In 2004, Russia’s ratification of the Kyoto Protocol, an international treaty signed in 1997 that aimed to reduce greenhouse gas emissions to combat climate change, enabled the treaty to take effect. The United States declined to participate, citing projected economic costs and the absence of commitments from major developing countries such as China, India, and Brazil. The idea was that emissions reductions by developed countries alone would be insufficient if emissions from developing countries continued to increase. The lack of involvement in the Kyoto Protocol, however, did not signal a total pause in regulatory environmental policy. This made the picture of future markets uncertain and therefore unstable.
In Climate Change Strategy: The Business Logic Behind Voluntary Greenhouse Gas Reductions, University of Michigan Professor Andrew Hoffman argues that despite this fractured environment, some companies were able to move strategically by weighing the costs and benefits of doing nothing or doing something, and evaluating which will be most financially sustainable for them. For multinationals, staying competitive meant complying in Kyoto markets while anticipating what U.S. states or regions might do next. For domestic firms, it meant deciding whether to wait for a federal mandate or use the policy gap to prepare, experiment, and even influence the rules that might eventually come.
He identifies voluntary emissions reductions as a strategic tool instead of just an environmental measure. Multinational companies used early action to prepare for regulated markets, normalize operations across jurisdictions, and in some cases shape the design of future regulations. BP and Shell, for example, implemented internal carbon trading systems years before government programs began, later leveraging this experience to influence the UK and EU trading schemes. Industry associations such as the International Aluminum Institute coordinated sector-wide reductions to strengthen both operational performance and public positioning. This emphasizes that companies often adopt voluntary measures for reasons tied to competitiveness and risk management rather than environmental stewardship.
One example that Hoffman mentioned was The Beer Store, a Canadian retailer, saving $17,000 a year and cutting 114 tons of CO₂ simply by training delivery drivers to reduce idling. After reading this article, I realized that my internship at DN Plastics, a Tennessee based manufacturer specializing in polyolefin and thermoplastic elastomer compounds, as a marketing and sustainability intern heavily correlated with the principles outlined in the article. Despite DN plastics not having any specific environmental regulations placed on them, many of their consumers (and other OEMs) such as Ford have pledged to use at least 20% recycled and renewable plastics globally by 2025 which in turn creates market pressures for supplying industries to be able to support this goal. The plan that I worked on to incorporate post-industrial recycled (PIR) plastics into the production of thermoplastics would be able to supply the new demand that companies are forced to comply with due to policy uncertainty.
This article highlights that whether or not a company directly faces regulatory policy, our ever-changing policy environment has the potential to affect all industries. If turning green has more benefits than costs, it may be a transition that occurs regardless of regulation. In the end, Hoffman reframes the question from “Does it pay to be green?” to “When, where, and for whom does it pay?” In an uncertain policy landscape, the winners aren’t those who just act. They’re the ones who can find a way to profit in compliance with global agreements, local rules, and prevailing beliefs.
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