Sustainability briefing for CEOs Part 1: New opportunities
Sustainability has become a C-level issue.1 Whilst many businesses are taking the issue of preserving and restoring the balance of nature more seriously simply because it’s the right thing to do, more and more they are also realising that pursuing a ‘sustainability transformation’ also makes sense financially. This post is about the new opportunities and industries being created by the trend towards sustainability.
The trend towards sustainability has been building for many years, received a major pre-pandemic boost globally through the school strike for climate movement, and has slowed only superficially during the pandemic (despite the fact that 2020 was a record year for weather-related disasters).
Insight in brief
- While many businesses see protecting the environment as an important cause in itself, there are also plenty of financial reasons why businesses should start to think more seriously about sustainability.
- For innovative, agile companies, a key point of interest is the fact that sustainability is creating entirely new industries.
- Companies that position themselves correctly now will be able to play a major role in shaping these new industries.
Pressure from consumers and legislators has been building relentlessly. Once industrialised nations are able to put the coronavirus crisis behind them, economic activity is likely to be geared much more heavily towards sustainability. For at least the next decade, sustainability is set to be second only to profit in driving business thinking.
Five reasons for driving forward with sustainability
But even today, as well as protecting the environment, there are also five financial reasons why businesses should be driving forward with sustainability:
- Consumers are demanding more sustainable products. According to a study by NYU Stern, products marketed as sustainable grew 5.6 times faster than conventional products. Sustainability is also playing an increasingly important role in public sector contracts.
- When it comes to recruitment, candidates are ever more focused on the contribution a business makes to sustainability. Sustainability is an important factor in choosing an employer for 76% of candidates, and the decisive factor for 40% (study from stepstone).
- Investors are increasingly looking for sustainable investments. BlackRock CEO Larry Fink, for example, has proclaimed that from now on sustainability will be the new investment standard for his US $7.4 trillion fund, and that the fund will exit environmentally damaging investments such as coal (read Larry’s letter to the CEOs here).
- Legislators are compelling businesses to be sustainable. From the EU’s Green Deal, the US Climate Plan and China’s 14th Five-Year Plan to the global Paris Agreement, a plethora of regulations are set to steer the global economy in a more environmentally friendly direction. For businesses in Germany, these include the EU Ecodesign Directive (energy efficiency, right to repair), the new German Sorgfaltspflichtengesetz, which obliges businesses to perform human rights due diligence on their supply chains, and the EU Taxonomy for sustainable activities.
- Sustainability will give rise to entirely new industries. I will be exploring this point in more detail below.
New industries besides sustainable products
If we are to achieve the 1.5 degree target set out in the Paris Agreement, we are rapidly approaching the point where reducing emissions alone will not be enough. We will also need to actively reverse the effects of past environmental sins. That means sequestering not just a significant proportion of past emissions, but also emissions set to be produced in future, even with more sustainable technologies. This will create colossal new industries. Action needs to be taken in a number of areas, including, but not limited to:
- Sequestration of CO2 (and other greenhouse gases, such as methane) from the atmosphere
- Water purification to remove antibiotics, hormones and microplastics
- Soil decontamination
- Halting, then reversing the decline in biodiversity
This needs new technologies, new providers and new business models – and represents a colossal market for start-ups and innovators. There are already plenty of examples. Climeworks (Switzerland), Carboculture (Finland) and Carbo Engineering (Canada) are extracting CO2 from the air; The Ocean Cleanup is aiming to clean up the seas; Orbital Systems (Sweden) offers a water recycling system; Biomede (France) uses special seed mixtures to remove copper and heavy metals from the soil (phytoremediation); Remsoil (Finland) has created an additive to accelerate the natural breakdown of pollutants such as oils and PAHs.
The most important task, and the biggest challenge for governments, businesses and consumers, involves reshaping entire systems to make them sustainable, and therefore fit for the future. In the case of energy, this transformation is already underway. Our transport and food supply systems are still on the starting blocks. The waste management industry needs to become a recycling industry – waste, after all, is just resources in the wrong place.
No government and no company can tackle this alone. It requires a collaborative approach. And that means, in the drive towards a circular economy, that in addition to ‘make’ and ‘buy’, managers increasingly need to be considering the third option – ‘ally’.
The pioneers of today will shape the industries of tomorrow
Companies that jump on board now are in the best position to shape these growing industries and achieve first mover advantage – cf., for example, Tesla in automobility.
On a personal level, the best way you can help the planet is by consuming less. As a business leader, you can get more efficient, offer more coherent technologies (i.e. technologies that have less environmental impact), offer new technologies for cleaning up the planet, or help to reshape systems.
The ball is in your court – what are you going to do?
Our Sustainability Circle brings talks bring practitioners together to discuss how other companies are tackling this issue. If you’d be interested in taking part, please get in touch.
In part 2, I will be writing about different strategies for taking advantage of the opportunities offered by the growing trend towards sustainability.