Can an SEC ruling reverse climate change?
Mary: Sara, let me loop you into the conversation here. We’ve been talking, thus far, about the impact of this one, specific SEC decision’s effects on corporations and investors and the economy in general. But as a futurist, what is it going to mean to the rest of us? For the regular people, like the college student who’s pulling coffee at Starbucks, or the single mom who’s stocking shelves at Wal-Mart, or the unemployed auto worker, public school teacher — you name it. Is my life, or my habits, or my community going to change at all in the next year, or 10 years, or 20 years? Can you look into the crystal ball and tell us how?
Sara: This [ruling] is part of a very important inflection point. After 20 years of talking and educating each other about climate change, we’re finally reaching the point where the doing is happening. Julie talked about turning supertankers. Changing our minds, changing our attitudes, our beliefs about things is comparatively low-cost compared to changing the entire financial and physical infrastructure of our society, which is really what this is about. And so we’re at that point. When the SEC makes guidances like this, it helps change the entire way money flows. And that in turn will change the structures we live by. So, yes, within five years I think investments will be flowing differently. Governments and businesses will be making big decisions, high-stakes decisions that they haven’t been willing to make on this kind of scale until this point. This does open the door. Changes will begin to happen more quickly because these [corporate] institutions are big; they control a lot of our resources. Individuals residences are only about 15% of the carbon problem; business is 85%. When business begins to change, that’s when the problem begins to get solved. I’m very excited about the prospects here.
Mary: Kristen, you pointed at one point, earlier in the conversation, that an accounting for environmental risks has been largely absent from long-term corporate planning. But isn’t long-term planning central to corporate success? Does corporate America just not take climate change seriously? Have the captains of industries just been sticking their heads in the sand on this one? Or is corporate culture just not really designed at the moment to think more than two or three quarters out?
Kristen: Long-term environmental risks have largely been absent from the forefront of business priorities and decision-making, and they’ve been absent, largely, from economics that then models those business decisions. In part, it’s because all of us have had this default assumption, whether we made it explicit or not, that we didn’t have to worry about long-term environmental problems because between technological change and economic growth would be able to negate most, if not all, negative environmental feedbacks. And here we are talking about an environmental crisis where the impacts are largely irreversible, at least within a human time frame. It forces us to realize that we can’t wait for technology to save us; we can’t just assume that being richer in the future will insulate us from these feedbacks. We need to take proactive actions in the present.
We could, of course, also point to all sorts of other things that encourage institutional short-term decision-making. The current system of pay and rewards for corporate leaders, for example. When a CEO’s pay depends largely upon stock options and dividends, it’s no surprise that she’s going to make decisions based on short-term profitability rather than long-term considerations. The SEC ruling really won’t change that, but at least it’s going to give investors the information they need to determine which firms are going to remain profitable over the long-term.
Mary: Julie, what’s your view on that? On that kind of short-term thinking that has come to dominate Wall Street, and American businesses, and certain investors, probably, for at least the last couple of decades? Why do you think it’s become so entrenched?
Julie: It’s really embedded in our society. We have fast food, continuous polling in Congress. It’s all stuff that tends to focus you on the right here, right now. What I call the wolf at the door problem. If the most important thing in your life right now is that you don’t have a job, you’re not going to be very worried about climate change. Climate tends to be more of the termite in the basement problem. Termites will eat your house just as surely as the wolf will blow it down. But you can’t wait until the termites have eaten the parlor floor until you act, because by then it’s too late. We have greenhouse gases that persist in the atmosphere for up to a century in many cases. It’s something we have to start on now and get the payoff later. That is not terribly in step with our current society.
Mary: Sara, let me get back to you. When I think about our ability to think long-term as a species, the Mayans built these huge temples, the Egyptians built pyramids, the Europeans built cathedrals. All projects that took generations to complete. The person who launched these projects — the pharoah, the archbishop — had to know that they certainly wouldn’t be alive to see their completion, nor would their grandchildren, or their great-grandchildren. So humans obviously possess the capacity for very long-term thinking. Are there more contemporary examples of long-term planning that you could provide that would give us some hope in that regard? Or has that ability to plan for the long term somehow atrophied? If it has atrophied, why did it happen and how can we get it back?
Sara: First of all, Americans are world-class planners; we are in league with those [temple, pyramid, cathedral] people. We tend to do it on a very fast basis. We’re acute responders. We do it in the E.R. What we don’t do in the long-range, we can do a lot, and very quickly, in the short-range. We know how to organize and prioritize in a way that nobody in the world has been able to do. We proved this in World War II: we were arming the world and fighting a two-front war and we had these logistical tools. We had this magical ability to plan that on a scale that nobody else really could. It’s a gift that we have and we take it very much for granted.
I think it’s going to come back to the fore. In terms of longer-term thinking, the societies that you described were all monarchies of one kind of another and in a democracy it’s harder to hold a vision for the longer term. You need to assign the role of vision holding to the institutions of your societies rather than to an individual like a king or a series of kings. The way you do that is you embed it in your educational system and in your religion. There are institutions that are foundational, that carry forward our values and priorities from generation to generation. And as long as these institutions keep teaching new generations you can hold the vision. Our education system, our media, and to a very large extent our religious institutions, have a big role to play here in holding that vision for as long as it’s going to take, which is the rest of this century.