What a difference a few months can make. Last fall, during the presidential and vice-presidential debates, the issue of climate change didn’t even come up. But last month, in his inaugural address, the president could not have been clearer that the issue is back on his agenda. “We will respond to the threat of climate change, knowing that the failure to do so would betray our children and future generations,” he said.
If the administration is going to tackle climate change in its second term, the question is how. Big new legislation seems unlikely; it was unable to get cap-and-trade legislation through Congress in its first term, even with Democrats controlling both houses. There are executive actions the president could take without the need for congressional approval. But which of those might make a real difference?
Let me suggest one. In 2011, the federal government spent $500 billion on private contractors. That’s about 14 percent of total federal spending and more than 3 percent of the total US economy. If the federal government would use its buying power to convince its contractors to cut back on their emissions, it would have an immense ripple effect throughout the economy, especially considering that most Fortune 500 companies do at least some business with the federal government.
Some might object that this would be a new federal burden on business. In reality, it is essentially no different than what Walmart has done. In 2005, Walmart under then-CEO Lee Scott started to see sustainability for the business potential that it had. Its first step was to look into its own operations for ways to eliminate unnecessary energy use. It found plenty. For instance, it reduced the amount of packaging on a toy truck made in China, saving 4,000 trees, 497 fewer cargo containers to be shipped from China and a million gallons of fuel – $2.4 million in savings. It changed the shape of their milk jugs so that 224 gallons of milk could be stored in a cooler that previously stored 80 gallons – and it was able to reduce the price of the milk it sold by over 15 percent. These and many and other improvements have helped the company save money -more than $231 million last year from just waste reduction and recycling, and another $150 million expected in FY 2013.
Then, recognizing that less than 10 percent of the carbon emissions associated with the products it sells lies within its own operations, Walmart took the next logical step: it invited its over 60,000 suppliers to reduce their carbon footprints. It did so by asking its suppliers, starting with the largest, to fill out a questionnaire developed by the nonprofit Carbon Disclosure Project to disclose their carbon emissions. Some suppliers suspected that the effort was just another costly compliance burden. But the main aim of collecting the information was for the companies themselves to look at their operations with fresh eyes and to see what Walmart saw: that carbon is money and cutting carbon saves money. After apparel-maker Dana Undies went through the exercise, it instituted changes that lowered its electricity bills by 71 percent. Recently, Walmart has made clear to its suppliers that it will make buying decisions based on sustainability performance, carbon emissions being one criterion.
While there’s some question whether Walmart under CEO Michael Duke, who succeeded Lee Scott in 2009, has maintained Lee’s commitment to environmental stewardship (not to mention higher labor standards, a whole other issue), there’s no reason why Obama shouldn’t follow Scott’s lead. In fact, he’s already taken the first step. In 2009, the president signed an executive order requiring federal agencies to examine their own operations for ways to reduce waste and to set 2020 goals for greenhouse gas (GHG) emission reductions. With nearly 500,000 buildings in its real estate portfolio, more than 600,000 vehicles in its fleet and 1.8 million people on its payroll, the government has plenty of opportunities to minimize its energy use. And indeed, this effort has yielded a reduction of 3.6% in carbon emissions from a 2008 baseline.
Now, having begun to take care of its own house, the U.S. government should take the next step and recognize that the biggest opportunities for emission reductions probably lie in its supply chain. In his state of the union address, the president should announce that the federal government will invite all federal contractors to fill out the CDP survey, providing them with the same opportunity Walmart gave its suppliers – save energy, save water, minimize waste and reduce cost. Just as Walmart is making sustainability a criterion for its buying decisions, so too should the largest purchaser in the country. If it works for Mr. Sam, it should work for Uncle Sam.