Green Economy or Bust

We are facing unprecedented and deadly environmental challenges which are not only threats to the planet, but also pose significant short-, medium- and long-term risks to business and the very foundations of our societies. The transition to what has become known as a ‘green economy’ is an imperative for companies to mitigate these risks and ensure long-term sustainability.

The Earth Day theme of 2023 is Invest in our Planet, and it is important to reflect on the need for a low-carbon, resource-efficient, and socially inclusive economy. One which addresses environmental challenges while promoting sustainable growth and job creation.

This transition is not just a moral imperative, but also a smart business decision. The conventional fuel sector is facing significant risks as governments and investors around the world shift funding towards a new economy. According to a recent report by the Carbon Tracker Initiative, fossil fuel companies risk losing up to $25 trillion in the next two decades due to the rapid adoption of renewable energy and increased climate regulations. Financial organisations are also (belatedly) waking up to the investment risks linked to biodiversity loss.

We must acknowledge that the transition is not without its risks, but businesses that continue with business-as-usual practices are likely to face significant additional risks in the coming years. As regulations tighten and carbon pricing becomes more common businesses that rely on fossil fuels will find their profits squeezed, their customers morally or financially abandoning them for their competitors, and access to financial services increasingly restricted.

This is why it is essential for businesses to adopt sustainability strategies that are aligned with the sector guidance published by the Science Based Targets Initiative. The SBTI promote the setting of goals and strategies to reduce emissions in line with the findings of the IPCC, and supports companies to take advantage of going beyond this by channelling additional climate finance towards mitigation activities outside of their value chains.

Not all businesses are seen as going as far as they can, even by their own investors. Several Shell shareholders have made their views clear on the company’s levels of ambition in its environmental plans; Royal London by abstaining on Shell’s climate transition plan and ClientEarth et al filing a climate risk lawsuit against Shell’s board. Shareholders voted to force Chevron to reduce emissions from the products it sells, and a tiny activist investment firm secured three positions on ExxonMobil’s 12-member board to increase the pressure to change tack and commit to a serious reduction strategy. A $2.4tn coalition of investors led by campaign group ShareAction secured an HSBC Board commitment to phase out financing of coal-fired power and thermal coal mining by 2030 in the EU and OECD and by 2040 elsewhere.

However, it must also be a just transition and ensure that the changes do not disproportionately impact vulnerable communities and workers. The shift to a low-carbon economy may result in job losses in certain industries and it is important that these workers and communities are not left behind. The Just Transition Fund in the EU and the BlueGreen Alliance in the US are just two examples of how this can be achieved. This comes with its own warning, however. When business leaders choose to use the words ‘just transition’ as an excuse to go slowly or not take urgent and necessary action due to a lack of understanding of the true risk, of misunderstood responsibility to shareholders or just of plain greed, then this must be called out loudly and publicly.

There is an evidenced need for a rewired economy to address the pressing environmental challenges and deeply interconnected business risk we face. Businesses that ignore this are likely to face significant losses in the coming years and it is essential to adopt sustainability strategies that are aligned with a transition which is fair and equitable for all stakeholders. As we mark another Earth Day, let us renew our commitment to creating a genuinely, beneficially, sustainable future for all.

And let’s aim to drop the ‘green’ bit. It’s just how a well-functioning economy needs to be.

Author: Scott Bearman-Brown, Senior Learning Manager at Earthwatch Scott co-leads on the design and delivery of leadership, coaching and experiential learning programmes for Earthwatch’s Corporate Partnerships. Scott has spent 20 years in employed roles and consultancy specialising in senior leadership development, facilitation, coaching, strategy creation and team engagement with clients such as HSBC, Metro Bank, BMW, Manchester United, Thames Water, andas global leaders in travel, aviation, utilities and education. Over the last 9 years he has focused primarily on sustainability leadership. Scott is an accredited Insights® Practitioner and coach and holds a distinction in Learning Practice from the CIPD.