Tricks of the Trade: How Companies Anonymously Influence Climate Policy Through Their Business and Trade Associations (2014)
Tell the SEC to Shed Light on Corporate Political Spending
A proposed Securities and Exchange Commission (SEC) rule would require publicly traded companies to disclose their support for trade and business associations. Tell the SEC that the public needs to know who is influencing climate policy!
Trade and business associations are major actors in both business and public policy in the United States. These associations provide many benefits to their member companies, and one of the most important is the leverage they provide for influencing policy through political activities such as campaign contributions, lobbying of elected officials, and issue advertising.
Since climate change, and policy responses to climate change, can have significant implications for business, it's not surprising that trade associations have been deeply engaged in climate policy discussions. And as a 2013 UCS report revealed, the impact of trade association engagement has often been to block meaningful climate action or misrepresent climate science.
Holding member companies accountable for the activities of their associations is not easy. As tax-exempt non-profit organizations, trade associations are not required to publicly list their membership or boards of directors—and member companies can take advantage of limited corporate-disclosure laws to engage in political activities through trade associations without much scrutiny from government, investors, or the public.
In an effort to shed light on the relationship between companies and their trade associations on climate policy, UCS partnered with CDP (formerly the Carbon Disclosure Project), a non-profit organization that administers an annual climate reporting questionnaire to more than 5,000 companies worldwide, at the request of 722 institutional investors represeting $87 trillion in invested capital.
Starting in 2013, the CDP questionnaire began asking whether companies were members of trade groups and, if so, whether they agreed with these groups' climate policy positions, as documented in the 2013 UCS report Assessing Trade and Business Groups' Positions on Climate Change.
The results show that many companies are not yet willing to be transparent about their political activity through trade associations.
- More than half of the companies who received the questionnaire opted out of participating, and only 33 percent were willing to make their responses public. Non-participants included corporate giants such as Apple, Amazon, Comcast, and Facebook.
- Some 40 percent of companies responding publicly acknowledged that they could influence policy through their trade association. Yet, of companies listed on publicly available board membership lists for four large trade associations, a majority failed to acknowledge their board memberships on the survey.
Many companies indicated that they do not agree with the climate policy positions of their trade associations.
- Nine of 15 responding companies that reported being board members of the National Association of Manufacturers (NAM) stated that their positions on climate policy were "mixed" or "inconsistent" compared with NAM's position.
- Several other major U.S. trade associations, including the Edison Electric Institute (EEI), the American Petroleum Institute (API) and the American Chemistry Council (ACC), received multiple "mixed" or "inconsistent" responses from board member companies.
- When companies were asked if they had attempted to influence the climate positions of trade associations that they belonged to, however, responses suggested that many companies—especially smaller companies—do not feel they are able to influence their trade groups’ climate change positions.
These findings raise the question of which actors are actually shaping the policy positions and agendas of trade associations.
The public deserves to know who is influencing policy decisions on critical issues like climate change. To bring needed transparency to the business community's political activities, the report outlines a set of recommendations for both private and public sector actors:
- The Securities and Exchange Commission and the Treasury department should make rules that require disclosure of political activities by publicly traded companies and tax-exempt "social welfare" groups;
- Congress should approve the DISCLOSE Act, or similar legislation, to enhance disclosure of indirect political contributions;
- Companies should push trade associations to accept climate science and support policies that will result in meaningful carbon emissions reductions. Where companies and their associations differ about climate policy, companies should publicly state their differences, try to influence their associations' positions, and if differences are irreconcilable, leave the associations. And investors should use their influence to pressure companies to take such actions.