Kategori: sustainablity

Too much uncertainty

I believe that a normal reaction to being, is stress and discomfort. There are several reasons, for one: the latest IPCC-report (which was discussed in last month’s newsletter) is a reminder of what is likely to happen with regard to our climate, and as you probably know the situation is similarly worrying when it comes to biodiversity (read more here on the state of biodiversity). In addition, billions of people are going to bed hungry, live in areas affected by conflict or live under authoritarian, non-democratic rule. This, naturally, makes for uncertainty that makes many companies – or investors – hesitant to invest in solutions.

I frequently talk to companies who are reluctant to invest in developing markets because of the uncertainty, and the reputational risks, they face if something goes wrong, or sometimes even for being on a particular market. At the same time, there’s a need for much more investments in these markets, not less. Whatever we have achieved in terms of climate smart solutions, decent working conditions and (possibly) more inclusive or fair ways of doing business in one part of the world, should be shared.

Disclosing sustainability information to avoid risks is one way, but as important, is to learn from each other and actively share in a sense of “we are in this together!” We need stories helping – inspiring – us to see that things can get better!

But things are also getting better (for example in Georgia)

When I’m writing this, I’m on my way back from Tbilisi, Georgia. A country that I visited a few times in the late 1990’s. I like coming back to countries. Because often, contrary to what I tend to presume, I find that things have gotten better.

Georgia is a very pleasant country to visit, despite its many challenges. It was nice 25 years ago as well, but I also notice what statistics confirm: many things have gotten better.  Many things can, I’m sure improve but it is inspiring to see the graffiti on the walls in Tbilisi, to hear about how people dared to protest laws they disliked, how life expectancy have increased, years of schooling has improved, poverty has dropped and how the economy has grown. And, despite the current economic slow-down around the world, development is still taking place in many, if not most, developing countries. (read more about the Human Development in Georgia).

This is not to say that Covid, the war in Ukraine and economic down-turn and the climate crises doesn’t come at a cost for people and businesses, but fact remains that we have been able to turn things around for the better before, so we ought to be able to do that again.

Emission trading system – a success that we can learn from

The European Emission trading system is about to be expanded. It is a system that has existed since around 2005, and it is built on the “polluter pays principle”. At times it has been accused of having a limited impact, but now I think most observers would agree that it has in fact been very successful and one of the drivers of the decreasing emissions in Europe (read more). The new rules increase the overall ambition of emissions reductions by 2030 in the sectors covered by the EU ETS to 62% compared to 2005 levels.

New sectors to be included in the system includes (but are not limited to) maritime transport, building, road transport and emissions from aviation. Enlarging this system would perhaps be one of the best ways of creating incentives for companies to invest in more climate smart solutions as well as finding ways of avoiding emissions all together. Read more here.

Aviation fuel – finally something is moving?!

The European Parliament and member states on April 25 agreed that fuel suppliers must ensure that 2% of fuel made available at EU airports is renewable (SAF) in 2025, rising to 6% in 2030, 20% in 2035 and gradually to 70% in 2050. (read more)  This, in my view, is a very important step forward. It will take time before we have electrified airplanes or other renewable sources of energy and since eg the car fleet is easier to electrify, I would wish that as much as possible of todays aviation fuel is replaced with renewable fuel.

It is, by the way, possible to do reduce your impact already today. I, and companies I have worked with, have done this through the Fly Green Fund. Expensive, yes, but perhaps flying ought to be more expensive util there are better fuels? Besides, reducing your impact is a great feeling when you do your climate impact assessment!

Sustainability reporting – a way of learning!

Ok, be prepared for a slight overload of acronyms: CSRD, ESRS (which is the reporting standard to be used by companies when reporting according to CSRD) developed by EFRAG, and CSDD (the upcoming human rights and environmental due diligence directive) are a couple of EU directives that are believed to move the frontiers when it comes to sustainability.

In my view, European companies are adapting to a new reality. I’m not claiming that companies, generally speaking, are doing enough, but in my experience, awareness is growing and many companies are certainly moving in the right direction. If you are doubtful, have a look at the sustainability report of companies. They are in my view certainly better today than only a few years ago. Smaller companies, however, are facing a more challenging time.

I am currently working with at least two companies that have decided to analyse and disclose their material impact even though they are not obliged to, which I find encouraging. One example is B-corp certified Chiesi Pharma. What I particularly like about their sustainability report, is that they are brave enough to disclose achievements as well as areas where they are still struggling. In that way I find that it is also a valuable tool for others to look at, taking on board some of Chiesis lessons. It’s sweet and short : read it 🙂

If you feel you need to learn more about how your company can become more sustainable there are plenty of guidelines out there, but I also think you can learn from reading a few sustainability reports from peers that you find serious. Good luck!

The latest IPCC report

 

The most recent IPCC report reveals no news. As usual it is a summary of current research – and a grim reminder of how troublesome our situation is. The report also highlights some opportunities, not least the reduced price of renewable energy. This is not a small thing, but there are still several reasons why we should feel really worried: temperatures are now 1.1 degrees above pre-industrial times, and we need to immediately reduce our emissions if want to have even the slightest hope of staying beyond 1.5 degrees of warming.

The consequences of the global warming are already now obvious and include increased sea levels, water shortages and more extreme weather.  There is still hope, but as the scenarios in the picture below (from the report) shows, we need to act – but even if we act we should also prepare for a warmer climate. Most businesses (if not all?) will be impacted, one way or the other.

