The business of rapid transition

Business represents the great paradox of rapid transition. On the one hand, much is expected of business in terms of technological innovation, new models of financing and shifts in business models to adjust to the climate emergency. On the other hand, many corporate actors are moving slowly or deliberately seeking to delay action on climate change because they profit so much from the status quo. Last year we hosted a meeting with the Carbon Trust to bring together people from business, civil society, foundations and academia, aimed at moving this agenda forward in the business community. We asked how far and in what ways are businesses responding to the need to align their corporate strategies with a 1.5 °C trajectory?

The United Nations IPCC report on 1.5°C, left little room for doubt about the need for rapid transition in business and across society if catastrophic levels of climate change are to be avoided. It also pulled few punched about the scale of change, calling for ‘transformative, systemic change’. In response, governments, cities and municipalities have declared climate emergencies. But what is business doing?

Business is clearly not a monolithic and homogeneous sector. Very different dynamics apply to businesses of different scale and ownership structure – from micro social enterprises to medium cooperatives and large shareholder owned corporations. But from seeing climate change as a threat in the early days of the climate regime, there has been a shift – in some quarters at least – towards seeing action on climate change as an opportunity.

Over 760 businesses are committed to meeting the 2 °C target by setting Science-Based Targets, including BT, Unilever, Carlsberg and Tescos. There have been over 1,700 commitments to ‘bold action’ from over 1,100 companies via the global coalition We Mean Business.  And there are important examples of innovation taking place. The Dutch materials company DSM, has completely transitioned from engineering to health and zero-carbon materials. Ørsted, the former Danish oil company, plans to have reduced carbon by 97 per cent as soon as 2023 and has shifted entirely to renewable energy. Unilever, meanwhile is committed to zero-carbon by 2030. For those businesses that do transition rapidly, The Global Commission on the Economy and Climate says that a potential $26 billion can potentially be earned if their investment proposals are acted on, compared to business-as-usual.

But we cannot shy away from the fact that some businesses or business models may no longer be viable in a zero-carbon society if they refuse to shift away from carbon intensive activities. We can no longer rely on having to make a ‘business case’ for action on climate change and sustainability. Sometimes a moral case should suffice. There are important conversations to initiate with stakeholders about such a transition, including customers and staff. Businesses after all are accustomed to technological and cultural disruption. They have to adapt all the time to threats from competitors and shifts in the landscape of supply and demand and consumer desire. Climate change adds to these pressures, whilst also re-defining many of them.

Businesses also face a whole serious of sustainability challenges alongside climate change. From water to biodiversity, land and food, businesses need to think more holistically about their corporate strategies. This potentially raises an altogether bigger challenge where entirely different models are required. There are interesting examples of some companies managing their own decline. Fossil fuel companies might become energy companies over time. The focus will be on the service rather than the technology or fuel. At the moment, growth tends to drown out efficiency savings every time.

As is clear from our report, whilst there are brave and imaginative examples of business-led rapid transition emerging, there is still insufficient recognition and discussion of these bigger issues and alternative economic models. Starting from shared values around well-being, belonging and prosperity may be the entry point for having these challenging but critical conversations.