For the longest time, companies have measured corporate performance in terms of how much revenue they generated, how many factories they operated, and how profitable they were. Other considerations, such as sustainability, the efficient use of resources, carbon emissions, and the impact on the environment were secondary in many senior executives’ and policy makers’ minds – if they featured at all.
Thankfully, this mindset is changing. More and more companies (and policy-makers, as the European Green Deal shows) are becoming aware that it’s in their best interests to consider “non-financial” factors such as climate action and environmental performance as just as important as financial metrics.
Being part of the climate solution is fast becoming a critical success factor for companies
In the EU, the policies laid out by the European Green Deal are all about reducing greenhouse gas emissions by 55% by 2030, and making Europe climate-neutral by 2050.
On 14 July, the European Commission presented the “Fit for 55” package of policy proposals to make the European Green Deal a reality by aligning the EU energy and climate regulatory framework to the 2030 target.
The proposals also aim to incentivize private-sector investment into low and zero-carbon technologies, renewable energy, energy efficiency and the circular economy. Tax reforms and a holistic CO2 pricing system will also incentivize change, by making it more expensive to emit carbon, thus attracting investment in projects that reduce or remove emissions and in fuel switching.
As such, the EU Green Deal is a growth strategy. All the more so in this time of crisis management: the historic European NextGenerationEU Recovery Plan (NGEU) – with its € 750 billion of loans and grants to help the region recover from the effects of COVID-19 pandemic – is kick-starting the long-term transformation to a more resilient, digitized, prosperous and sustainable Europe.
In other words, whether companies act out of a sense of moral responsibility, or out of sheer business rationale: those that offer solutions in these fields, embrace an integrated approach, adapt their business models to this new reality, and reducing their own emissions and those of their supply chains stand to benefit massively from these shifts. What’s more, they stand to benefit from local and regional policy incentives, and from bringing their best technological innovations to the table.
Customers, investors, employees: expectations for climate action have intensified
Adding to the rationale for corporate climate action are the changing expectations of customers, financial markets, and employees.
Customers – both consumers (B2C) and business (B2B) – increasingly care about how green the company they are buying from is – and not just its own operations, but also in those of its suppliers and business partners.
Likewise, investors, financial markets and regulators are raising the pressure on companies to factor climate change impacts, risks and opportunities into their business strategy and behavior, and to lower the environmental and carbon impact of both their own operations, and those of their supply chains.
And then there’s the issue of attracting and retaining talent: younger generations, in particular, choose to work for companies whose values they share – and climate action and environmental responsibility, for many, are hugely important.
For these stakeholder groups, greenwashing and superficial tinkering are no longer acceptable: increasingly, in their eyes, companies’ “license to operate” needs to include determined action towards protecting the environment and moving to net-zero emissions.
Corporate climate action: both a responsibility and an opportunity
Climate change is the biggest challenge of our times. For companies, acting to combat it is not just a moral responsibility – it’s also simply good business. Those that don’t act, or that make just incremental changes, stand to lose the trust of customers, investors, and employees.
Conversely, those that do make climate action part and parcel of their business strategy, and embrace decarbonization as an opportunity rather than a set of challenges, stand to benefit.
In the end it’s an ecosystem. Everyone has a contribution to make, whatever their starting point is. The trick is to act fast, and holistically: to be part of the solution, rather than part of the problem. At the end of the day, the cost of climate action is far less than the cost of inaction.
For more on how Schneider Electric is supporting the European Green Deal, click here.