Personally, I still believe that there is time for a green transition, and I think that this transition will entail both new technologies and new behaviour. But for the transition to take root – to be sustained – it will also have to be just. This brings us to…

Corporate due diligence for human rights and the Norwegian Transparency Act

 

Have you heard of the Norwegian Transparency act? Or Åbenhetsloven, as it is called in Norwegian. It’s an interesting piece of legislation that came into force in Norway July 2022, and applies to larger companies resident in or offering services or products in Norway. The act aims at promoting companies respect for (fundamental) human rights and decent working conditions. It further requires companies to carry out due diligence assessments and to disclose (publish) an account of their assessments.

The assessment shall be carried out in accordance with the OECD Guidelines for Multinational Enterprises, and is many ways similar to the proposed Corporate Sustainability Due Diligence Directive (which I touch upon in this previous Newsletter) – though I suspect that it will be some what less “heavy” for companies to report according to the Norwegian act than the CSDD in its current form.

“The Transparency Act requires enterprises to conduct due diligence assessments, meaning that they must look at both their own business, their supply chain and their business partners to find out where the biggest risks are”
(Section 4 of the Act)

The due diligence assessment shall cover the entire supply chain but, the act also stresses the principle of proportionality, meaning that context, severity and probability of any adverse impact should be taken into consideration. It is estimated that 9000 companies are directly bound by the act. The assessment mus be published (at least) on the companies website and the first dead-line is 30 June 2023. In addition, companies have a duty to provide information to anyone who requests to know how it addresses actual or potential adverse impacts.

Personally, I very much look forward to see how the act will unfold and what this may imply in terms of companies respect for human rights. I think it will fairly soon impact many more companies than those who are directly obliged to report in accordance with the act, and even companies outside Norway.  It is also worth noting that there is similar legislation in force or being proposed in several countries, for example France, Germany and the Netherlands  (Here is a link to an interesting chart/summary) and with CSDD being approved we will see similar legislation in all European countries.

Change is coming!

 

Do we need more guidelines?

In all honesty, I often find guidelines unhelpful. I know that is partly me, but I think that as soon as you engage with a complex problem, a guideline will tend to ask the wrong questions. Or ask too many questions, which makes you spend time on issues that are not the most relevant. The same is true, I think, for many sustainability frameworks, ESG-ratings and reporting directives. Good results require knowledge, curiosity, and a firm interest in focusing on what is material. That doesn’t imply that guidelines and directives are not good, only that I find that for those who wants to stay ahead, they probably also need to go beyond the guidelines.

I have thought of the role of guidelines when reading new EU legislation relating to reporting (the Taxonomy with its minimum safeguards as well as CSRD) and due diligence (upcoming Corporate Sustainability Due Diligence Directive).
The new legislation relies on two of the most influential guideleines when it comes to sustainability: the OECD Due Diligence Guidelines for responsible business conduct   and the UN Guiding Principles on Business and Human Rights. I think that these are great instruments. But I’m not sure how many business people who find the documents hands-on and useful. Perhaps because they are, well, guidelines directed towards a very broad spectrum of companies. They have helped us deepen the entire discourse around sustainable business, but that doesn’t make them the most valuable of tools. Therefore I think that this kind of guidelines are useful as an introduction but you need to sit down with someone with knowledge about the context as well as the business in order to make good sense of the guidelines.

Having said all that, there are of course a number of guidelines and templates that are of great value to anyone working with sustainability. The other day, for example, I came across this guide for inclusive sourcing. A good starting point for companies who wishes to improve on their sustainability work in general and diversity and inclusion in particular. For those who wish to take their supplier code of conduct forward aligning to relevant ILO-conventions as well as the UN Guiding Principles. I find the Responsible Business Alliance provide some good support. Read more here. For those who wish to go a little further and learn and develop together, I would recommend you to have a look at  the approach chosen by for example Chiesi, who have developed a Code of Interdependence.

The war in Ukraine

It is now slightly more than a year since Russia’s attempt to a large scale invasion of Ukraine. And still no peace in sight. The war, and the concept of war, feels so…unfashionable. We don’t have time for this.

When I wrote about the invasion a year ago, I was immediately asked if I thought investments in the arms industry could ever be sustainable. (I wasn’t able to give any straight answer). That discussion was fairly intense for some time and opened up other avenues not only focusing on whether it is legitimate to produce arms or not (see for example this article). Maybe it’s only me but I find that this discussion hasn’t continued with the intensity that I had expected. I think one of the reasons is the recent debate around the shortcomings of ESG-ratings; ratings tend to be blind to context. Sasja Beslik has written insightful on this at a number of occasions, eg here .

When the war ends, I hope the discussion on sustainable investments will continue to evolve in all its complexity. What is sustainable at one point in time or in one location, may not be as sustainable in another. And right now, I believe that producing and selling arms that allows countries to defend themselves is necessary.

Why do some people join violent extremist groups?

The other week UNDP published an interesting report on what drives people into extremism in Africa. The report shows that lack of job was, among the 2000+ interviewed, a more important driver for people to join extremist groups than religious ideology. To me, that is a strong reminder of the importance to also address the social aspects – and the justness –  in the green transition we have ahead. Lack of jobs, poverty, broken social contract, bad education….it is in all our interest to address the underlying push and pull factors behind violent extremism. Or in other words: we need more green inclusive growth.

