trade associations should be planned. Without clear transition plans and associated capex details, financial institutions face heightened uncertainty in cashflow forecasting, potentially impacting their assumptions on free cash flow and dividend cover.”

The imperative for companies to align trade association affiliations with stated beliefs is underscored by Bayer’s and LyondellBasell’s proactive approach and its broad alignment with the AAA Framework. As the world grapples with climate challenges, the time for blurred communication is long gone, and corporate leaders should be clear about their climate transition pathway.

ENDS
 
Read the full Report here

Download the Best Practice Guide
 
For more information please contact:

Josh Hoppen, ESG Communications | t: +34 612 28 72 64 | josh@esgcommunications.com
 
ABOUT PLANET TRACKER 

Planet Tracker is an award-winning non-profit think tank focused on sustainable finance with the purpose of ensuring that capital markets’ investment and lending decisions are aligned with planetary boundaries and support a just transition. Its mission is to create transformation of global financial activities by 2030 to bring about real world change in our means of production so that they align with a resilient, just, net-zero and nature-positive economy. Planet Tracker serves both as a watchdog on corporate behaviour, including issues such as greenwashing, and serves as an ally to support finance and business to know how to undertake transition. Having identified the companies causing the worst environmental and social damage within targeted supply chains, Planet Tracker then identifies the investors and lenders in these companies whose financing is enabling these practices to continue unchallenged.