6 Ways to Prevent Greenwashing and Risks from Trade Associations

The voice and political participation of business are critical to meeting ambitious emission reduction goals in the United States. An increasing number of private sector actors have started to advocate for climate policy at the federal level, but without aligning their trade associations to the same objective, their actions fail to move the needle.

Trade associations are a main conduit of corporate political influence in the United States, and often wield this power to undermine and, in some cases, outright block or reverse climate legislation. When companies are members of associations that lobby against climate policy, these businesses become guilty by association.

To avoid the associated reputational and fiscal risks, companies should focus their efforts on aligning their trade associations, as emphasized by WRI CEO & President Ani Dasgupta in a recent statement:

“We urge all companies to re-examine their lobbying, political spending and participation in trade associations to ensure that their actions are fully aligned with their public statements on climate change,” said Dasgupta.

How the Oil and Gas Industry Leverage Trade Associations

A recent example of trade associations’ influence comes from Exxon Mobil. In late June, one of the company’s top lobbyists revealed that the oil and gas major intentionally and strategically uses its trade associations, including the American Petroleum Institute and The U.S. Chamber of Commerce, to combat climate policy. This has included calculated and successful moves to strip funding for climate measures from the federal infrastructure bill, while voicing support for carbon pricing legislation precisely because they believed “it would never pass.”

This is a classic example of greenwashing. Exxon receives credit for appearing to support climate action while pouring resources into maintaining the status quo and spreading climate disinformation.

Earlier this year, a group of trade associations (U.S. Chamber of Commerce, National Association of Manufacturers, American Petroleum Institute and Business Roundtable) made the news with their newly announced support for carbon pricing or similar market mechanisms. Exxon is a member of each of these organizations, which puts the associations’ new positions under a cloud of suspicion. If Exxon uses support for carbon pricing as an insincere green talking point to score points with the public, is it possible that their trade associations are being asked to amplify this strategy?

Trade Association Memberships Put Companies at Risk

Time will reveal the breadth of consequences Exxon will face, but the company has already undergone reputational harm, an expulsion from the Climate Leadership Council, and will likely face congressional hearings.

On August 25, 2021, a recording of the lobbyist on the company’s climate strategy was cited in a brief filed in the 8th U.S. Circuit Court of Appeals in Minnesota’s lawsuit against Exxon and other fossil fuel companies. Investigation into duplicitous climate policy strategy continues, and pressure to pass ambitious federal climate legislation is building.

Meanwhile companies in other sectors, such as tech, banking and consumer goods, face backlash and increased risks now too. This includes reputational risk, as the behavior of companies’ trade associations on climate has come under increased scrutiny from politicians, investors and civil society.

By giving money to organizations working to thwart climate action, companies become complicit in these activities. They then face the possibility of boycotts, lawsuits and loss of investor support, as well as huge financial risks tied to the cost of inaction on climate change.

The longer it takes to get the necessary climate policies in place, the higher global temperatures will rise and the more expensive it will be to deal with consequences such as ruined crops, disrupted supply chains and destruction of property from natural disasters.

Risk Management — Aligning Trade Associations

Companies’ trade associations should be working for them, not against them. In October 2019, WRI and 10 of our NGO partners introduced the AAA Framework for Climate Policy Leadership to guide companies on the new standards for political engagement. A core component of this framework is aligning the positions of trade associations with science-based climate policy.

To complement this new framework, WRI recently released a report exploring the barriers to corporate climate policy engagement and, more importantly, strategies to overcome them.

Redirecting the priorities of large, multi-industry associations is no simple task, but here are six easy places to start:

• Audit: Have a trustworthy third party conduct an audit of your company’s trade association memberships to evaluate instances where trade association climate policy positions do not align with your company’s. Commit to a clear process of what steps you will take if misalignment is found.

Over the past two years, many oil and gas companies conducted internal audits of their membership in trade associations. But because these were not conducted by objective third parties, in all cases, there were a number of notable errors where misalignment was not determined objectively. If these audits are not conducted by objective third parties, this can be another form of greenwashing.

• Team up: Find, align and collaborate with other corporate members who also have an interest in pushing climate policy.

For several years, companies within the US Chamber of Commerce have banded together to push Chamber leadership to adopt more progressive positions on climate change. There is power in numbers, and this group of companies needs many more partners to be able to truly shift the Chamber’s actions related to climate change.

• Focus on influencers: Find out what motivates and/or worries other members with the most to lose — and use this knowledge to better engage.

Whether this is through one-on-one outreach or encouraging your trade association staff to invest in member education, it is important to have companies from heavy-polluting industries on board with climate action.

• Engage: Speak with trade association staff in individual and committee meetings and ensure your views are known even if you are not sure you will prevail.

In recent years, many trade associations have formed new climate committees or task forces to engage their members on this topic, including the US Chamber and Business Roundtable. Companies should engage with these existing bodies and push for the creation of new committees where none currently exist.

• Vote with your dues: For most trade associations, membership dues are negotiated annually. Take advantage of this process and use your money to send a message.

Different companies may prefer different approaches based on how and when dues are paid. One example of a hybrid “carrot and stick” approach is to attach a set amount of money to a defined climate outcome. If the outcome is met the money will be released to the trade association as “bonus” dues. If the outcome is unmet, the same amount will be deducted from the next cycle’s payments.

• Meet your lobbyists: Ensure that any organization or individual lobbying on behalf of your company supports and promotes your climate policy positions.

Career lobbyists are not always loyal to their current employer — rather they may feel loyal to the status quo of their peers as they maintain an eye toward future career opportunities. Make sure that everyone speaking for your company is aligned with climate action.

As Senator Sheldon Whitehouse noted recently, “Despite considerable corporate support from the C-suite in corporate America, none of the trade associations are taking this seriously. None are leaning in to push for strong climate legislation, not even carbon pricing.”

Ultimately, it is the CEOs who must step up. Companies should not risk being guilty of climate inaction. They must align their trade associations — as a matter of urgency.