In his 2021 letter to CEOs, Larry Fink, the CEO and chairman of BlackRock, the world’s largest investment manager, wrote: “No issue ranks higher than climate change on our clients’ lists of priorities.”
His comment reflected a growing unease with how the climate crisis is already disrupting businesses.
Over the past few decades, many companies came to embrace sustainability. It became the corporate norm to seek ways to reduce a company’s negative impacts on society and the planet and operate more responsibly.
Sustainability-as-usual is the slow and voluntary adoption of sustainability in business, where companies commit to changes they feel comfortable making. It’s not necessarily the same as what science shows is needed to slow climate change, or what the United Nations recommends for an equitable society. Businesses’ response to both will be drawing global attention in November when world leaders gather for the annual U.N. climate conference.
One notable example is Heinz. The ketchup maker announced a cap for its ketchup bottle that is 100% recyclable. It was the outcome of $1.2 million invested and 185,000 hours of work over eight years, according to the company.
Climate change requires a new approach
While companies appear to grasp the magnitude of the climate crisis, they have been trying to address it mainly in a sustainability-as-usual fashion – one ketchup bottle cap at a time.
Consider emissions reductions. Companies have been slow to commit to reducing their emissions to zero no later than mid-century, a target that the Intergovernmental Panel on Climate Change considers necessary to limit global warming to 1.5 degrees Celsius – roughly 2.7 degrees Fahrenheit – and avoid the worst effects of climate change. Only about one-fifth of the major companies have 2030 goals that are in line with reaching net-zero goals by 2050 at the latest.
Companies have tried to rebrand their efforts in ways that sound more sophisticated, moving from terms like “corporate social responsibility (CSR)” to “environmental, social and governance (ESG),” “purposeful companies” and “carbon-neutral products.”
Business is at a strategic inflection point, which Andy Grove, the former CEO of computer chip-maker Intel, described as “a time in the life of a business when its fundamentals are about to change.”
This transformation could evolve in different ways, but as I suggest in my book, fighting climate change effectively requires a new mindset that shifts the relationships between profit maximization and sustainability to prioritize sustainability over profit.
Early signs of evolution
There are early signs of evolution, both within companies and from the forces that shape the environment in which companies operate.
Another example is changes in companies’ relationships with suppliers – for example, the business software company Salesforce added a sustainability clause to its contracts requiring suppliers to set carbon reduction goals.
Add to these bright spots changes in regulation and policy worldwide that aim to put in place key sustainability principles and push to cut emissions at a faster pace, plus the changing expectations of young job seekers when it comes to environmental and social issues, such as inclusion and diversity, and you can start to see how the end of sustainability-as-usual may be closer than many people think. Due to climate change, the question is more “when” than “if” it will happen.
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Raz Godelnik does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.