Among nearly 2,200 interviewees, one-quarter of voluntary recruits cited job opportunities as their primary reason for joining, a 92 percent increase from the findings of a groundbreaking 2017 UNDP study. 

Take care!

PS If you are Swedish speaking and interested in  aid, trade and sustainable development, you may want to read this short piece that I wrote on LinkedIn

 

In this month’s newsletter, I highlight some of the more prominent sustainability issues that I think we will hear more about in 2023, through the lens of three presentations I have given recently.

For those interested in the latest on the EU – US trade discussions relating to sustainable investments I would recommend this piece (in Swedish but an older version is available in English) from Anna Stellinger from the Confederation of Swedish Enterprise. And if you are interested in what happened in Davos, have a look at this summary.

During 2023 I think we will see more companies that will openly declare their ambition to balance profit and value creation for people and planet. We will also see more actors – both public and private – that share their challenges and lessons learned.

1. In early January I gave a presentation on the 2022 sustainability achievements at a company I have worked with for a few years, a pharmaceutical company called Chiesi Pharma. It’s a successful company, both in terms of profits and in terms of the value it creates for its different stakeholders. The success can be measured by an increased score on the company’s B-Corp certification, but what impresses me the most, is that Chiesi Nordic is also wiling to disclose and learn from the goals that it has not met. And the company is willing to spend time and energy – showing leadership – on influencing others in its ecosystem.
   
   In 2023, a fair amount of the sustainability agenda among companies will come from employees who wish their employers to address material risks when reducing their negative footprint and improving their positive contributions on people and planet.
2. Mid-January I gave a presentation for a MedTech company which was more of an introduction to how a company can gain value by becoming more sustainable. As usual, I started with the challenges we have ahead, but also with some of the improvements we have seen during the last decades (partly thanks to fossil-fuel doped growth). I then spent some time on my favourite topic, the importance of a materiality analysis; of doing “the right things”. From the discussion that followed, I took with me the keen interest from all levels of the company, in sustainability and on focusing on what is most important. That energy!

   I do believe that in 2023, regulation and incentives from the EU will be main drivers for the transition towards more sustainable business practices, to some extent also beyond the borders of the EU.

3. Late January I made a presentation at a Round Table at the Swedish Embassy in Pretoria. The Round Table was about challenges and opportunities with regard to a “Just Green Transition”, and more specifically how Sweden and climate smart products developed by Swedish companies, can contribute to a greener and more just future. During the Round Table we spent some time talking about the development in Europe regarding increased regulation around sustainability disclosures (e.g. the Taxonomy, CSRD and the coming Corporate Sustainability Due Diligence Directive). Not everyone was convinced about the greatness of disclosure, and I personally agree that regulation on disclosure will not be enough.

And here are some other sustainability issues that I will keep an eye on during 2023…

-How companies and governments will operationalise the conclusions from COP 15 on biodiversity

-How ESG-disclosure standards will evolve, both through voluntary agreements and through regulations to curb green-washing

-Access to clean and affordable energy (and I think it’s time to look beyond Europe)

-The evolution of new business models and innovation where sustainability is an integrated part of the business model (often, but not only, circular models where the “waste” of one process, is the “food” of another. Keep your eyes on e.g. the textile industry!)

-Social sustainability. This will partly be driven by regulations on human rights due diligence and minimum safeguards (from the Taxonomy), but I also think that companies who previously have donated money a little a little “erratic”, will get more professional and to a larger extent look for shared value.

-Carbon taxation. Who will joint the ride?

-Investments. Sustainable investments are likely to continue to grow in 2023. The most interesting development, however, will be how the American and European public spending and investment race will evolve. Will we see European companies with climate smart products moving to or setting up new businesses in the US?

And finally, I wish (and think) that we will see more companies and countries sharing technologies and experiences for the betterment of all of us. A little like when Volvo, in the 1950’s, decided not to patent the three-point seatbelt. This will also include, I think, a slightly new take on aid, trade and sustainability – interestingly enough probably fairly aligned with the general approach of the 2030 Agenda for Sustainable Development!

 

Stay tuned & stay safe!

It was a shitty year, but actually a lot of great things also happened in 2022…

I think most of my readers are quite aware of the many challenges we’ve faced during 2022. The list of evils is long – and it doesn’t stop by the backsliding with regard to the 2030 Agenda, the war in Ukraine (which I wrote about in this Newsletter), the climate crises and our inability to fully prevent or deal with its consequences (read more here), the biodiversity crises, food crises, populism and authoritarianism, tensions around Taiwan, economic slow down and the inflation, the crack down on women’s rights in Iran and Afghanistan… to mention some of our shared threats.

However, there were also many good things that happened in 2022 that we should acknowledge. Allow me to point to some of our achievements in this annual review.

…for example:

The European Parliament and EU member states agreed on a more ambitious emissions trading system, which is expected to reduce industrial carbon emissions. There is a plan for phasing out companies’ free allowances and new sectors, such as transports and buildings, will be included. In addition, more money will be made available to green transition and for green innovations.

Climate change investments in the US. A part of Biden’s Inflation Reduction Act is directed towards investments in clean energy reduction and tax credits for cutting carbon emissions. The bill is controversial in Europe as it favors investments in the US and thereby risks distorting competition, or free trade. However, it is generally seen as giving a boost to green investments as it will increase demand for green energy and green innovations as well as to force other countries to pay more attention to – i.e. find ways of supporting – green investments.

