“We are raising the bar on the commitment to tackle climate change”
Bayer publishes its first Industry Association Climate Review
Back in November 2019, in a letter to the investor group Climate Action 100+, Werner Baumann committed to leading increased industry coalition support for decarbonization. He also announced that Bayer would make its support for trade associations contingent on their positions towards science-based policies addressing climate change. Bayer has now published its first Industry Association Climate Review as an initial step in this process. It is currently foreseen that a repeat comprehensive assessment would be carried out in 2023. Besides, an interim update on engagement and identified material misalignments will be carried out in Q4 2022.
We talked to Marco Annas, Global Vice President Public Affairs, about Bayer’s quest to evaluate and engage industry associations on their support of climate-friendly policies.
“We are very pleased to see the publication of Bayer’s first Industry Association Climate Review. The results evidence a lack of positioning on climate-related issues from over half of the organisations assessed and reinforces the critical importance of company engagement around this topic to prevent misalignment between rhetoric and action. Through ongoing dialogue as part of Climate Action 100+, Bayer has shown its openness to investor feedback and its commitment to support and advocate for science-based climate policy. Union Investment looks forward to continued engagement with Bayer on its increased alignment with the Climate Action 100+ Net-Zero Company Benchmark.”
Janne Werning, Head of ESG Capital Markets and Stewardship, Union Investment, Investment LEAD CA100+
Marco, what is Bayer doing to fight climate change?
We have set ourselves the target of achieving net-zero greenhouse gas emissions – including our entire value chain – by 2050 or sooner. As a mid-term goal, we want to become climate-neutral in our operations by 2030. But we’re not stopping there. Bayer has also committed to supporting others like farmers with its solutions. Consequently, our political engagement is focused on climate policies supporting the journey to net zero emissions. With the Industry Association Climate Review, we are further raising the bar on our commitments to tackle climate change.
What role do industry associations play?
The climate crisis is the most pertinent global challenge. Accordingly, policymakers across the globe are working on plans to limit global warming to 1.5 degrees Celsius in line with the Paris agreement. Unsurprisingly, climate policy is a political battlefield with a wide range of competing interests involved. Industry associations are an important player in these discussions. Our ambition is to be an international leader in climate protection. This shapes our political engagement, and we expect industry associations to act in line with our commitments.
What did the review entail, and what measures will you implement going forward?
A starting point is to publicly disclose our climate policy positions and approaches. Further, we investigate climate policy positions and climate-related activities of trade associations we are a member of. To make sure all relevant industry associations are evaluated and treated according to the same benchmark, we have developed an assessment method and a detailed framework to address misalignments. These also include escalation steps. We assess their alignment based on a variety of factors.
From a policy perspective, we looked at the explicit support for the Paris Agreement and its goals, the transition to net zero, and the policies that will enable it.
Additionally, we assessed whether the industry associations are aligned with Bayer’s core climate positions.
"The Church Commissioners welcome Bayer’s first Industry Association Climate Review and engagement with Climate Action 100+. Bayer’s commitment to transparency and their engagement with misaligned and partially misaligned associations are appreciated, and we look forward to seeing tangible results. We also welcome Bayer’s aspiration to work with relevant organisations that currently have no climate stance to develop positions that support the low carbon transition across the global economy. The Church Commissioners will continue to engage with Bayer on environmental issues and value our ongoing constructive dialogue."
Bess Joffe, Head of Responsible Investment, Church Commissioners for England, Investment Lead CA100+
As you are looking at associations worldwide, misalignments would be no surprise. Could you tell us a little bit more about the escalation steps; what happens if misalignment occurs?
Shareholders, as well as other stakeholders, have clear expectations that companies act in line with their societal commitments. In the past, lobbying practices were not always in line with such commitments. There was a double standard: companies were positioning their positive societal and environmental contributions progressively while trade associations were often tasked with defending the status quo.
In our first review, we looked at 65 industry associations in four different industry branches (chemicals, agriculture, healthcare, cross-industry) across 18 countries, the EU and on a global level. Instances of misalignment between Bayer’s climate commitments and policy and the corresponding industry association will lead to engagement. In close cooperation with Bayer’s global teams, this process will be led by policy teams in the association’s host market to examine, understand, engage, assess, and influence. Where the engagement process does not result in a satisfactory change in policy, or where we assess that alignment is unlikely to create a harmonized approach, we will need to talk.
This remediation process will go through different stages and could ultimately result in a potential exit by Bayer.
This is an impressive project. Are there any precedents in the industry of other companies assessing their industry associations?
While we are not the first company to undertake this process, we will set new precedents beyond energy-intensive sectors by including agriculture and healthcare. Bayer is the first company to carry out such an analysis covering the agricultural and pharmaceutical industries. Many industry associations in these areas are rather specialized and climate change policy is not considered a core topic, as our findings have confirmed. Our goal is to use the report and its findings to strengthen discussions around building positions on climate change.
The report is now complete. Are there significant findings and required actions for Bayer?
Overall, the findings show that most of the associations we work with do not have explicit positions on the Paris Agreement. Nonetheless, many have spoken about the importance of climate change. We see this as an opportunity to strengthen our leadership in this space by engaging on this important matter more purposefully. 31% of the examined positions were aligned and in 54% of the cases we examined, associations were found to have no public positions on Bayer’s priority issues.
A small minority – 12% - were classified as being partially misaligned with Bayer’s positions or some aspects of the Paris Agreement. There were a few isolated cases where associations were materially misaligned with Bayer in some areas; these will be addressed in our ongoing discussions with them.
Which misaligned positions in these cases stood out to you?
We saw some discrepancies regarding the transition to net zero, policies to support that transition, and the pathway to 100% renewable electricity by 2030. Different positions also arose when discussing technologies and innovation, lowering GHG emissions in agriculture by 30%, and climate measures within a rules-based trade system. Based on the proposed escalation process, it will be a priority for Bayer to engage with these associations on climate change and our commitments. In the first instance, the public affairs country teams will address the areas of misalignment to understand the origins of the respective association’s position and assess their ability to align it with our own more closely.
What are your long-term plans? Will you continue to monitor the positions of your industry associations?
This report also marks the start of regular reporting. A comprehensive re-assessment will be carried out in 2023. In the interim, we will constantly engage with our industry associations and regularly revisit our findings to provide updates on their progress. But it is not only about processes and reporting. This is probably the last decade in which we can effectively set the course for containing global warming. It is crucial to act now, and as a private sector company, we want to play our part.