The ongoing economic crisis has led to the blocking of international initiatives. Why should business leaders give priority to sustainability goals while struggling to keep their businesses afloat?
We are currently experiencing what can be called a “polycrisis” – a situation in which many harmful events occur at the same time. Things are out of whack, Europe is in the grip of a power crisis, and the global crisis caused by the pandemic continues to frustrate manufacturers. Inflation rates have reached unprecedented levels, and President Putin’s war in Ukraine is causing further disruption. As one might expect, it may not be the best time to think about the weather.
And yet, the current crisis shows that sustainability and climate change are of utmost importance to the industry. Not because of the motivation of their leadership or some other cultural goal but because sustainability and climate change have become economic imperatives.
From a business perspective, switching to sustainable business models and renewable energy sources would be wise. Any company that invests in renewable energy will tell you the same thing, especially in the midst of rising energy prices. Some companies may rely on government tools in the short term to help them through a crisis, but in the long run, only radical change and innovation can make companies competitive.
I’ve identified five improvements that could help our efforts to stabilize the global economy amid growing uncertainty:
1) Smart de-risk
Many of the advanced technologies needed to achieve the ambitious decarbonization goals are already technically available; however, developing them will require significant investment in research and development. According to recent estimates, clean technologies and infrastructure investment should rise to $3 trillion USD annually in the 2030s.
An increase in income of such a size cannot be done without the support of various means of support. “Smart de-risk” can improve the feasibility of lighthouse projects in cleantech by supporting private funds and donations from the public sector – at least until the technology reaches commercialization. This can range from subsidies to guaranteed purchases or financing agreements – anything that reduces the company’s risk and gives them a solid investment base.
2) Value chain decarbonization
When companies buy intermediate goods, they “export” a large part of their output. Similarly, companies “send” emissions when consumers use their products. These Scope 3 emissions account for approximately 85% of total CO2 emissions. In industries such as real estate, the figure can reach 97%, while others, such as utilities, are around 57%. Despite this, many companies fail to disclose the actual level of their Scope 3 emissions or set reduction targets.
One of the reasons is that Scope 3 emissions are more difficult to measure and control. For example, a multi-brand car manufacturer may have up to 60,000 suppliers, each with their own reporting systems. Identification and participation of stakeholders is critical to efforts to reduce overall emissions. One way is for the company to take a cooperative approach, giving top suppliers a toolbox to reduce carbon emissions in return for their commitment to reducing emissions.
3) Innovation and circularity
A traditional sustainable economy is based on “take, make and dispose”. This type is very resource-intensive and emits a lot of air and at the same time creates a lot of waste. According to the analysis of our sustainability experts, the European cycle alone can reduce pollution by 72% by 2040 and eliminate 70% of CO2 emissions by 2050. In addition, it can save $ 1 trillion USD by 2050 and save resources that would otherwise be wasted. .
Companies need to re-evaluate their product mix, and remove polluting and similar but less common products. They can also change the size of things or extend their life through reuse and recycling. Other opportunities include sharing resources across regions and “products as services”. A bold move is needed – not only for the good of the environment but also for the multi-billion dollar opportunity that the circular economy represents.
4) New corporate culture
Climate action requires a new corporate culture that balances sustainability and performance. The company’s mission, vision and mission must be translated into a clear map of day-to-day activities. Integrating performance indicators into performance evaluation and decision-making processes can be very useful. Employees at all levels must be prepared to deal with climate change. However, the motivation must come from the top down: a culture that encourages employees’ skills in sustainability and openly promotes new ideas gives companies a competitive edge and increases their ability to adapt to climate change.
5) Public discussion
Finally, it should be clear that companies cannot do it all by themselves. They should consult with governments and policy makers to encourage action to reduce carbon dioxide emissions. Governments should implement policies that use market forces to promote sustainability and reduce emissions. This may include carbon contracts for difference (CCfDs), where governments provide additional funding related to green technologies to promote investment in these technologies. Such policy instruments should be accompanied by international efforts that protect climate-friendly companies from unfair competition from economies that have less climate goals.
Polycrisis shows that sustainability is a matter of economic wisdom: companies will not remain competitive without innovation and climate change. Even if we are under a lot of stress these days, we must not deviate from the established paths and goals that we have set for ourselves. Acting quickly on decarbonization is no longer a moral choice – it determines whether your company survives and the economy thrives.
Source: World Economic Forum