Thought Leadership piece
Thought Leadership piece
More than 140 countries have announced or are considering net-zero targets, covering about 90% of global emissions and including big polluters such as China, the United States and the European Union. Almost 5,000 companies are taking action towards science based targets, with new coalitions for change emerging in key sectors from energy to fashion, consumer goods and more, including in so-called “hard to abate” sectors such as shipping and aviation. Citizens around the world are demanding action, as voters, as consumers and as employees.
Yes, we have a mountain to climb: current commitments still don’t add up to the change that is needed. Science says humanity must reduce emissions by 43% by 2030 and yet we are still heading towards a 10% increase. But momentum is growing. We’ve moved more in the last three years than in the last thirty, particularly in business where the cost of climate inaction now clearly outstrips the cost of action. From this point, with enough ambition and urgency, we can meaningfully start to accelerate.
The question is how. How can industry and government work together to scale the innovations needed to ditch our collective dependence on fossil fuels? How can we give our sluggish multilateral efforts a shot in the arm? How can we drive forward the standards and behaviours that will speed the transition, whether it’s ending harmful subsidies, putting a cost on carbon or preserving and enhancing nature?
What’s clear is that we’re not going to achieve any of this through piecemeal reform. In order to transition to a safe, clean and inclusive global economy in the time available, we will need to transform the systems by which our societies live, work, produce and consume.
This isn’t just about energy. It’s everything from the food we eat to the clothes we wear, the cities we build, the way we travel and so on, as well as the financial system which underpins it all. This level of systemic change will require unprecedented collaboration within every industry, as well between business, policymakers and civil society. We need a whole economy approach and, while there is no easy answer, for business leaders three principles are becoming increasingly clear.
First, business should lead from the front
Governments must, of course, set the laws and regulations needed to drive the transition, but the private sector brings the necessary innovation, speed, and scale. And by clearly supporting bold climate action, business leaders can embolden and empower more politicians to do the same.
Fortunately, many more C-Suites now see that moving on climate isn’t just about mitigating risk to their business, it’s also about unlocking opportunity. A growing body of evidence shows that companies that walk the talk on their environmental and societal commitments generate higher, more stable returns, invest more in R&D and are more likely to adopt a long-term, strategic mindset, and benefit as a result. In the years that one of us (Paul) ran Unilever, the company increased shareholder returns to 290% while consistently ranking first in the world for sustainability.
Deloitte predicts a $180 trn hit to the global economy by 2070 if we do not aggressively address global warming. This is versus a $43 trn gain from taking action and keeping global temperature rises beneath 1.5 degrees. 83% of CEOs now say that they expect sustainable investments to produce improved business results over the next 5 years.
Second, incremental action isn’t cutting it
Despite growing recognition of the need to act, too many companies are still stuck in the CSR space, meaning Corporate Social Responsibility. The problem with most CSR is that, while it may be well-intentioned, ultimately its aim is to make a company “less bad”. Given the scale of the climate crisis, and the fast-diminishing time left to address it, “less bad” just isn’t good enough.
“Given the scale of the climate crisis, and the fast-diminishing time left to address it, “less bad” just isn’t good enough”
No CEO wants their company to be part of the problem, but too many are tweaking and tinkering around the edges – a new sustainability initiative here, a small pot of money there – when they should be fundamentally looking at their business models Too many are setting the climate targets they know they can deliver, including through vague promises to reduce emissions by 2050 targets, when they should be setting the ambitious targets the world needs, and going hard on delivering them. The decade for action is now.
Going Net Positive
Which brings us to the third principle: we need more leading companies to take a Net Positive approach. In essence, Net Positive companies profit by fixing the world’s problems rather than creating them. Instead of aiming to be “less bad”, Net Positive businesses actively work to restore and regenerate our environment and societies. For instance, by taking carbon out of the air, or replenishing the water they use, or creating more nature. They help make our economies more inclusive and equitable. They promote science and truth.
No business is fully Net Positive yet, but those embarking on this journey are already finding themselves better placed to navigate our uncertain and fast-changing world. These are the companies striving to take responsibility for all their impacts, including the indirect consequences of their business for the environment and society. These businesses take a long-term view and work to serve all their stakeholders, including employees, customers, suppliers, local communities, the next generation, and the planet itself, and deliver for their shareholders as a result. They work with others to help deliver the changes no single company can drive alone.
This collaboration point is key. Net Positive companies work with others, including their competitors and critics, to advance changes across their industry, and they partner with government and civil society on broader systems change. This is precisely what NREP is aiming to do through its UN17 Village, which has brought together all of the key players to provide more than 500 new homes in Copenhagen in a new development which encompasses all 17 of the United Nation’s Sustainable Development Goals, focusing on both climate mitigation and healthy, integrated communities. Through partnership and joint action, the ambition is to create a new template for sustainable development.
With enough collaboration, and high enough ambition, humanity can finally begin catching up with climate change. The real barriers to tackling the climate crisis are not, in the end, technology, or a lack of knowledge, or even money. Whether we do this will come down, ultimately, to human willpower, leadership and courage. We still have time – but only just. Less bad is still bad; it’s time for a Net Positive approach.
Here, investors like Urban Partners have an important role to play. Access to a safe, clean, healthy and sustainable urban environment should be a human right, and is particularly important in cities, where nearly two thirds of the global population will be living by 2050. Changing how we design, deliver and operate our buildings and cities has the potential to drastically reduce carbon emissions, as well as having an impact on key societal issues such as productivity, access to food and water, health and wellbeing, living standards, safety, biodiversity, resilience and mobility. Investing now can make cities a benefit, not a burden, for people and the planet.
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