"I've seen many scientific reports in my time, but nothing like this”. These are the words of the UN Secretary-General, António Guterres, on 28th February 2022 at the launch of the 2nd part of the IPCC report, previously disclosed in August last year. At the moment he proffered these words, four days had passed from the most terrible event in Europe since World War II. As nobody would dare to imagine, on 24th February 2022, missiles and airstrikes hit Ukraine after Vladimir Putin had announced a "special military operation" to demilitarise and denazify the country.
The IPCC report Guterres refers to, can be as much or scarier than the war we have in hands. It describes the causes, impacts, and solutions to Climate Change: a war we are all feeding by how we live our lives, and how businesses run their operations. As in any other “war”, if it passes the way of no return, we will all be losers quicker than we imagine.
This report is important for us (business people) because of three main reasons:
- Findings in the report show that climate breakdown is happening faster than expected and that the window to take action is closing fast.
- The report appeals to the private sector to take drastic action against climate change.
- The race to net-zero is a massive opportunity, while inaction will put you out of the market quicker than you think.
Firstly, this IPCC report alerted us that things are actually worse than we thought. In fact, many of the impacts of global warming are now "irreversible," which can make life complicated for humans. For example, the report shows that extreme weather events linked to climate change like floods and heatwaves are hitting humans and other species much harder than before. Moreover, 40% of the world's population is "highly vulnerable" to the impacts of climate change, which unfortunately affects more the population of poorer countries. Parts of Africa, for example, will become uninhabitable in the next few decades."
Moreover, the world already faces immense biodiversity and ecosystem loss. The risk of diseases will spread more quickly in the coming decades, putting humans at risk. The sea level is also rising, at the same time that we see the melting of ice caps and the thawing of permafrost, which can mean the acceleration of global warming. A critical risk is also the ability of the ecosystems to absorb carbon dioxide, turning peatlands, oceans, and forests from carbon sinks into carbon sources. Even though this catastrophic scenario, there is still hope. If the rise in temperatures is kept below 1.5C - as accorded in Paris in 2015 and reinforced in Glasgow 2021 (COP26), - it would be possible to reduce projected losses and keep the human activity in harmony with Nature.
Secondly, the report appeals to the private sector to take drastic action. As the UN already averted and this report confirmed, our opportunity for action will only last for the rest of this decade. Consequently, and knowing that the worst impacts can be averted if we act in time, action is urgent from the greatest polluters - big companies. We know, for example, that between 1988 and 2017, just 100 companies were the source of over 70% of emissions of GHGs (industrial greenhouse gases). Nevertheless, the private sector is the most powerful and trusted agent to make this change happen. It accumulates the capital, technological and human resources able to operate the transformation we need. Do you feel your power? What about your responsibility?
Lastly, citing one of the men of the moment: "We focus on sustainability not because we're environmentalists but because we are capitalists!" (Larry Fink, Chairman of Blackrock). In fact, if inaction prevails, it will shave up to $23 trillion to the annual global economic output worldwide until 2050, representing a decline of up to 14% of the world economic value. Industries like agriculture, forestry, energy, transportation, tourism, and wine (just to mention some relevant ones in our Portuguese context) will face intensive hurdles, and some will fail.
This way, if you aim to be a successful businessman, don’t just focus on risk mitigation. Of course, we all know how having a sound energy transition or a fire prevention system will save you costs, but understanding how to capture real opportunity from this challenge will make you a positive and respected leader for your legacy and profit.
As a matter of fact, in 2018 the world’s largest companies reported over $2 trillion of climate-related opportunities from low-carbon goods and services. This number is $1.4 trillion in Europe (more than six times the cost to realize them). Moreover, the World Economic Forum also found that eco-innovation-focused companies grow at an annual rate of 15% higher than their counterparts. Capgemini confirms this information, reporting in a recent study that 63% of companies found that sustainability initiatives helped boost sales, while 79% of consumers prefer to consume sustainable goods and services.
And after all this, you may be asking: “What can I do?” If you are a beginner, I highlight some actions you can start with, but please, feel free to complete this list and start working:
- Align your business ambitions with the Science-based targets. Don’t be afraid to work on scope 1,2 and 3. That will bring you leadership!
- Set your aspirations to be carbon neutral and carbon positive ahead of your competitors - 2050 is too far – be rebel, not lowly.
- Work along your value chain: change your business model (from selling to renting, for example); engage with your suppliers; set a rigorous procurement policy; design your services and products to lead on sustainability, and carbon label on products; engage with your customers by education; and invest in low carbon projects.
- “The climate challenge is bigger than any one single company,” said Sak Nayagam – so work in collaboration with your industry mates, NGOs, and environmental consulting peers. They will support your efforts.
Remember! There is still a brief window of time to avoid the very worst. This is the Decade of Action, if we are going to turn things around! In the words of Helen Adams, one of the IPCC’s authors, from King's College: “One of the things that I think is really, really clear in the report is that yes, things are bad, but actually, the future depends on us, not the climate”.
Have a great and impactful week!
Filipa Pires de Almeida
Center for Responsible Business and Leadership