Oliver Balch analyses the latest sustainability news, from the companies responding to the business group’s Vision 2050 refresh to growing action to address water risk
The year 2050 lies a long way off. A generation or so in human terms. Five chief executive rotations, if not more. Yet, in geological (and climatological) time, it is but the blink of an eye. Blink, indeed, and business may well miss it. That’s the warning shot across the bows from the World Business Council for Sustainable Business. A little over a decade since its first Vision 2050 report, the influential business-led membership group has issued a revamped update.
What’s changed? Both everything and nothing. On the change side, climate is the most notable mover. Despite pioneering efforts by a small group of pro-transition multinationals (numerous WBCSD members included), atmospheric carbon levels are now topping out at almost 418 parts per million – an average growth rate of around 2.4ppm since 2010. As the new, 60-page iteration of WBCSD’s Vision 2050 reveals, the world is now facing a convergence of crises – not least of which are the ever-increasing income inequality gap, a pending biodiversity implosion, and now a pandemic-induced global recession.
Interestingly, what’s not changed is WBCSD’s macro-analysis. Sure, there are plenty of new whistles and bells in its mid-century “refresh”, including a detailed set of nine “pathways” for system-level change (focusing on food, water, health, energy and finance, among others). Yet, the two top-line messages are much the same as a decade ago; namely (i) things are bad, but it’s still not too late and (ii) it’s time to “reinvent” capitalism, re-engineering business to prioritise value creation rather than value extraction.
Atmospheric carbon levels are topping out at almost 418 parts per million. (Credit: Tatiana Grozetskya/Shutterstock)
Both imperatives demand a host of radical responses. Whatever shape these may take, clearly action cannot wait until 2050. WBCSD set the tone here at its last annual meeting, voting to make a “science-informed” 2050 climate strategy a condition of membership. Henkel appears to have been listening. The German chemicals and consumer good company has just joined a growing list of companies pledging to become “climate-positive” by 2040. The pledge also includes a commitment to reduce its carbon footprint by 65% by 2025 (against a 2010 baseline) as well as to move forward its 100% renewable electricity target by a decade to 2030.
Bold sustainability targets cannot be left to unfold in silence. Without strong market signals, consumers and competitors will simply sit on their heels. It’s worrying, then, that research by Hanover Communications finds only 0.6% of Twitter posts by FTSE 100 companies focus on climate change (of which 73% receive no replies at all). A more positive example comes from consumer goods firm Procter & Gamble, which has teamed up with National Geographic in a pan-European consumer campaign (via its laundry brand Ariel) to push for the decarbonisation of the laundry sector as a whole.
The initiative points to a second key message from WBCSD: the need to work at a systems level. Of course, in an ideal world, all major systems actors (companies, unions, regulators, consumers and so on) would get together and agree a common way forward. With time now so desperately short, such consensus will have to be arrived at on the run.
Brands should look to pre-competitive areas where they can come together as an industry
As a start, brands need to team up. U.S. hydrocarbon giant Chevron has done just this, partnering with oilfield services company Schlumberger and tech giant Microsoft to develop a biomass-powered electricity plant in California’s Central Valley. The experimental facility, which will convert agricultural waste biomass, such as almond trees, into a renewable synthesis gas to generate electricity, will be equipped with capacity to capture and sequester carbon emissions.
Similarly, brands must work to get suppliers on board. Morrisons provides an illustrative example, committing this month to source only from net-zero British farms by 2030, the first UK supermarket to do so.
Better still, brands should look to pre-competitive areas where they can come together as an industry. The hard-to-abate global shipping industry has recently done just that, giving its backing to a $5bn, government-led R&D fund designed to deploy zero-carbon ships at scale within the next decade. The agreement, which was brokered by the International Chamber of Shipping, will be financed via a $2-per tonne levy on maritime fuel consumption. The move follows earlier negotiations by the industry-led Global Maritime Forum to draw up a detailed net-zero trajectory for the sector.
Lastly, as ever, is the question of leadership, which, if WBCSD could have its way, should be “shared, disruptive and accountable”. How, disruptive CEOs can afford to be has to be open to question, however, following the recent ejection of sustainability pioneer Emmanuel Faber from the top job at French yoghurt firm (and B Corp member) Danone. Other CEOs whose efforts to disrupt the status-quo has contributed to their ousting include Isabelle Kocher at Engie and Sacha Romanovitch at Grant Thornton.
Accountability is an easier sell, with a number of high-profile brands recently committing to tie executive compensation to sustainability goals. Early out of the blocks was sportswear brand Nike, which has promised to link a portion of board members’ pay to its performance on a new set of diversity and inclusion targets. Logistics giant Deutsche Post DHL has taken-a similar stance, connecting executive compensation to its new 10-year, €7bn carbon reduction plan. Finally, top bosses at French oil firm Total will also see part of their future share-based bonuses linked to cuts in the company’s indirect emissions in Europe (which were set earlier this month at 30% by 2030, compared with 2015 levels). In a strong sign of leadership, nearly half (45%) of FTSE 100 firms now link executive pay to at least one social, environmental or governance target, research from professional services firm PwC finds.