Ethiopia. The war in in and around Tigray calmed down and was replaced by some form of fragile peace. Other countries that seemed to be moving in the right direction include Iraq (which had a new government installed), Mozambique and possibly Yemen.

A new agreement on biodiversity was reached at COP15! After years of negotiations (and postponements) a landmark agreement was reached in Montreal in December. Among other things, a framework and targets were agreed to address pollution, overexploitation, and unsustainable agricultural practices.  Perhaps not as grand as the Paris agreement on climate, but hopefully equally influential.

The EU is becoming a sustainability champion! In addition to the Emission Trading System mentioned above, some milestone decisions were taken regarding everything from a provisional agreement reached between the council and the parliament to set up a new fund to help vulnerable citizens most affected by energy and transport poverty, to the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDD). Well, those are not ready yet, you may argue. True, but things are now moving quickly and some of the minimum safeguards regarding not least human rights, are becoming more and more operational. See for example this very useful paper from the platform on sustainable finance (from October 2022) that gives advice on the application of the Taxonomy regulation.

Malaria. Last year a vaccine against malaria was given a go ahead by WHO and there are now hopeful signs of a new, even better vaccine with “world changing potential”. There are still some final trials going on but the vaccine, that is reported to give an 80% protection, is said to be very promising and agreements to produce 100 million doses/year have been signed. This could save millions of lives. Read more

The private sector is taking a lead in the transition! Despite some governments slowing down in the transition towards more sustainable economies, the private sector proved to be quite resilient and has even stepped up. Especially regarding their commitments to the Paris Agreement. (see e.g. this previous Newsletter). Very hopeful.

Green steel. Production of steel is estimated to cause c:a 8% of the worlds CO2 emissions. Good thing than, that green steel from companies such as Swedish Hybrit and H2 Green Steel  is (or are about to) start the production of steel more or less without any CO2 emissions. And despite a higher price, there seems to be some demand as well. We need more of it!

Fusion energy. In what the US Department of Energy described as a “major scientific breakthrough”, researchers in California managed to produce more energy from fusion, than the energy needed to power the process. Certainly, a step towards clean energy. Read more.

Protection of forests. The debate on how forests are best used is intense in many parts of the world. However, science seem to be in agreement with regard to the importance of protecting large rainforests, such as the Amazon. The new administration in Brazil, together with Indonesia and the Democratic Republic of Congo reportedly started talks about forming “an OPEC of rainforests”. – and the new minister of environment in Brazil, Marina Silva, is an Amazon activist.

These are but a few of all the good news from 2022!

There are lots of more things to be said for example on fossil free energy, on sustainable investments and impact investments, on science, friendships, peace and love.
If you are specifically interested in innovations, you may want to read this piece, and if you are Swedish speaking and interested in global development, this may be of interest.

So, how was 2022 for We-ness?

Very well, thank you. We have supported and given advice to some eight companies and organization, ranging from pharma and medtech to recruitment, industry associations, an impact company, global development (including the UN) and more.

Among other things I have worked with
-materiality analysis and
-preparing sustainability plans,
-in finding ways of supporting small and medium sized companies in developing economies,
-in strengthening partnerships for impact investments,
-in sustainability reporting,
-in reviewing how companies can become more sustainable and have a greater impact, (including B-corp certification)
-in defining impact,
-with agrobusiness in Albania and with
-concretizing the concept Just Green Transition and
-with the minimum safeguards of the Taxonomy regulation.
-I’ve coached leaders and I have given lectures.

In summary: I have learned a lot and I’m deeply grateful to all the companies and individuals that I’ve worked with for what we have achieved together.

We are all change makers! Happy new 2023!

COP 15: finally time for some proper talks about biodiversity!?

Next week the COP 15 on biodiversity is expected to kick off – after having been postponed 5 times and finally moved from Kunming (China) to Montreal (Canada). The goal is to reach a framework for biodiversity, similar to the Paris Agreement on Climate. Biodiversity is, just like climate, of outmost importance for humans as well as other species. It is, however, more difficult to measure which is one of the reasons that it is more challenging to find and agree on goals and mechanisms for follow-up. Despite all difficulties, many companies have engaged ahead of COP15 (here is an example from the financial sector).

COP 27: what happened?

In the previous newsletter for October (here) we explained some of the challenges and expectations ahead of COP 27. Now it’s over. Expectations were not that high, and the results are generally considered (at best) lukewarm. The most interesting outcome was probably that an agreement was reached to create a mechanism for “loss and damages” but what and how remains to be carved out (read an interesting summary by Rockström et al here). And though few would deny the need for a well-functioning mechanism and many would agree with the principle, there are many things that could go wrong.

Another question that many observers (and some participants) seem to ask themselves is if the current set up of the COP meetings is fit for purpose, or if future COPs should focus primarily on follow-up.

Finally, as I alluded to in the previous newsletter, despite the dubious results at the negotiating table, the private sector did manage to distill some optimism and energy into the negotiations! (you probably haven’t missed it but if you want to read more, here is an example).

Social sustainability

Though there is currently a lot of focus on climate, I find that many companies and many investors are increasingly asking how they should work with social sustainability. Definitions vary but for me social sustainability is about people; it is a proactive means of managing and identifying business impacts on employees, on other stakeholders including employees in the value chain, on customers, and on the communities where the business has an impact.
According to the United Nations Global Compact, social sustainability is about identifying and managing business impacts, both positive and negative, on people:

While it is the primary duty of governments to protect, respect, fulfil and progressively realize human rights, businesses can, and should, do their part. At a minimum, we expect businesses to undertake due diligence to avoid harming human rights and to address any adverse impacts on human rights that may be related to their activities.

