First published in the Vietnam Investment Review, Sustainable Development Publication 2022: The Roadmap to Net Zero.
Nature will deliver a hostile climate if we do not effectively manage the process and transition to net zero. How do we then build resilience to what we are already experience from extreme storms, heat, floods etc. This will take a concerted effort from all sectors including business and people, everywhere.
We have seen some of these efforts in the increase in business innovations and products in the last years and big ramp up even here in Vietnam on renewable energy (RE). However, is delivering on a product or innovation enough?
I say no.
I say it takes more than a product to deliver on a net zero transformation. It takes a systems approach.
Let’s look at the Tesla example. Kaushik Sridhar highlights this controversy in Elon Musk vs. ESG where Tesla’s CEO, Elon Musk, was outraged earlier in 2022 on being removed from the S&P 500 ESG Index due to a ‘lack of a low-carbon strategy’ and ‘code of business conduct’ including poor working conditions. Musk’s take is that producing a ‘green’ product’, its electric vehicle (EV), is impact on climate.
The areas that Tesla is lagging behind are on items of social and governance such as the environmental impact of its batteries, paying a fair and living wage, poor working conditions, and diversity, equity and inclusion (DEI)-related discrimination. Kaushik Sridhar writes pointedly:
“One can’t live in a vacuum of just environmental or just social issues – they are all intertwined”.
Imagine a weighing scale. On one end of it is the amount of greenhouse gases (GHGs) and on the other end is the amount removed. In the middle is where net zero is. The middle of that balance is where it is the strongest. The strongest sustainability meeting point is also in the middle when the three pillars of sustainability – environment, social and governance – meet, and where short-term is also steadied with a long-term lens.
Influx of ‘green’
Let’s also have a look in Vietnam. We have all witnessed the influx of ‘green’ companies investing in Vietnam in the renewable energy (RE) space. While this has been an opportunity to lead the way on net-zero with this low carbon strategy, this rapid inflow has also shown that other long-term aspects have been neglected such as the impact on the environment and nature conservation to impact on communities.
In a recent coverage by the Vietnam Investment Review on Local Considerations Required in Vietnam’s Energy Advance, it points some of these ‘green’ projects are not ‘brightening’ some of the locals lives in which the reassignment of land from agriculture to solar power farms has placed farmers in awkward situations where they have lost their land and their livelihoods. Nor is there enough data in how and if these stakeholders are transitioning into roles in RE companies.
Driving a net zero business
As the Elon Musk and RE examples show, to drive a net zero business means moving business as usual to a more resilient net zero business which builds on collaboration and integration in all aspects of business. According to the University of Cambridge Institute of Sustainability Leadership, the keys steps to drive this organisational transformation are:
Purpose and strategy:
Aligning corporate purpose and strategy with a transition to net zero so it does not sit ‘alone’ but becomes part of doing business as usual.
Re-defining how business sees value. By adding environmental, social and governance values to the already traditional value of maximising financial value alone allows the business to apply updated metrics to define value.
For example, with this lens, waste moves from a linear approach to one of circularity and becomes a value that did not exist in a traditional format.
Designing systems thinking:
Design and implement the purpose and strategy into your processes by identifying what needs to be done to reach net zero targets. This can be done by updating management systems, implementing monitoring and reporting and developing a long-term perspective to mitigate risks and identify opportunities.
By incorporating a systems thinking approach, business see problems as parts of an overall systems versus reacting to a specific part or event.
Technology and innovation, such as Elon Musk’s EV, are crucial towards net zero as they apply solutions to existing problems and future opportunities. They can also influence a business in efficiency, communication, accessing new customers and connecting employees but it is not the only component to a net zero business.
It is important to note that corporate culture and employees do not operate in isolation. Ensuring that culture and people are in the forefront to drive the transition and transform is a key component to a successful net zero business.
As we work at transitioning and transforming business as a whole towards a net zero business, we will of course meet many sceptics that do not see this as a business priority.
But climate problems will not go away. Let’s look at two sides of the coin: business impact on climate and vice versa.
Business impact on climate change
In my Sustainable Vietnam article around COP 26 last year: 101 on Climate Change, COP26 and Business Resilience, I explain that one area with big potential to decrease GHGs which contributes to climate change and impact on net zero is energy usage. The reason is this; the energy sector is responsible for 76% of global emissions (World Resources Institute) with an over reliance on fossil fuels, oil and gas, and coal. While there is a range of sectors that contribute to global emissions, almost three-quarters of all GHG emissions come from our use of energy. Industry and businesses are among the main users of energy.
As business has such a clear impact on climate change, there is a need to shift business models and transform ways of working.
Climate change impact on business
On the other side, climate change will also impact on how businesses are run as the world becomes more volatile.
These impacts can be described using the VUCA Concept (Schick, Hobson & Ibish, 2017) in which the four elements are:
- Volatility: when business face unexpected or unstable factors for sometimes unknown duration e.g. prices of raw materials fluctuate due to extreme weather.
- Uncertainty: how far in the future we can predict and in the case of climate, how it will fully impact society.
- Complexity: refers to the interconnected parts and variables to be considered e.g. the multinationals with complex supply chains around the world.
- Ambiguity: the lack of clarity to interpret information or circumstances e.g. the interpretation of news and fake news around climate impact.
More than a product
To drive a net zero business takes more than working in silo, more than having a product. It takes collaboration within your organisation and outside your organisational walls. It takes integration and ensuring all three pillars of sustainability – environment, social and governance – are part of the short-and long-term puzzle. And it takes awareness and knowledge to build resilience knowing that climate change will impact your business one way or another.
I leave you with four questions from Sue Garrard, Executive Vice Principle of Sustainable Business and Communications at Unilever to guide in your transition to build a robust business with a net zero strategy and these are:
- Will it drive growth?
- Will it reduce cost in the long-term?
- Will it mitigate climate-related risk?
- Will it build trust?
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