The main excuses businesses give for climate change inaction

The private sector has a critical role in tackling global warming, but it needs to get out of its own way, says Professor Jonatan Pinkse.

by Jonatan Pinkse
Last Updated: 21 May 2019

As the Brexit debate took a brief break over the last couple of months, climate change has once again been one of the most talked about topics, with UK Parliament even declaring a ‘climate emergency’.

Social activists grabbed headlines with the Extinction Rebellion movement, MPs got lectured by a 16-year-old Swedish schoolgirl, Greta Thunberg, on their irresponsible behaviour towards climate change, and David Attenborough’s climate documentaries fired the public’s ambition for a more environmentally sustainable future.

To add to this, The Committee on Climate Change (CCC) published its long-awaited report, advising the government to aim for net-zero carbon emissions by 2050. The report proposes the measures needed to achieve this aim, including a move away from fossil fuels for electricity generation, electrifying transport and reducing people’s meat and dairy consumption.

But now inevitably all eyes will turn to business.

Companies are the engine of the economy with their investment power, innovation potential, and influence on consumers. They also have a very important role to play in reversing the effects of climate change.

So, what’s holding companies back?

The easiest excuse is that we have a government who – despite its best intentions to introduce several climate policies and initiatives over the years – has failed to provide certainty for business that their investments will be worthwhile. There have been too many schemes introduced that have either been scrapped mid-way through or have failed to deliver what it set out to achieve. It’s therefore maybe unreasonable of government to expect businesses to invest in costly low-carbon or energy-saving technology if it struggles to even stick to its own promises.

Secondly, with any large investment, companies must prove to relevant stakeholders and investors that there’s a strong business case to justify that spend. But all too often stakeholders or investors demand an immediate financial pay-off for any large investment. This is a mistake.

Climate change is a very complex issue. Simple solutions will not do the job and businesses can’t be expected to do it alone – or overnight. Reversing climate change requires vast investments where pay-back may not be seen for five, ten or even 15 years. 

Companies should also be aware that it does not get caught up in the alarmist mood. Opting for quick fixes that cut down on energy use can often neglect the complexity of sustainability issues, leading to unintended consequences. Biofuels are the perfect example.

Efforts to upscale biofuels in the early 2000s led to a global debate about rising food prices in Mexico. They were also blamed for the destruction of the rainforest in Indonesia. Before businesses realised it, they were part of a major new scandal, despite only having the best intentions to help the environment. 

Still, the ever-recurring argument from business that it needs more time is also outdated.

It is all too easy to find reasons not to act. We need businesses to have an entrepreneurial mindset to their sustainability initiatives, where layers upon layers of internal politics don’t hinder progress.

We also tend to look too much at the role of established companies. The start-up movement can play a significant role. Look at the current tech leaders like Google and Amazon, they are all relatively young yet manage to change the world through entrepreneurial thinking. Start-ups hold a lot of promise to come up with the solutions for a low-carbon future.

Changing the consumer mindset

Businesses are masters of marketing. Great companies can persuade customers to buy products and services they often don’t even need. So how can this marketing power be leveraged?

If climate change just means that consumers feel the hit of higher fuel prices time and time again or are having to splash out on expensive heat pumps, the urgency to take action on climate change will quickly transform into political resistance instead. The recent yellow vest movement in France shows that it’s the poorer people in society who feel penalised by drastic climate measures the most.

Business should therefore try to translate their low-carbon technologies into great value propositions. People are only mildly enthusiastic about electric vehicles, yet they would still love to own a Tesla.

The main message here is that green products do not necessarily sell well but if they are part of an attractive value proposition, they will start to. One of the main challenges for business is to get a clear picture of why people might not like low-carbon technologies and try to change their perception by making them more attractive.

So, what is needed for business to tackle climate change is not so much technological innovation – there are plenty of low-carbon technologies available off the shelf – instead they will have to think more deeply about how to innovate their business model. What benefits will low-carbon products have beyond saving the climate alone? This is where managers have to start using their imagination.

Professor Jonatan Pinkse is executive director of the Manchester Institute of Innovation Research at Alliance Manchester Business School.

Image credit: Jaymantri/Pexels


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