The Corporate Sustainability Reporting Directive (CSRD) and the European Commission proposal for a Corporate Sustainability Due Diligence Directive (CSDDD), are both expected to contribute to and give guidance on reporting and thereby on expectations regarding social sustainability. The latter is particularly interesting when it comes to human rights. The proposal is now being negotiated and the proposal is that when approved, it will have to be incorporated into member states national legislation. The legislation is expected to move the entire agenda on due diligence forward, though there are also fears that it will add to bureaucracy and create a burden for many (relatively smaller) companies. Read more in this We-ness newsletter .

Another approach to social sustainability is to look at the 2030 Agenda for Sustainability. The agenda and its 17 Goals create a common framework that can be used by both the public and the private sector. Many of the goals are directly related to social sustainability and how companies can create a lasting impact.

Having read a number of reports, guidelines and frameworks addressing different aspects of social sustainability, I find that there are several valuable frameworks, but I also think that there are quite a few frameworks and reports that are not so helpful. At times I get the impression that they are written by people who don’t understand or appreciate the business of doing business. (I guess that’s occasionally true also for myself…).
One recent report which I actually did find valuable, produced by PwC, gives some good insights to how some real estate companies in Sweden deals with social sustainability. If you speak Swedish and if you are interested in learning more about how companies can work with social sustainability, you can down-load the report here.

For more reading: What Is Social Sustainability? – Network for Business Sustainability (NBS)

Leadership for sustainable business development

The other day I had the opportunity to talk about leadership for sustainability with a small group of CEOs. A great discussion where the focus was not so much on the business value of sustainability – they all knew, appreciated and accepted that – but rather on challenges and opportunities in our roles as leaders. We talked about courage, endurance (or “long-term activation”, as it is called in an interesting paper on Leadership for the Decade of Action, produced by the UN Global Compact), curiosity and empathy.

We were all in agreement that leadership will be crucial for the transformation towards more sustainable business models. And as leaders, we have a responsibility to explore how we lead, as well as what we lead towards. What are the attributes that leaders need, and how can we support our leaders in moving beyond the basic requirements, making some of the bold decisions that come with running a business sustainably? A willingness to collaborate and support each other, we argued, is one of those attributes.

 

The world’s most important meeting: COP27?

 

In less than two weeks – from November 6 to November 18 – it is time for the largest annual, and arguably most important, gathering for climate action, COP27, in Sharm el-Sheikh, Egypt. One purpose of the meeting is to follow-up on commitments made in Glasgow. A recent report ahead of the conference (read more here) reveals that there has been some progress, but unfortunately it is still getting worse:

“We are still nowhere near the scale and pace of emission reductions required to put us on track toward a 1.5 degrees Celsius world. To keep this goal alive, national governments need to strengthen their climate action plans now and implement them in the next eight years” -Simon Stiell

The World Meteorological Organization just released new data revealing atmospheric levels of the three main greenhouse gases carbon dioxide, methane and nitrous oxide all reached record highs in 2021. All three gases have increased, and in particular methane. The levels are now 149%, 262% and 124% respectively, compared to pre-industrial levels (read more here).

With the current trajectory we are, according to an analysis of National Determined Contributions (NDCs) that most countries have produced, heading towards a 2.5-2.8 degree temperature increase in relation to pre-industrial times. In addition to this analysis of NDCs (produced by the UN Environment Programme, link here),  the analysis also includes recommendations on what needs to be done to get on track.

The themes for COP27 include adaptation, gender, finance, energy, water, biodiversity and solutions (there are 11 thematic days during COP27). The major discussion, however, is expected to be around the concept of “just transition”; how can the transition towards a greener economy benefit all, and in particular those economies that have contributed the least to the changed climate -and who often bear the greatest consequences from a changed climate?

 

It is quite evident that the longer we wait with reducing our emissions, the more we will have to spend on mitigating and adapting to a new climate. For most of us, the financial and human cost of doing nothing is going to be high. The lack of urgency among many countries and decision makers is therefore likely to create costs for all of us. Good news is, that the COP-process (COP stands for Conference of the Parties) has a very strong participation from the private sector nowadays. I asked Marie Trogstam, Director and responsible for sustainability at the Confederation of Swedish Enterprise (Svenskt Näringsliv) what they expect from COP27:

“For us it is important that we don’t lose sight of the 1.5-degree target. Both climate change mitigation and adaptation will be key. Can we still make it? Well, when I see the drive, concrete technical solutions and the aspirations among Swedish companies, I get hopeful.

 

Our contributions to a green, and just, transition corresponds well to our values but limiting global warming is also very much in line with long-term and sustainable economic growth. Swedish companies have a lot to offer when it comes to finding solutions to the climate crises, as well as with regard to adaptation. In that way the transition also offers new business opportunities for companies who are serious about sustainability. And if we had a global price on CO2, that opportunity would increase further, which is exactly what is needed to stay within 1.5 degrees.”

