Business as a Force for Change
So far, I have made it sound like the major trends affecting businesses and their operations are all external – pressure from consumers and investors and the rising costs of primary inputs – but in many cases, businesses are leading the changes taking place and fuelling the trends themselves.
We Mean Business is a global nonprofit coalition working with the world's most influential businesses to take action on climate change.
There are over 1,350 We Mean Business members representing $25tn in market value committed to climate action.
Many other business representative and trade organisations are also driving action on climate change and ethical business practices, and there are many examples of businesses taking the lead:
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Microsoft has pledged to be "carbon negative" by 2030 with a $1bn innovation fund to combat the climate crisis.
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Amazon founder Jeff Bezos has committed $10bn to fight climate change.
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Nestle is to invest €1.68bn in sustainable packaging.
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Starbucks announces aspiration to become "resource positive."
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Nestle, Enel, Novozymes, Cisco, and Osram are listed in the Top 20 Sustainability Ranking for 2020.
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Sainsbury's will invest £1bn to become Net Zero by 2040.
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93% of the 250 largest corporations in 49 countries worldwide are now reporting on sustainability.
There are many opportunities for businesses created by the emerging trends we cover in this course.
The 2018 Report of the Global Commission on the Economy and Climate is called "The New Climate Economy." It predicts:
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$90tn is required in infrastructure investment by 2030 – more than the whole current stock.
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Low carbon opportunities of up to US$26 trillion through to 2030.
The New Climate Economy report states, "The opportunities are great, but so too is the potential for stranded assets, stranded communities, and stranded workers."
And the 2018 New Climate Economy report identifies four urgent priorities for governments and businesses:
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Carbon pricing and moving toward mandatory disclosure of climate-related financial risks, as part of broader policy packages.
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Accelerating investment in sustainable infrastructure, supported by clear national and regional strategies and programmes.
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Harnessing the power of the private sector, including unleashing innovation and advance supply chain transparency.
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Ensuring a people-centred approach, such that the gains are shared equitably, and the transition is just.
CDP is a not-for-profit charity that runs the global disclosure system for investors, companies, cities, states, and regions to manage their environmental impacts.
CDP estimates the global market for low carbon goods and services to be well over $6tn. They also forecast that $4tn worth of assets will be at risk from climate change by 2030.
Business as a Force for Change Actions
As we have seen, the opportunities are out there, but they require more innovative thinking from organisations than simply repeating approaches from the past.
Your organisation can expect to feel increasing pressure to act across their supply chains to make them more sustainable and to address human rights and equality issues.
Repurposing old spreadsheets will not work – the old standard assumptions no longer apply! Your organisation needs to develop new models for opportunity appraisal that taking into account new priorities and imperatives.
Your finance team needs to invest more effort and more research into preparing the business plans and investment projects for the next decade and beyond. The criteria by which these projects are judged will not be the same as they were previously. Sustainability, climate change, carbon zero, and ethical business practices all attract much higher ranking than they may have done previously. Indeed, investment projects that continue practices now considered undesirable – like greenhouse gas emissions, pollution, single-use plastics, and poor employment practices and wages – will no longer be acceptable to shareholders and investors.
New Technologies
Technological advances are taking place on many fronts, and I cannot cover them all. I am going to focus here on technological advances relating to some of the trends I have already highlighted, particularly climate change, carbon zero, and resource scarcity.
The new challenges facing business are spurring innovation, and there are big potential gains for companies that take the lead. Just a few examples of new technologies being developed include:
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Carbon Engineering – a Canadian company, backed by Bill Gates- that "pulls carbon dioxide out of the air by running it through specially formulated chemicals." It recently raised $88m to build its first commercial facility.
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Charm Industrial – "burns plant biomass to create hydrogen, capturing the greenhouse gases that are produced in the process."
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Newlight and Carbicrete – manufacture bioplastics and cement-free concrete, respectively, using processes that are carbon negative, meaning the process to manufacture them removes carbon from the atmosphere.
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Ocean-Based Climate Solutions – has "created a device that stirs up water in the ocean to promote the growth of phytoplankton and algae that can take carbon dioxide out of the air and deliver it to the bottom of the sea in solid form."
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Project Vesta – "covering shelf seas with volcanic rock, the weathering of which will remove carbon from the atmosphere."
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Prometheus – building a machine "that creates usable gas from thin air – rather than the oil deposits deep underground."
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Silicon Kingdom Holdings – is building "a pilot project that can capture 100 metric tons of carbon dioxide per day, and eventually develop full-scale plants capable of removing nearly 4 million tons each year".
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Visolis – is "working on creating carbon-eating microbes.
New Technologies Actions
Investment opportunities in new technologies have high potential returns, but also high risks. Your organisation should review and renew its efforts for innovation and new product development.
Your investment appraisal should assess the costs and benefits of increased investment in innovation.
Keep in close touch with industry bodies and other organisations that can provide information and guidance on new technologies coming into your industry sector.
Thank you for listening to this lesson. In the next lesson, I cover government policy and regulation and climate impacts on business.
