Grace Binchy, Insight & Trend Specialist, Bord Bia - The Irish Food Board
“We are too slow, I think we need some more internal challenges”
Herbert Diess, chief executive VW
The impetus for change to address the environmental challenges we are facing is becoming ever more critical. Crisis is the new norm as we are all now aware and the effects are far reaching and becoming more omnipresent.
Big business is now feeling the pinch too. Take the reinsurance leader Swiss Re. They have seen large increases in payouts for damages caused by the weather events of recent years. In fact they saw $2.5 bn more in payouts in 2017 than they had envisaged. The Governor of the Bank of England, Mark Carney has said we are likely to see more company bankruptcies if we don’t start tackling these challenges with urgency.
In an earlier Food Alert I talked about some new models for change in addressing climate action and while businesses are now engaging, emissions are still rising and under existing policies reductions won’t begin to approach what’s needed to cut carbon emissions to zero by 2050. Change needs to be more radical.
Andrew Winston, the founder of Winston Eco-Strategies in his HBR article: “Leading a new era of climate action” sets out to highlight a range of approaches that could help accelerate the change required which we reflect on in this article.
1. Employees take action.
One interesting action to emerge is that of employees putting pressures on their employers to do more to address change.
At Amazon as an example, more than 8,700 employees have signed an open letter to Bezos with a list of actions, including the development of a plan to get to zero emissions. They are also looking to eliminate donations to climate denying legislators.
The Amazon employee effort has paid off, undoubtedly playing a part in pushing Bezos to announce large ambitions to be carbon neutral by 2040 and also to buy 100,000 electric vehicles.
2. Leveraging stakeholder relationships
Big buyers want to see change and are challenging their suppliers more than ever. They want transparency and to see progress in suppliers sustainability footprint from carbon to human rights. These are new norms according to Winston, but what he is really interested in is what are boundary pushing companies doing to drive change?
Making businesses more sustainable often requires investment and capital that can act as a deterrent for many. Companies that ask suppliers to change how they do business can help - he says– for example in 2018 after achieving 100% renewable energy in its own operations, Apple launched the China Clean Energy Fund, a joint pool of $300 million to help suppliers buy one gigawatt of renewable energy with the result that the funds first big wind farms went up last year.
Other examples highlighted here include businesses like Levi’s and Walmart working with HSBC and other banks to provide lower interest rates to suppliers that score well on sustainability performance.
3. Collaboration for change
Tom Szaky , Terracycle, says we need 100 ideas like his Loop system. Global business is increasingly recognising the need for collaboration. Winston also emphasises this, highlighting the need not just for value chain innovation but highlighting how sector wide collaboration can have an even great impact. He talks about how Walmart and Target have worked together to create the Beauty and Personal Care Sustainability Project. Bringing together others companies such as P&G, Unilever and their chemical suppliers they have collaborated to rethink ingredients , packaging and more to reduce health and environmental impacts.
4. Using less
We have talked a lot about the “recycling myth” and so reducing consumption is another action companies can support consumers to do. Winston highlights Patagonia as an example here. While encouraging companies to repair their Patagonia branded clothes so that they don’t need to buy new items might sound like it could hit their bottom line negatively, it has in fact had the opposite effect. Sales have quadrupled over the past decade, reaching an estimated $1bn.
5. Making work more woke
While we have seen consumers aligning themselves with brands that reflect their values, employees now are starting to seek out employers who share their values. People under 40 in particular want to work for employers that share their values. This cohort will represent 75% of the workforce by 2025 (Forbes) and so this is likely to become more prevalent.
Benefits can flow both ways with companies needing their employees commitment and buy in to achieve their sustainability goals. Reinforcing this relationship, companies, says Winston, must build sustainability and climate action into their regular incentive structures and systems.
Supporting employees values by helping drive change in the world around them takes this a step further. Lush the cosmetics retailer, having identified the “climate emergency” as a top employee concern, closed 200 shops in the US to allow their employees join the global climate marches last September.
6. Rethinking revenue
Winston talks about how establishing internal carbon pricing on companies own operations to encourage emissions reductions is another way to explore internal revenue models- with more than 1,400 companies now using internal pricing in some way. Businesses like Microsoft, Disney and LVMH have created pioneering models where they are collecting real money from divisions or functions related to their emissions. This “tax revenue” is reinvested in energy efficiency renewables, or offset projects such as tree planting. This rethink enables businesses at the very least prepare for future government imposed carbon taxes.
7. Mixing business with politics.
Businesses acting as activists are key Winston believes to success.
In fact in the current climate it’s becoming more challenging for business and their CEOs to be neutral players. As society has become more politically polarized, companies have become more activist according to a HBR study “ How do consumers feel when companies get political” (Bailey and Philips, Feb 2020). Canvas 8 highlight how people aren’t put off by brands political activity either. It used to be the case that business and politics never mixed. However in an era where brands are being held accountable for their actions, people have come to expect them to take a political stance when it comes to social and ethical issues. VW in fact just announced this week they are to appoint an “aggressive” climate activist to scrutinise policies. A first and certainly in the car industry to create such a post as it steps up its green strategy.
In conclusion, being relevant today to future proof tomorrow will require all business being more radical. This is particularly the case in the food and drink industry, where the sustainability narratives are more developed and the consumer interface more immediate than in some other industries.
Read more:
LEADING A NEW ERA OF CLIMATE ACTION – Andrew Winston - https://hbr.org/cover-story/2020/01/leading-a-new-era-of-climate-action
FT Article - VW to appoint ‘aggressive’ climate activist to scrutinise policies - https://www.ft.com/content/213c954a-5748-11ea-a528-dd0f971febbc
How Do Consumers Feel When Companies Get Political? James R. Bailey and Hillary Phillips - https://hbr.org/2020/02/how-do-consumers-feel-when-companies-get-political