Man’s discovery of fossil fuels opened a bonanza of human development. We liberated energy from carbon to create surpluses of wealth and time. A cultural and economic system of growth erupted, allowing societies and individuals to advance into our present civilisation.
Business may be our best chance to accelerate the transition to a low-carbon future. The organising power of markets is a decisive weapon in the battle against rising emissions.
The undeniable gains of fossil fuels, however, have been achieved at a cost. Burning carbon releases greenhouse gases, which in turn causes the planet to heat up. At the current rate, global warming is likely to reach 1.5 ̊C above pre-industrial levels between 2030 and 2052 (IPCC).
Even 1.5 degrees will lead to dying oceans and draining freshwater, wildfires and floods, hunger and heat related death. Conflict and migration will increase. Inevitably, failures within nature will damage economies and worsen social issues such as poverty and suffering.
Credible bodies call for climate action
As the world understands better the complex, interconnected problems caused by anthropogenic (or human-caused) global warming, credible bodies such as NASA and the IPCC are calling for decisive and immediate action.
As I write, the United Nations Climate Change Conference COP 25 in Madrid is holding nations to account for their Paris Agreement pledges to reduce carbon use. The agenda aims to galvanise the ‘action of regions, cities, business, investors and civil society’.
Patience is wearing thin
A rant about capitalism, markets and business is many a first response to the question of global warming. This anger has merit – no one credibly denies that industrial processes and consumerist lifestyles have burned a great deal of carbon. Our use of the earth’s resources has been reckless.
Still, the solution is not to tear down the systems that have animated our societies for so long. Indeed, business may be our best chance to accelerate the transition to a low-carbon future. The organising power of markets is a decisive weapon in the battle against rising emissions.
Directors can no longer get away with greenwashing as a response to climate threats. Regulators, investors and customers will vilify executives who spin a yarn about their impact.
Companies are well positioned to influence consumer behaviour through products and advocacy. They can also translate government policy into practice, creating conditions for culture change.
Business leaders will hope to avoid the socialist fantasy that some activists clamour for. They will fail in this ambition, however, if they do not overhaul the way companies operate. Pick up any newspaper and it’s clear that the patience of regulators, customers and bystanders is already wearing thin.
How, then, can companies that rely on fossil fuels work toward a low-carbon future? The answer lies in strategy and culture. The four imperatives below are a starting point.
1. Reimagine business strategy
Companies must make money to survive. There is also an expectation – from shareholders, employees and society – that business create surplus wealth. Unsurprisingly, the strategies that have prevailed in recent decades are geared toward monetary returns.
Many companies have bolted corporate social responsibility (CSR) onto predominantly financial strategies. These are unlikely to yield the shift required.
Similarly, directors can no longer get away with greenwashing as a response to climate threats. Regulators, investors and customers will vilify executives who spin a yarn about their impact.
The simple truth is that for a low-carbon future, new commitments must sit alongside financial goals – within formal, agreed strategy. Companies have no choice but actively to seek three forms of value: financial, ecological and societal.
Meanwhile, any executives not persuaded by the good sense or moral arguments for reducing carbon emissions should consider this: tighter climate policies could erase $2.3 trillion in stock value by 2025.
2. Rethink day-to-day practice
Strategy becomes real through corporate culture, which we understand as having three parts. Culture comprises visible practices – what people say and do, norms of behaviour, and known expressions of the workplace such as office layouts and team sizes.
Culture is shaped by spoken values – what we say we care about. Yet culture, and therefore how a company works in practice, emerges more directly from our hidden assumptions – what we really believe, but may not say aloud.
Various assumptions hidden in how we conducted fossil fuel era business will derail efforts to pursue low-carbon strategies.
For companies that came of age in the fossil fuel era, a low-carbon future likely means a radical departure from practices that in the past were successful. The vision will vary by industry and company, yet simple principles apply across the board.
a) When sourcing materials, a climate-friendly business respects the constraints of the natural world. It does not plunder resources that the earth cannot easily replace. It limits collateral damage, so, for example, does not destroy rainforests to lower the cost of its crops.
b) In day-to-day operations, the business minimises its dependence on energy sources that emit greenhouse gases. It also ensures that waste products do not cause undue pollution. It invests in workplaces that help employees limit waste and their use of carbon.
c) As for products and services, a climate-friendly business support customers in their efforts to burn less carbon. In many industries, this means a move away from ‘cheap’, disposable solutions to those that last or which can be recycled. The company’s offerings bring real value to people.
3. Agree climate friendly values
Businesses invest time, energy and money into setting out corporate values. These words then laze around on websites, peel off head office walls and hide in e-mail signatures.
‘Make lots of money, but, please, please, if you can, do it in an inclusive, collaborative, innovative, customer-centric way!’ Few people care – strategy eats culture at the end of the day. When the strategy is more holistic, however, (as I recommend above) good values will reinforce its effectiveness.
Therefore, until ‘harness the earth’s resources responsibly’ becomes second nature, companies can set out values to guide decision making, actions and behaviour. Avoid boring, grey words that any business might use; opt for expressive, bold, unique language that reflects what you stand for.
4. Question fossil fuel era assumptions
Day-to-day practice will not yield to new corporate values if people’s longstanding beliefs go unchallenged. Various assumptions hidden in how we conducted fossil fuel era business will derail efforts to pursue low-carbon strategies.
One belief is that man, the reigning species, could extract from the natural environment ad infinitum. Climate threats now reveal non-negotiable limits to how much we might take before the planet’s equilibrium is disturbed. In future, we must respect the limits of nature, and replenish.
A second assumption is that business and wealth creation somehow operate independently of the natural and social worlds. Today we see how business both shapes and depends on these two environments. In future, we must be big enough to recognise how everything intersects.
Third is the – increasingly unsaid yet prevailing – assumption that business exists merely to create shareholder value. Right now, our world has other needs. In future, the role of business is delivering value for people and the planet, profitably.
Finally, a fourth assumption that what brought success in the past will work again. The fossil fuel era yielded many benefits but to continue on this path will lead to ruin. In future, we have to move away from carbon-fuelled growth to more sustainable sources of energy and wealth, and quickly.
Time is running out
Business has a window of opportunity to reimagine its relationship with nature and its role in society. The executive teams of which HR leaders are a part must act quickly to embrace and pursue goals that are not wholly financial.
Similarly, if new strategic commitments are to have positive impact, companies must also nurture a culture where day-to-day practice is aligned with the evolving needs of today’s world.
Businesses that fail to make the transition to a low-carbon economy have no future.
Interested in this topic? How to take care of people, the planet and profits.