Sweden’s new government (and the continued preassure from the private sector)

Sweden recently elected a new center/conservative government. It’s still early days for the new government and so far, I haven’t seen much analysis about plans or visions on the broader sustainability agenda as regards for example Agenda 2030. There has, however, been concerns from both the political opposition as well civil society on the new environmental and climate related policies and some heavy criticism towards the decision to scrap the ministry for the environment, and instead have the minister report to the minister of enterprise and energy (read more here) as well as new, lower ambitions related to the reduction obligation (“reduktionsplikten”) in fuels (if you speak Swedish you may want to listen to this recent episode of Vetenskapsradion Klotet).

The new government has also announced a decrease of foreign aid (there’s been talk of a reduction of core support to multilateral institutions) and a merger of the foreign trade and development cooperation portfolio to one minister. There is probably a lot to say about the merger of trade and aid (with both opportunities and challenges), but I will leave that for now.

The new government comes into office at a time of high inflation and economic slow-down, which could tempt decision makers to prioritize short “quick-wins”, rather than more long-term policies addressing sustainability in general and the climate in particular. The same could be true for the private sector but, it seems as if many of the larger corporations are firmly committed to ambitious goals, even if it comes with costs in the short run. This would indicate that many small or medium sized companies that are part of the supply chain of larger companies, will be incentivized to continue on their sustainability journey.

 

Unlike what many companies experienced during the financial crises in 2008, the transformation towards more sustainable ways of running businesses seems – at least for many sectors and companies – to be irreversible. The “flywheel” is in motion. Read more in this article for example, where more than 200 companies urge politicians to view the current transformation towards more climate smart policies as a business opportunity that needs political support, or this report from Hagainitiativet showing how some of the largest emitters in Sweden are transforming rapidly.

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My intention was to devote this newsletter to write about social sustainability and about sustainability impact – beyond the basics (“the hygiene factors”). However, I’ve written too much already so I will leave you with a cliffhanger: next months newsletter will feature a little longer piece on how corporations can work with their social sustainability and their impact beyond “do no harm”.

 

PS Have you tried “the climate game”? Great game that will give you a good hour of interesting discussions with your playmates. Try it yourself; it doesn’t take more than 15-20 minutes.

The Climate Game — Can you reach net zero? (ft.com)

Human development: are we back-sliding?

Recently the United Nation Development Program launched this year’s Human Development Report.   HDR and its index Human Development Index (which measures human development by looking at economic factors as well as life expectancy, health, education) has now been around for some impressive 32 years. We have gotten used to the HDR confirming a steady process of improvements, but this year is the first time that the HDI declined a second year in a row. We live in a time of worries and uncertainty. An “uncertainty complex”, argues the HDR (with data to support it). Our worries can, according to the HDR, be traced to three interacting causes: the desta­bilizing planetary pressures and inequalities of the Anthro­pocene, the pursuit of sweeping societal transformations to ease those pressures as well as widespread and intensi­fying polarization.

The world has, as Hans Rosling reminded us, certainly gotten a lot better in many, if not most, aspects during the last 20, 30 or 100 years. But the human development report is a reminder that we can’t take progress in human development for granted. At the same time the report shows us that there is also a way forward; things we can do to reverse the negative trend and continue to build on the trajectory of continued human development.

All is not well, but all is not lost, either. Policies that focus on the Three I’s—investment, insurance and innovation—will go a long way in helping people navigate the new uncertainty complex and thrive in the face of it (HDR, p 17)

 

The complexity of investing                     

How you invest capital, as an individual or as a company, has consequences. By avoiding certain companies or sectors, it is often argued, we make it easier for more sustainable businesses and sectors to access capital and, hence, grow. This certainly has some truth to it, and avoiding some companies can also be part of a moral stand, but divesting is not necessarily always the most efficient way of reducing for example CO2. For those who have the means, being an active owner may allow you to tweak the business model of some companies, which in turn can make a huge difference. In a recent opinion piece in Dagens Nyheter, one of the dominant Swedish pension funds, AP7, argued:

The international capital market is dominated by traditional capital management without significant climate ambitions. What is missing are sustainable investors who are prepared to roll up their sleeves and get involved as owners. (Gröttheim and Florén, AP7)

So where does this leave those of us who are aware that our savings can make a huge difference, but don’t do investments for a  living? Well, a good start is to find out more about the companies you invest in – or do business with – as well the strategy of your asset manager. Your choices make a difference (there is plenty of information available on the web and I have recently referred to BlackRock in a couple of newsletters. See also how some Swedish investors approach this)

 

Purpose: is sustainability becoming politicized?

In the US and to a certain extent also in Europe, the debate on Environment, Social and Governance (ESG) in business is heating up. Elon Musk’s tweet “ESG is scam” put light on the one aspect of the debate (to what extent ESG should only be about the environment -see also last month’s Newsletter on climate vs other aspects of sustainability). But the debate is broader than that where critics, including politicians, argue that ESG is a leftist ideological pursuit (read more e.g. here).

To me, the sustainability agenda (of which ESG is an instrument), definitely has ideological connotations – and implications. But it isn’t particularly “leftist”, just like fundamental human rights shouldn’t be described as “leftist”. It has in my view rather been fairly mainstream, something most politicians can agree on, at least in principle. However, as the conservative/nationalistic and far right movement is gaining support, policies that were previously not contested have become dividers. Even if ESG originally was a tool for investors to identify and assess risks of an environmental, social and governance character, it now seems to have become associated with much more than that. Fact remains, however, that companies uninterested in these issues put themselves (and their stakeholders) at great risk.

