* Any views expressed in this opinion piece are those of the author and not of Thomson Reuters Foundation.
The global environmental sensor market, as just one example, is already proliferating and expecting to be a $3 billion annual market in under ten years
Michael Shank is the communications director for the Carbon Neutral Cities Alliance and adjunct faculty at New York University's Center for Global Affairs.
The Economist Intelligence Unit’s report this week warns that climate change will shave 3% off the world economy, costing almost $8 trillion by 2050. That’s a serious hit to our economies. No business, especially ones reliant on resource availability – retail, manufacturing, energy, technology, or financial sectors – will avoid adverse impact.
One might expect these industries, then, to make a transition to more climate-friendly and climate-resilient practices, given what we know regarding current climate risks to our economy. Yet, that’s not what’s happening. Take a look:
The Environmental Defense Fund released a report last month regarding Business and the Fourth Wave of Environmentalism, surveying, for the second year in a row, 600 executives across companies with $500 million to $5 billion in revenue. Fourth wave environmentalism, according to EDF, captures “the potential for technological innovation to supercharge and scale companies’ sustainability efforts”. This is an appropriate query, then, given a prevailing belief in the climate space that technology will save the day when it comes to climate change.
So, let’s see if it is saving the day across business.
First, and shockingly, one in three executives say their company lacks internal dialogue about environmental stewardship. That’s just a dialogue, let alone climate-friendly business practices. Couple this with the fact that the majority of those surveyed – more than 9 in 10 executives – simultaneously acknowledged that consumers will likely hold them accountable for their environmental impact. (That’s up 12 points from EDF’s 2018 survey.)
This is perplexing when it’s so easy to transition to climate-friendly business practices, let alone have an internal dialogue about it. To be fair, 25% of all executives surveyed said that uncertainty about climate policies slowed their sustainability commitments. (It was 15% in last year’s survey.) They’re looking for regulatory consistency, which makes sense. But a dialogue? One-third of these businesses aren’t even doing that. And when 7 in 10 of these C-suite leaders and VPs are being pressured by investors and customers to make sustainability a strategic priority, you’d think they’d doing just that.
Second, when executives were asked how they’re using new technologies to accelerate their sustainability efforts, one in three leaders admit lacking awareness around specific technologies. And yet, 92% of these business leaders agreed that these emerging technologies can boost sustainability and their return on investment. Why such a disconnect?
While the majority of companies say these technologies – e.g. data analytics, automation, artificial intelligence, sensors and blockchain – are relevant to their core business and a majority are using at least one of these technologies, many are missing out on a major investment opportunity. The global environmental sensor market, as just one example, is already proliferating and expecting to be a $3 billion annual market in under ten years. Artificial intelligence is expected to add $15 trillion to the global economy in ten years. And outdated tech can be very inefficient and ultimately costly for employers, costing trillions of dollars for U.S. workplaces alone. You would think this is a financial no-brainer.
Third, when these C-suite and vice-president-level business leaders were asked what they think hinders their company’s ability to make a positive impact on the environment, there was a five percent increase, over 2018, in the wrong direction: a perceived lack of clear return on investment. This is surprising given that the green economy, as one example, is overtaking fossil fuels and offers, according to stock market indices, “more significant and safe investment opportunities”. The green economy in the U.S. is already valued at $1.31 trillion, which is just 16.5% of the global green economy.
Sure, regulatory uncertainty can slow investment, but the market has clearly switched and it’s no longer a question as to whether climate-friendly investments offer a clear return. This month, the European Investment Bank, EU’s lending arm, announced that it’s going to end its financing of oil, gas and coal projects in two years and become the world’s first “climate bank”. This is huge. And it signals where the financial industry is headed with its investments.
The business case is clear, then. There’s money to be made. Now it’s time for businesses to fully get on board. Their investors want it. The market demands it. And the climate requires it.