Organisations are missing the sustainably-powered bandwagon.

There’s a planet-sized market opportunity for businesses to save the world from climate disaster and profit in the process, but it’s going unexplored by many organisations. 

This “business can save the world” perspective is contentious in the environmental movement. A prevailing school of thought is that the solution to planetary crisis can only realistically be realised through fundamental, overarching global political and economic change. In particular, redressing the shift towards free market capitalism popularised by Milton Friedman in the second half of the 20th century and enacted through deregulation and globalisation.  

This may well be true, and a shift towards Scandinavian-styled social states may offer the best path to averting crisis. 1 Such changes however feel a long way off. Trump’s rise and associated attempts at further economic deregulation in the US are key indicators. 2

And anyway, rightly or wrongly, most businesses don’t set out to enact wholesale change to the economic system, but rather prosper within the environment they operate in and amend what they can.

In the absence of such fundamental changes therefore, I’m looking at the situation based on the rules of the playing field as we know it, and exploring a pragmatic path forward. 

In this context, the situation facing our planet is the challenge of our time. Not since the Cold War and mutually assured destruction has there been such an existential crisis. Future generations depend on our actions now. 

Of course, there’s a justifiably pessimistic narrative about the situation. We may prefer to ignore it, and some to even deny it, but for the vast majority it’s a sad fact.

But herein lies the opportunity. The very scale and complexity of the challenge we face brings with it inherent opportunities. 

Sceptics decry this environmentally-friendly perspective in business as altruistic, niche and un-monetisable. 

Altruistic, for sure. Niche, not for long. Un-monetisable, no. Leading organisations are already building a better tomorrow and profiting in the process. 

Typical responses to climate change today focus on minimisation of exposure to downside impacts. Hardly surprising given that 15-20% company cash flow is estimated to be at risk. 3

A set of common organisational responses today include charitable giving in cash or kind. Obviously this is no bad thing, but by no means a central tenet of organisational purpose and strategy.

Similarly, cleaning up supply chains and positioning operations for the future is a critical step. But it’s just that, a cleaning up exercise, that maintains parity with market shifts but is unlikely to be a strategic differentiator.

These actions alone bear fruit. And not just any fruit, but large, organic, healthy fruit. Those companies actively managing and planning for climate change already secure 18% higher return on investment (ROI) overall than companies that aren’t, and 67% higher than companies who refuse to disclose, according to CDP. 4

But this is just the start. Not least because tracking along the steady path we’re on probably won’t get us to where we need to be to save the planet. 5

From a purely financial perspective though, what about creating exposure to upside benefits of averting planetary crisis? This is where the real opportunity sits, and is being missed.

The largest challenges typically throw up the greatest bounties. History is littered with examples, from Scottish clergymen setting out to care for the widows and orphans of their peers and in the process building the insurance industry; to US captains of industry bringing affordable cars to the masses; to Silicon Valley garages becoming the organising force for the world’s information.

Averting a planetary crisis that impacts billions of people has to be up there in the pantheon of big challenges, probably the greatest of them all.

‘Disaster capitalists’ are apparently prepping business models to succeed in a world hurt by climate change. This centres on a response though, not a cure to the root issue. 6 And as a personal aside, I wonder whether future consumers will look less favourably on those companies providing newly essential services who have a history of doing little to avert the crisis in the first place, or even lobbying to encourage it.

Too few organisations have a strategic response proportional to the scale of the opportunity faced.

Getting into the specifics of “how” organisations can benefit themselves and the planet, and crucially how they may be recognised and rewarded for their actions, is clearly no small feat and a topic for a later blog post. For now, signals show the tides of change and businesses already garnering material gains from positive action. 

At a policy level, the Paris Accord of 2015, and the response of Corporate America and various state and local governments to Trump’s proposed backtracking, highlight an important change in emphasis globally. 7 We’re seeing many countries following suit and introducing further policy change to realise their 2c climate change goals.