I understand that all the talk about new ways of doing business, stakeholder capitalism, and combining profit with purpose (read more in previous Newsletters) can be perceived as a threat to those who believe that status que serves them well. But, as the Human Development Report referred to earlier shows, we need to change trajectory and to speed up the transition towards more sustainable ways of running our businesses and our societies. The era of fossil fuel and competition based sub-living wages is not the future. We need a system that is fairer to future generations as well as to hard working people that can’t make ends meet.

Not everyone, or every company, can (or should?) go as far as Patagonia in their sustainability endeavors but for me it is hard not to get inspired by a company that has decided to not only to be as sustainable as they can in their production and in their operations, but also to redistribute the profits – and ultimately the ownership of the company – to a trust “fighting the environmental crises and defending nature.” (read more about Patagonia’s decision here)

Agreeing that the current trajectory isn’t sustainable and that business can be a force for good doesn’t mean that we have to agree on how change will happen. But those companies and organizations that manage to agree on these basics will, I think, be in a better position to manage competition and change. They will have a “super power” in that they have a purpose, some values on which they agree and that makes employees and owners proud.

IKEAs approach to social sustainability and the development of tools for circular business models

It is often easier to talk about things that ought to be done, than actually doing them, or showing how they can be done. I regularly help companies transform sustainability visions into plans and actions and I, almost on a daily basis, meet individuals or organizations that come up with new innovative ways of addressing sustainability challenges that they are facing. Two examples that have inspired me the last few weeks:

• Cradlenet and Steena Circular Consulting recently produced a report named Product-as-a-Service in the circular economy: the nine critical challenges and how to fix them. The challenges are divided into three categories (customer acceptance, operational and capability related costs and finally financial risk) and followed by concrete advice for companies who want to work with PaaS. My experience is that few method documents are instant game changers, but I have no doubt that our economies will become more circular, and then this kind of methods development will be useful. The report can be downloaded free of charge e.g. here.
• IKEA recently amended their sustainability strategy. The update relates to how IKEA, through its business, wants to reduce inequalities and strengthen human rights. The strategy recognizes IKEA’s opportunity – and responsibility – to work with others to build resilience in societies and make equal opportunities available for all (read more about the new strategy here)

Our business is built by people. To thrive as an organisation, we must ensure the well-being of people, leaving no one behind. (p 16)

Having a good strategy – and a commitment – is a great start, though it isn’t enough. When reading their sustainability report, however, I get reminded that change is happening. With strong values and a strong culture that support your sustainability aspirations, you are likely to reduce the risk of strategies remaining strategies.

Without any deeper knowledge, I can’t help but think that one of the challenges Ericsson has faced in implementing their sustainability aspirations, relates to a culture not shared by everyone in the company. Luckily, that can change.

In my experience a lot of the change that needs to happen and a lot of the change that is happening now, derives from the private sector rather than from the government. So, for those looking for inspiration, a good start may be the companies who are at the forefront in your line of business!

The role of companies and corporate legislation (- or is it time for “benefit corporations” in the Nordics?)

More than half a century ago, the American economist Milton Friedman wrote that the responsibility of the private sector is to “make as much money as possible while conforming to the basic rules of the society,” (the article was called “the social responsibility of a business it to make profit”). A similar view seems to be at the core of several pieces of corporate legislation around the world. Some countries, however, have introduced new corporate forms that allow for companies to register with dual purposes; to generate profit while at the same time also serving other stakeholders (which in practice often means integrating ESG into the business model). This is the case in the USA where companies have the opportunity to register as a “benefit corporation” in more than 30 states. A similar legislation has been passed in Italy and recently also in Spain and France.

In Sweden, criticism towards the corporate legislation act (“aktiebolagslagen”) from an ESG perspective has been raised from time to time (see for example this discussion in Dagens Industri from 2021). The criticism often points to the fact that current legislation only stresses the need to make profit, and may discourage entrepreneurs who wish to combine profit making with having a social or environmental impact.

I believe that the time has come when the “basic rules of society”, as Friedman put it, have evolved and now include a genuine expectation that companies also consider environmental and social aspects in their business. It would seem more logical if we requested those companies that do not have any ambitions regarding ESG to explain why, rather than the other way around. In that case, ESG might become more of a strategy discussion and less of a reporting requirement.

A couple of weeks ago a Swedish politician, Lotta Olsson (M),  together with a the CEO of a pharma company (Chiesi) and the founder of the B-corp movement in the Nordics wrote an article suggesting that it is time to introduce a new form of corporate legislation to complement the current legislation so as to encourage, or enable more of a stakeholder approach and dual purposes combining profit and social or environmental goals.

Perhaps, I thought when reading it, this could be one way of “solving” the politically very contested area (at least in the Nordic countries) of making profit in the welfare sector? (I have written about some of these issues, including the distinction between stakeholder and shareholder capitalism in some previous newsletters).

Reporting: with tighter requirements the accusations of “green-washing” seem to increase

As the roll out of more and more legislation around sustainability disclosure (reporting) continues, so does the criticism towards alleged “green washing” (meaning portraying themselves as greener, or more sustainable, than they are). The criticism comes from both consumers and licensing authorities, which I have written about in previous newsletters. Though some readers might be frustrated when hearing about companies trying to portray themselves as more sustainable than they are, I think it is only natural and a sign of the business maturing. Definitions, expectations, and communication will need some time to be calibrated and even then, there will still be some room for interpretation – and of course some companies wanting to paint a brighter picture of their footprint than they can back up with facts and figures.