With policy one of four “enablers” of systems change identified by WBCSD, leadership by governments is also an imperative. The EU recovery budget is a prime opportunity to demonstrate such intent, a step recently adopted by Italy, which has committed €80bn to decarbonising its energy supply over the next five years. The decision marks a welcome shift from how Covid-19 stimulus funds were dispersed last year. According to a new report by UNEP, a mere $368bn of the $14.6tn issued by the largest 50 countries went to projects that can be described as “green”. Among these, $56.3bn went towards nature-based solutions, and $28.9bn for technologies for decarbonising sectors such as aviation, plastics, and agriculture, and carbon sequestration.
To borrow from the subheading of WBCSD’s new vision statement, “it’s time to transform” business.
Pricing in the world’s most precious asset
World Water Day passed this month with the usual flurry of brand announcements. U.S. beverage giant PepsiCo used the landmark date to announce that its water programmes have helped give 55 million people access to clean water since 2005 (over half way towards its 2030 target of 100m beneficiaries). Likewise, Czech automaker Skoda, owned by Volkswagen, revealed a 37% improvement in its per-vehicle water consumption over the last decade, while U.S. coffee chain Starbucks told the world it intends to cut water use in coffee processing by 50% by 2030.
No less significant is news of the participation of London-headquartered firms Deloitte, Arup and CDC Group in the newly launched Resilient Water Accelerator, a cross-sector initiative backed by the Prince of Wales that seeks to stimulate finance for improved water services in Africa and south-east Asia.
Amid the buzz, you could be forgiven for missing the publication of the United Nations’ latest World Water Development Report 2021. Written with dry precision and running to over 200 pages, it’s no light read. Yet, hidden within the bureaucratic prose are some real gems, like the statistic that national water infrastructure capital needs in the U.S. amount to a whopping $123bn per year, while service disruption could easily cost the world’s largest economy $43.5bn. Expand the lens globally and, by 2050, water-related losses in agriculture, health, income and property could represent a 6% drop in economic production and even “sustained negative growth” in some regions of the world. Already, 2.4 billion people are experiencing water scarcity (up from 32 million people in 1900), while 90% of today’s natural disasters are now water-related.
Little wonder corporate leaders regularly rank water scarcity high on their list of business risks. It’s a point that disclosure specialist CDP hammers home in its annual water security survey of leading companies. In its latest report, entitled A Wave of Change, it estimates the combined loss of business value from mismanaged water risks (think, increased water scarcity, flooding, drought, severe weather events and declining water quality) at an eye-watering $301bn. In contrast, the bill for addressing such risks comes in at around $55bn – almost a bargain by comparison.
On a positive note, around two in three of the 2,934 companies that filled in CDP’s detailed questionnaire report are stabilising or reducing their water withdrawals thanks to water saving and reuse policies. Moves by companies to help those in their value chains to manage their water resources better are equally welcome, with Kimberly-Clark’s updated WaterLOUPE tool an illustrative example. The U.S. personal care corporation’s open-source solution allows municipal authorities, local businesses and others to identify water scarcity risks at a watershed-level and identify potential solutions.
If companies and utilities were required to fully disclose water-related risks, we could expect much greater investment
Less positive is the paucity of companies reporting the nature and value of the water risks they face – a reality CDP’s 590 supporting investors (with over $110tn in assets) would like to see changed. It’s a sentiment echoed by others in the investment community. U.S. asset manager Franklin Templeton Investments, for example, says companies that transparently disclose their water risks will gain a “leg up” on their competitors. Keeping the markets in the dark, in contrast, is likely to lead to such risks being mispriced and assets put at risk, the asset manager warns.
Conservation charity WWF was more direct, using a World Water Day editorial to express its stupefaction that no major bank currently requires its clients to assess or disclose their exposure to water risks. “If companies and utilities were required to fully disclose water-related risks, we could expect much greater investment in actions that lower that risk.”
But the UN’s report warned that focusing exclusively on the monetary price and cost of the planet’s “blue gold” can overlook the social and cultural value of water. How, for example, do you quantify lost schooldays due to water-related diseases (currently estimated at 443 million per year)? The answer is still far from clear. Arriving at a standard metric or set of metrics for valuing water’s multiple dimensions is unrealistic, just as trade-offs in the use and management of water are inevitable. The UN’s advice? Integrate as wide an assortment of stakeholders as possible into future water resource planning and governance. Uncertain as the precise methodologies might remain, “the risks of undervaluing water are far too great to ignore".
This article appeared in the March 2021 issue of The Sustainable Review: See also: