“The business climate is changing” is just one among the many wordplays that have been used in recent months to describe the emerging alliance between corporations and the environment, between ecology and economics. The immense challenge posed by global warming seems to have opened new business opportunities. The latest report of the Intergovernmental Panel on Climate Change (IPCC), compiled thanks to the work of 2,500 scientists and six years of research, has proved beyond controversy the correlation between human activity, greenhouse effect, and the rise in global temperatures. CO2 concentration has rises from 280 ppm before the Industrial Revolution to 379 ppm today, thereby exceeding the range of variation recorded over the last 650,000 years (180-300 ppm). Business-as-usual scenarios point to a rise in carbon concentration to 500 ppm by 2050, which would translate in an average temperature rise of 2-3°C and potential economic costs as high as 3% of annual GDP. Although accurate forecasts are probably impossible, “we know enough to understand the risk”, to quote the Stern Report.
An inconvenient truth is thus before our eyes, to cite the title of the academy award-winning movie by Al Gore and David Guggenheim, and we are confronted with the frailty and precariousness of our model of economic development, as well as of the ecosystems which we inhabit. As Edgar Morin remarks: “Humankind has gone from activities integrated within ecosystems to the conquest of the biosphere, but has not managed to escape the biosphere... Man has climbed the top of nature, but remains with its realm.” This is a time of strong discontinuity, however. Firms have now changed strategy and are ready to take on leadership roles to promote initiatives capable of reversing negative environmental trends. According to many company reports, the costs of climate change caused by passive approaches could be offset by the benefits of taking immediate action. In other words, the transition to the low-carbon economy may offer important business opportunities. UN statisticians estimate that the market for cleaner technologies could reach €1,480 billion by 2015, and the World Bank has assessed the carbon trading market to be worth €8.5 billion. Lehman Brothers and Citigroup show that businesses can sometimes move faster than regulations in containing carbon emissions, while BP and Shell have launched business units that focus on alternative and renewable energy sources; BASF, DuPont, Dow and other chemical companies are investing in bioplastics and eco-efficient processes; the auto industry is testing new fuels and new technologies, such as biofuels, hybrid engines and hydrogen-powered fuel cells. Other international banks like HSBC and JP Morgan have publicly announced they are going carbon-neutral. An alliance of over a hundred transnational companies, including Volvo, Air France, ALCOA, Swiss RE, Ericsson, Bayer, ENI Ford, Toyota, Wal-Mart, GE, as well as Indian and Chinese corporations, have signed an agreement vowing to take immediate action in tackling climate change, and asking governments to set precise targets to reduce greenhouse emissions.
Summing up, a dynamic model of the “push-me-pull-you” sort seems to be emerging, whereby civil society and policy-makers push companies to change their ways, but also companies are in the process of pulling governments along, so that they set rules and incentives capable of rewarding innovative endeavors. Some call sustainable capitalism this emergent set of social phenomena. What’s certain is that a growing number of corporations are on the move to seize the opportunities posed by climate emergency. However, we are not witnessing the reconciliation between the imperatives – historically at odds – of economic growth and the health of the planet: hydrocarbons are still the key energy inputs of our current techno-economic paradigm. Nevertheless, the current reorientation of business decisions provides reasons for guarded optimism.
by Stefano Pogutz and Antonio Tencati,
Assistant Professors, Institute of Corporate Management (IEGI), Università Bocconi