Also: Crypto's "parade of horribles," recession odds rising, and a teachers crisis.
Good morning.
Not a week passes that I don’t have an interesting conversation with a CEO who is focused on reducing his or her company’s climate impact. This isn’t because they are kowtowing to the “woke left,” as former Vice President Mike Pence claimed recently, but rather because climate action has become a business imperative.
Last Friday, I spoke with Jeff Simmons, CEO of Elanco Animal Health, who recently acquired exclusive U.S. licensing rights for a drug developed by Royal DSM called Bovaer, which is a feed additive that reduces methane emissions from cows. Elanco thinks it can not only lead to a significant reduction in methane emissions, but also has revenue potential in the U.S. exceeding $200 million a year. The same day, I spoke with Becton Dickinson CEO Tom Polen, who has ambitious plans to reduce the climate impact of the products his company supplies to health care systems around the world—in part because those health care systems are demanding it in order to meet their own net zero goals.
The explosion of business net zero commitments in the last two years has led to a virtuous circle of activity where companies are doing the right thing, not only because it’s the right thing, but because business customers, who are also doing the right thing, are demanding it. In the U.S., in particular, this has vaulted business well ahead of government in leading efforts to address the climate problem.
But most business leaders also acknowledge they can’t solve the problem on their own. Sensible government action is essential. And that’s why the SEC’s proposed climate disclosure rule, put out this spring, was so important. The current chaos in ESG investing illustrates the problems that occur without some form of standardized reporting. Business efforts to address climate quickly devolve into a chaotic, pick-your-metric world where it’s impossible to distinguish real action from greenwashing.
Note the phrase: “sensible government action.” That’s where the road gets rugged. Friday was the deadline for comment on the voluminous SEC climate rule, and the Business Roundtable—which has fashioned itself a leader in the movement toward stakeholder capitalism—issued a voluminous response. (If you have the stomach, you can read it this morning here.) While the majority of the BRT’s members have adopted significant measures and targets to address the climate challenge, they find much about the SEC rule to be impractical, impossible, liability-laden, or counterproductive.
There is a moment of opportunity here. It would be great if the SEC and the BRT could sit down together, as in days of old, and fashion a new rule that would win the support of, if not the entire business community, at least a majority of BRT members. But Washington is a world of politics, and the political question that hangs over such efforts these days is: Why bother? If the SEC were to negotiate with business, it is sure to be attacked by true believers on the left who think any negotiation with CEOs is an act of corruption. At the same time, they won’t win support on the right, where Pence and others are now heavily invested in the position that ESG is just a tool of the woke liberal left.
It’s been five years since Harvard business professor Michael Porter and his colleague Katherine Gehl wrote in Fortune that the biggest problem facing American business is a broken political system (still worth reading, here.) Perhaps as an independent agency, the SEC can rise above the partisan warfare. But don’t hold your breath.
More news below.
Alan Murray
@alansmurray
alan.murray@fortune.com
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Recession watch
President Joe Biden may beg to differ, but the chorus of prominent voices predicting a downturn in the world's biggest economy is growing. Elon Musk this morning joins Goldman Sachs economists and Nouriel Roubini in saying a recession is becoming a more likely probability. Bonus read: Cathie Wood thinks the Federal Reserve's plan to raise, raise, raise interest rates is a "draconian" move that will do serious economic harm. Fortune
'Exceptional times' call for exceptional pay-raises
With inflation in the United Kingdom running at 9%—a good bit higher than what you'll find in the United States or in the European Union—the British engine-maker Rolls-Royce has decided to give its rank-and-file staff a £2,000 ($2,455) bonus to deal with the "economic uncertainty," explains CEO Warren East, the latest move by a company chief to support staff during what he calls "exceptional times" of runaway prices. Fortune
"Parade of horribles"
Microstrategy has become well known in the world of corporate finance for its monster holdings of Bitcoin. With crypto in free-fall, however, BTC has become quite the liability for shareholders. Now, CEO Michael Saylor wants the government to step in, most likely to preserve the firm's bottom line. His plea to regulators: Crack down on crypto industry's shaky practices—the "parade of horribles" as he describes it—that are dragging down the price of Bitcoin. Fortune
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Unlocking the value of human capital technology A new future is unfolding in which people, work, and technology may be less separate and more productive than ever. Learn how organizations can help tech-empowered workforce ecosystems live up to their new potential—through human interactions, imagination, and vision. Download the report
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Teach your children?... Well
Lost in the employment data that came out of the Bureau of Labor Statistics earlier this month is this troubling statistic: Roughly 300,000 public school teachers and staffers have left their classrooms in the past two years, a 3% drop in America's public-school workforce. Survey data from the teachers' union, the National Education Association, suggest we haven't even begun to see the full exodus yet. Wall Street Journal
The must-know list
Yesterday, gracing the home page of Fortune.com, we had an engrossing look at the work of 19 Black American economists who are breaking new ground in how we can make progress in the areas of racial equality, inclusion, education reform, the future of work, household and public finance, and labor economics. (There's so much in this package, I'm sure I left something out). Fanta Traore, cofounder of the Sadie Collective weaves an engaging and comprehensive look at their work. Fortune
The future of work at Amazon
The retail giant is facing two major challenges, both of which could mess with the company's business model over the next 18 months. The first is a worker shortage so acute that the company is worried that, unless there's a remarkable turnaround, it will impact its bottom line by 2024. The other problem: What to do with its vast acreage of warehouse space if there's a slowdown? Fortune
This edition of CEO Daily was edited by Bernhard Warner.
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