Comment: This is no time to stand back. Business must lead the way to a more sustainable world
25 June 2024 - CISL's Interim CEO, Lindsay Hooper, writes: In an era of disruptions, polarisation, complexity and increasingly intricate environmental debates, the core business case for sustainability remains: business cannot thrive on a dead planet.
Whatever issues dominate political agendas in this mega election year, this is not the time for business to stand by while sustainability is pushed down leadership agendas, nor for themselves to deprioritise action. For their own sake, businesses should be stepping up to drive the transition to fairer, more resilient, sustainable economies. This requires them to speak up in support of effective government action, and to work with governments, financial institutions and citizens on credible, practical, joined-up delivery plans. Our new Agenda for Europe report outlines exactly the kinds of plans that are needed.
It is in businesses’ own interests to call for effective government action. Not just action in a general aspirational way of declarations and targets, but action to implement specific policies and investments to tilt markets and incentivise transition, for example, rolling out infrastructures for key sectors, electrification of transport and industry and green hydrogen production, or targeted support for innovation in the right sectors – all recommended in the report.
Government action isn’t just about policies but about politics. Much is being made of the move to the right in the recent European Parliament elections. The threat to climate action is hailing from the far-right in France, Hungary and Austria in particular. But whoever is in power will ultimately be unable to ignore the stark reality that transition is inevitable. The laws of nature have no respect for politics and will painfully demonstrate the limits of unsustainable business practice. History shows that extreme inequality inevitably leads to social fractures and conflicts. And market dynamics are unstoppable – where cleaner, smarter, and more efficient solutions exist, they will eventually prevail. The pressing question for leaders is how – and at what cost.
We are at a critical juncture, with a narrow window to direct the dynamism, innovation and sheer scale of business activity to meeting society’s long-term needs. But progress is slow. While capital has flowed into renewables faster than anticipated, the phase-out of damaging activities, such as burning fossil fuels and industrial-scale agriculture, is not happening rapidly enough, with the consequence that 2023 saw record global demand, opens new tab for coal and oil use, and record carbon emissions. Likewise, insufficient capital is being directed towards infrastructure and jobs in developing economies or for protecting nature.
The challenge is not one of lack of awareness. Most business leaders are aware of the need to act; their staff demand action, boards face new liabilities and regulations demand new disclosures. The challenge is one of speed – and this in turn is a challenge of structures and social engagement.
Without market structures that both incentivise green innovation and penalise those profiting from harmful activities, many committed businesses find themselves between a rock and hard place. They recognise the long-term costs and risks of inaction and see the opportunities that could be unlocked by economic transition, but they struggle to voluntarily bear the costs of positioning themselves for the future, while being competitively undermined by those who choose not to act.
However, calling for and contributing to government action is only part of the picture. Positioning for inevitable future transition will also mean thinking beyond the optimisation of “business as usual” ways of operating – and investing in the new capabilities to navigate strategic shifts. For example, as we face into a deepening “land crunch”, opens new tab it will be necessary to not only rely on regenerative agriculture to feed a growing population, but also look at new food production technologies and solutions that will disrupt current markets.
This also means working and innovating with others. In a range of critical systems such as transport, food and the built environment, there is a need for aligned ambition, innovation strategies and infrastructure across multiple actors. For instance, at Cambridge we run the Aviation Impact Accelerator (AIA), which brings together major players across academia, government, aeroplane manufacturers, airlines and airports, to identify step-change solutions to sustainable flight. Similar work is needed in a host of other areas to bring rigour and innovation to difficult trade-offs.
It is also in businesses’ own interests to shift their mindset on sustainability, away from a dominant focus on compliance, communication and pleasing stakeholders to one of long-term value, competitiveness and resilience. For example, action to prolong the future of internal combustion engine cars in Europe may be popular with certain companies and blocks of voters in the short term, but risks putting the EU at a competitive disadvantage relative to other car manufacturers, particularly new entrants to the sector.
But this mindset shift doesn’t mean ignoring the concerns of citizens, particularly when it is so apparent that many people resent being excluded from decisions that will shape their futures and don’t see the benefits of the energy transition in ways that are relevant and meaningful to them. On the contrary, if we are to achieve necessary support for action to incentivise sustainable business, we need not only a credible, positive vision for a better future, but also processes to enable citizens to participate in tough decisions, to co-create solutions and to self-organise to build resilience across societies.
As we emerge from the hype bubble around ESG, and as new governments establish their priorities for the second half of this “decade of action”, businesses have a window of opportunity to step up and to both demand and lead a shift towards a more sustainable, fairer and resilient future.