In a thrilling Super Bowl, the New York Giants upset the New England Patriots for the championship of the National Football League (NFL) and the Vince Lombardi Trophy.
Tom Coughlin, the head coach of the Giants, developed a winning game plan using realistic assumptions and scenarios based on careful study of the Patriots strengths and weaknesses.
Surprisingly, unlike NFL coaches, CEOs frequently base business strategies on faulty assumptions and unrealistic expectations. This is especially true when business plans involve government regulation.
A case in point are the companies pursuing a national law to address global warming by participating in the United States Climate Action Partnership (USCAP) – a coalition of corporations and environmental activists seeking a cap-and-trade regulatory scheme to reduce greenhouse gas emissions.
While the resolution of global warming legislation is far from over, it’s clear, however, that proactively seeking regulation is a losing game plan for USCAP member companies.
The failed strategy is attributable to the faulty assumptions found in the corporate social responsibility (CSR) playbook. With CSR, business objectives never conflict with the goals of social activists, competing businesses, or headline seeking politicians; everyone works together for a common good.
Because businesses operate in the real world, it’s not surprising to see the social and political reaction to global warming fears backfiring on companies.
Duke Energy, a USCAP member, provides a useful example of the failed CSR game plan. In a recent press statement, CEO Jim Rogers disclosed their strategy: “as the third-largest coal consumer in the United States, and one of the largest greenhouse-gas emitters, Duke Energy has a responsibility to be part of the solution. That means looking at not only how climate change affects our business today, but also the implications for the future.”
Embracing climate change regulation is a risky strategy for Rogers since the utility generates over 70 percent of its energy from coal – the fossil fuel that releases the most carbon dioxide.
Sure enough, Rogers was sacked by Warner-Lieberman – the first climate change bill to pass a Senate committee. The legislation requires companies to purchase part of its carbon allowances – the amount of carbon dioxide each company is allowed to emit - through an auction.
The proposal puts Duke Energy with its coal dependency at a huge disadvantage – the company wanted its carbon allowances free of charge.
Now that the legislation has escaped his grasp, Rogers is aggressively playing defense by describing the negative impact of the legislation on his customers: