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Anyone following the global response to climate knows that leaders in the private sector are setting the pace. While governments struggle to operationalise the Paris Agreement and civil society groups debate the direction and shape of a perfect outcome, proactive companies are forging ahead. In this, the sixth in our Climate Calculus series, Jonathan Shopley maps the new and emerging dimensions of corporate climate leadership.
We kicked off our Climate Calculus series with an article that posed a question—and a promise to revisit it with some answers: “How can we bank great leadership to secure continuing improvements in our approach to climate change in a VUCA (volatile, uncertain, complex and ambiguous) world?” The simple answer—“inspire the fast followers”. So, let’s unpack that.
Business fills a void
My previous article in this series looked at climate leadership amongst nations. It noted that countries looking to make progress during this fractious time for international affairs are forming clubs that exercise their collective clout to get other nations to follow their lead and so prevent losing competitive advantage to free-riders.
Forming effective ‘country clubs’ in the climate space is a work in progress under extremely difficult conditions. Unilever’s ex-CEO Paul Polman had these sage words on the topic of business and government leadership: “Governments in this world right now have a little bit of a hard time, and global governance is broken. Populism, xenophobia, nationalism…all these things are going in the wrong direction…. I believe it is the duty of the private sector to step up and fill that void and be responsible. We are not elected bodies, but we do have to fill that void. And it’s in the interest of business. And increasingly, business understands that.”
Our most recent analysis of the Fortune Global 500 evidenced that business indeed understands that, and more importantly, is taking meaningful action. It showed that a quarter had made commitments to carbon neutrality, 100% renewable power or Science-Based Targets by 2030.
What happens when business steps up
Sustainability leadership in the private sector often starts with a single company spotting an opportunity to address an environmental, social or economic externality. Think, for example, of DuPont’s journey in the 1970s from leading CFC manufacturer to proponent of non-ozone depleting alternatives aligned with patents that secured their leadership in that space; or, Microsoft’s deepening leadership in sustainability underpinned by its aspirations for its AI for Earth platform.
The competitive instincts of business are hugely powerful when they align with sustainability solutions. However, that very instinct can limit the depth and breadth of its impact when competition for leadership leads to exclusivity. We achieve scale by making change consequential for others. Climate leadership is not about who is first over the net zero line—it’s about inspiring others to join in and demonstrating how to do so.
Collaborating for success
What usually follows individual leadership is the formation of alliances and coalitions that give voice to a wider vision of leadership through pledges or stretching sectoral goals. There are many of both in the climate space. During normal times, the small Swiss town of Davos plays host to the World Economic Forum’s annual gathering. Government leaders and company CEOs announce new and renewed commitments to sustainability. Yet, despite the collective clout of these leaders, few collaborative commitments have yet to make an impact.
Commitments are effective when they are actioned not when they are announced. They become transformative when they gain widespread support. Other examples abound and new initiatives and coalitions emerge every day. Inherently, this suggests that existing platforms are not adequately equipped to take on the challenge.
One feature of many of these initiatives is that they fail to overcome another obstacle to scale: sustainability echo chambers. Sustainability echo chambers—coalitions of like-minded corporates—tend to become really good at talking amongst themselves. However, impact is greatest when that engagement extends to those not yet in the tent. Things get real when leading coalitions find channels to break out of the echo chamber.
Breaking out of the echo chamber
Anand Mahindra, chairman of the Indian conglomerate Mahindra Group called it when he stated: "The business community is still divided into two groups, the climate resisters and the climate tribespeople… I think it’s time we all stood up and told the climate resisters that you better pay your subscription and become a member of the tribe." This call to action is more likely to work for clubs of countries, when governments are able to add the magic words “or else we won’t let you play in our markets”. With no real stick to wield over the laggards, support from civil society and environmental NGOs is invaluable to proactive businesses in raising awareness and preference for those companies committed to climate action ahead of and beyond regulation.
When coalitions cannot find a route to the wider audience, there is a temptation to turn up the volume—‘go big or go home’. In the climate space we have gigatonne challenges, as well as million, billion and even trillion tree campaigns. These are brilliant and compelling rallying cries that catch the attention of fast followers. And yet, that constituency can still be left wondering how to engage to make a difference. What we need now is collaboration that shifts from big moves by the few, to meaningful action by the many. This is the leadership challenge for companies that are disrupting business as usual in their sectors.
Imprinting for success
Fast followers ready to contribute to the goal of a net zero economy know they can’t go it alone. It’s tough for individual entities to set course to net zero within the complexity of the changes occurring across in the global economy. To reframe that challenge in the language of calculus, meaningful action is a function of what you do today to neutralise climate impacts under your direct control + what you do to inspire others to align with the net zero goal.
In 2018, as part of the UNFCCC’s ‘Talanoa Dialogue’, we explored how to on-ramp companies, wherever they may be in their climate journey, to play their part in the transition to net zero. With input from 61 companies representing US$1.3 trillion in revenues the ‘Imprinting Net Zero’ framework that emerged sets out how companies can leverage direct action to speed the wider transformation of the global economy.
In the next and final article in this Climate Calculus series, we will be taking another look at how that framework is even more relevant today.