Kyoto's Magnetic Force

"Climate Change Strategy: The Business Logic Behind Voluntary Greenhouse Gas Reductions" by Andrew J. Hoffman, in California Management Review (Spring 2005), Univ. of California, F501 Haas School of Business No. 1900, Berkeley, Calif. 94720–1900.

If there’s one thing that business likes even less than government regulation, it’s uncertainty about government regulation—and that’s the condition business is now in, reports Hoffman, a professor of sustainable enterprise at the University of Michigan. The cause is the U.S. refusal to ratify the Kyoto treaty to control greenhouse-gas emissions, known formally as the Kyoto Protocol on Climate Change.

When, in late 2004, Russia became the 126th country to ratify the Kyoto treaty, it cleared the way for the pact to go into force this past February. Multinational corporations that operate in signatory countries must comply with the new requirements. But even firms that operate only within the United States face the possibility that Congress in the future may impose similar regulations—and the reality is that some states already are doing so on their own.

The companies that are voluntarily making emission reductions aren’t necessarily doing so out of concern for global warming or corporate social responsibility. Anticipat