A confluence of factors has seen China, the world’s second largest economy and biggest green house gas emitter, embrace renewables at a rate previously unthinkable. Together with the USA this contributed to renewables accounting for two-thirds of new power added to the grid globally in 2016, and leading the IEA to revise up its growth forecasts for renewables adoption globally. 8 China’s goal to be 20% renewable by 2030 may not be the silver bullet, but from a business-perspective (and the $780bn investment earmarked to 2020 alone), the trend is striking. 9

Financial markets show signs of real change. In funds management, those that track environmental, social and governance (ESG) are already outperforming the market, with inflows at record levels. 10 Ethical investing is leaving its speciality niche to join the mainstream, with a majority of institutional investors planning to continue to increase investments related to tackling climate change. 11 

More than smart investments and savvy long-term portfolio balancing, money is increasingly being made available for green projects. Green bond issuance, which is money raised by companies specifically for green projects, will reach $123bn this year, up nearly 30% on last year. Demand currently outstrips supply, raising questions of those organisations not on the front foot taking advantage of this ready capital. 12 

In the land of big corporate, giants like Unilever committed as far back as 2010 to reduce their environmental footprint by half by 2020. With a disappointing adjustment now to 2030, Unilever’s goal remains the same, but with an additional aim to be “carbon positive” (i.e. 100% renewable). 13 Perhaps no environmental angel in the eyes of many, but halving the footprint of products sold to two billion people daily ain’t bad. This has been recognised by seven consecutive years at the head of the Sustainability Leaders report. 14 Beyond warm and fuzzy accolades though, Unilever’s focus has translated into enviable growth of its Sustainable Living Brands that outstrips rates achieved by some of their more established stablemates. 15

And finally, the poster child for environmental change in the eyes of many, Tesla. Built on electric vehicles (and some would argue the sheer force of will and bravado of Elon Musk), it has surpassed the market cap of industry stalwarts GM and Ford, betting the house on a cleaner future for transport. 16

Pulling back the covers though, there’s more to the story. Wiley old Warren Buffet was ahead of the market too, investing in Chinese electric car company BYD in 2008. BYD is now the leading electric car manufacturer globally and trading at 2.5 times the forward earnings multiple that Buffet bought in at. 17 The near-lightening planned turnaround for Volvo to achieve a wholly electric and hybrid product range by 2020 shows others scrambling to keep up as greener companies are taking the industry by force. 18

Overall, there are plenty of enormous numbers out there to summarise the overall size of the prize presented by tackling the planetary crisis. Meeting the goals set in Paris equates to an estimated $12 trillion per year opportunity by 2030. 19 Putting that on a graph is pretty unhelpful though, it’s meaningless to most businesses. 

The pertinent point is that inherent to the worrying narrative of planetary crisis is a more hopeful theme of opportunity for business, but it’s being missed by many today. 

Organisations that create a proportional response to the crisis stand to benefit, not by profiting from the outcomes of change, but by being a part of the solution. Leading organisations are already showing the way.

Future posts will explore in more detail exactly how companies are responding to create competitive advantage. In particular, monetisation rests on bold new business models, technologies, and crucially consumer will. All themes I’ll explore in detail.

  1. Naomi Klein, This changes everything, 2015
  2. The Washington Times, Trump to outline more plans for deregulation in speech, 22 September 2017
  3. FT, Schroders issues climate change warning, 16 July 2017
  4. The Guardian, Sustainable companies are more profitable, report finds, 23 sept 2014
  5. HBR, Saving the Planet from Ecological Disaster Is a $12 Trillion Opportunity, 4 May 2017
  6. Naomi Klein, This changes everything, 2015
  7. NYT, Bucking Trump, these cities, states and companies commit to Paris accord, 1 June 2017
  8. The Guardian, Time to shine: solar power is fastest growing source of new energy, 4 October 2017
  9. Reuters, China solar, wind to attract $780 billion investment by 2030 – research report, 11 April 2017
  10. FT, The ethical investment boom, 4 September 2017
  11. FT, Big investors to put more money into tackling climate change, 12 September 2017
  12. FT, Green bond boom brings growing pains, 25 Sept 2017
  13. Unilever, Our big goal, 27 October 2017
  14. Globescan-SustainAbility survey 2017
  15. Campaignlive, 5 May 2015
  16. FT, Tesla and Elon Musk’s moment of truth with first mass-market car, 23 July 2017
  17. FT, The ethical investment boom, 4 September 2017
  18. The Guardian, All Volvo cars to be electric or hybrid from 2019, 5 July 2017
  19. HBR, Saving the Planet from Ecological Disaster Is a $12 Trillion Opportunity, 4 May 2017

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