A group of industry experts and sustainability professionals met in London to discuss DNV GL’s latest report which outlines vital links between the economy, societal well-being and good governance in addressing key sustainability challenges.
“In terms of additional costs from climate change, our estimates range from five to 20 per cent of GDP,” said Bjørn Haugland, executive vice president and chief sustainability officer at DNV GL. “These added costs will just increase and increase.“
DNV GL’s research identifies 36 ‘barriers to sustainability’ ranging from economic and market barriers, to policy, societal, and behavioural. The scale of the problem can seem oppressive, but Haugland insisted these problems can be overcome if businesses and politicians frame the response as an opportunity to innovate, open up new markets, and meet customer demands.
“We believe there is a need to put the focus on the opportunities,” he said. “For corporate leaders and politicians to speak a positive narrative is so important as it directs so much activity in society.
“We believe it is possible to create a thriving economy, it is possible to stay within the limits of the planet and it is possible to create a society for nine billion people to live well if we want to. It is human activity that has taken us into this situation and it is human activity that will take us out of it.“
For Richard Ellis, director of corporate responsibility at Alliance Boots Group, involving the financial sector is the key to unlocking the door to these opportunities.
“The investment community does need to understand that longer term sustainability is the key to long term value,” he said. “The problem is that you can talk about all these things, but when you look at how quickly stock is turned over, it’s clear that this message is not getting through.“
But others argued short-term thinking is equally prevalent in many boardrooms. Nick Molho, head of climate and energy policy at WWF-UK, agreed that at the moment there is a “fairly significant disconnect” between the urgency climate scientists are calling for and corporate action. But he said policy-makers can help accelerate a low carbon shift by better understanding the timescales businesses factor into investments.
He referred to International Energy Agency (IEA) research that found a lot of policies were completely ineffective in driving energy efficiency decisions in boardrooms because they had not taken into account the internal rates of return boardrooms were operating under.
“Commercial companies wanted investment to pay back within four years, but a lot of the energy efficiency measures governments push for have payback period of nine to 10 years,” Molho said. “Unless you tailor policy to how a company operates you’re going to struggle to get the buy-in you want.“
He also noted that in many countries there is a lack of policy clarity beyond the end of the decade, which makes investment decisions more risky and subsequently pushes up the cost of capital.
For James Robey, group corporate responsibility and sustainability director at Capgemini, viewing low carbon investments as a change agenda helped executives buy-in to longer-term thinking.
“Climate change and sustainability is the biggest business change problem we’ll see and are very likely to see- that’s how I sell it to executives,” he said. Robey added that at Capgemini the board has been considering purchasing carbon offsets, but he convinced them to spend the money in the business instead.
“That enabled us to invest in things that didn’t have the conventionally expected payback for the industry, which was around 18 months,” he said. “Provided it would break even over the life time of the investment we’d go with it. We shifted the mind-set and we now have a CFO who looks at things across the lifetime of the investment.“
Connor Hill, Plan A sustainability and deliver manager at Marks & Spencer, added that companies must share knowledge and expertise not just horizontally, but up and down their value chains.
“We’re not that big a retailer on the global scale of things so we need to work more closely on consumer goods forums so we can bring upon the scale and pace of change,” he said. “We can’t do it by ourselves; we need to do it together.“
He added that rapid change will also mean companies will have to ensure that while they have long term visions, these will need to be sufficiently flexible to cope with new technologies and economic models.
This returned the debate to the importance of embracing new and exciting technology as a frame for a more positive view of the opportunities thrown up by climate change.
“I think negative perspectives are the biggest obstacle we face,” said Annie Heaton, corporate responsibility programme manager at ArcelorMittal. “The need for getting excited and the creation of technology and innovation is key.“
And the scale of the benefits of achieving the shift cannot be underplayed. “We are going to be economically, environmentally, and socially better off if we adequately tackle the climate crisis now than if we do nothing,” Molho said. “If we don’t tackle the problem now, then the bulk of our financial resources in 2050 and beyond will be spent on damage control rather than productive financial investment.
“So we need to move away from a doom and gloom discussion to focus much more on the fact that the alternative is exciting and the transition to a new economy brings with it new opportunities and new ways of doing things.“
Tracy Oates, director DNV GL – Business Assurance, is clear of the benefits of the roundtable talks. “Meeting with industry experts to hear their opinions on how we can address key sustainability challenges is important. In all of this, collaboration is key. When businesses can work together with governments and NGOs, we feel hopeful that we will be able to meet the challenges head on.“
Source and Image Credit: DNV GL
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