There are expectations that new EU legislation, including CSRD (Corporate Sustainability Reporting Directive), will help strengthen the extent and nature of sustainability reporting. Many large companies in the EU are already now obliged to publish information relating to environmental and social matters (including treatment of employees), on human rights, anti-corruption, and diversity on company boards. When the new legislation enters into force there are expectations that, among other things, more companies will be obliged to report, that more detailed standards are used, that the information provided is audited and that information is digitally tagged.  Read more here. The first set of standards is expected to be approved already in October 2022 (read more here).

As a management consultant, I remain somewhat skeptical towards the idea of reaching goals – in this case more sustainable businesses achieving more positive impact while reducing the negative footprint of their doings – primarily by deciding what and how to report.  Therefore, I find the proposal adopted by the European Commission on a new legislation on corporate sustainability due diligence at least as interesting as CSRD. The aim of this Directive is to promote more sustainable and responsible corporate behavior and to secure both human rights and environmental considerations in the way companies behave, including in their value chain (read more here). The proposal also needs to be approved by the European Parliament and the Council before member states are given two years to transpose the Directive into national law.

Although these initiatives are largely welcome, a read-through of some of the many standards and requirements associated with them, serves to remind us that for small-and medium sized companies more regulations also mean less time to concentrate on the most material issues. For this to work, I think we will have to see more cooperation between companies and possibly more support through for example  industry associations.

 The ESG Debate: should we only focus on the E?

Recently, the Economist published a special report on ESG. It concluded that “although ESG is well-meaning it is deeply flawed” and that the S and the G  distracts companies from focusing on the crucial goal of cutting emissions (those who have an account can read the full story here). The arguments are not new. The report was met by criticism, for example from Principles for Sustainable Investments, who responded that the economic transition needed to reduce emissions is also a social transition.

“ESG” is not one thing, but rather a method for considering issues beyond traditional financial data, which still entail financial materiality. This is not to say that we shouldn’t be cognisant of the limits of ESG as a tool – we should. But separating climate from its impact on society and its implications on corporate governance marginalises the issue […] -PRI 11 August 2022

It is tempting to focus on emissions, which is relatively easy to measure. The challenges are very visible and very challenging. In my view, however, there is a reason that the 2030 Agenda has 17 Goals: many of the challenges we face are interconnected, either directly or indirectly, scientifically, and politically. Besides, the starting point for any serious sustainability work should be a risk and materiality analysis where the company identifies what is most relevant to work with.

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Change is coming?

The UN Global Compact Network Sweden recently launched a report on what companies in Sweden expect with regard to the transition ahead. It confirms the notion that most companies work with sustainability, but also that many still struggle with integrating sustainability into their operational work, their skills and knowledge among employees. You can read the report (in Swedish) here.

The greatest climate package ever (?) was recently passed in the USA. It consists of investments, largely related to clean energy, amounting to 369 MUSD.  The package, called “the inflation reduction act” originates from the “build back better”-initiative.  Though extraordinary in many ways, critics also points out that it is not enough to meet the 1.5-degree target in the Paris Declaration. However, some analysts believe that the package may contribute to a (much needed) “clean energy arms race” between China and the USA.

Abortion – a human right?

How and when a woman can choose to terminate an unwanted pregnancy is a matter of Sexual and Reproductive Health and Rights and as such it has been a central part of the global development agenda for decades. Yes, it has been controversial in many countries and battled at numerous international conferences, but inch by inch the agenda has moved ahead. It has moved in a direction where women’s rights to decide for themselves, and women’s health, more broadly, has been acknowledged. Women’s rights, it has been argued successfully, are human rights. With the recent decision by the US Supreme Court that prohibition of abortions is not unconstitutional in the USA, some of those rights have been lost.

A few years ago, I asked a senior minister in an African country why her country would not accept the rights of gay people. I remember her response very well. She looked at me, and it was clear that she was uncomfortable with the question, and said: “You know, David, it’s a matter of development. Only a couple of decades ago, we were new to women’s rights and now women’s rights are human rights. I believe we will get there with regard to LGBTI-rights as well, but it will take some time.” To me, it was clear that she thought that everybody should be free to love whoever they wanted to, but the political price of saying that out loud was too high. We both thought, however, that it was only a matter of time until those rights would be granted.

The decision by the US supreme court is a reminder that human development does not follow a straight path. Old battles must be re-fought. Reversal of human development is a fact in many countries and those of us who believe in human rights and democratic values must not give up. A partly new player in the struggle for democracy and human rights is the growing movement of companies who see themselves as corporate citizens, with responsibilities beyond regulations. In this specific instance, though many companies are yet to speak out strongly, there are also those like Google, Microsoft, Tesla, Starbucks, Netflix and Nike who have publicly confirmed that they will pay for employees’ travel expenses for abortion (read more here). It gives me some hope that this seems to be a fight that citizens and civil society will not have to fight by themselves.

 

WTO & G7 summits: both reasonably successful

At least in relation to expectations… It was the first time WTO met in five years and the fact that they met despite all the tensions that have followed on from Russia’s invasion of Ukraine should be acknowledged. Some progress in relation to the food crises, vaccine production, WTO-reforms and fishing subsidies were notable.

The recently ended G7 summit in Germany was dominated by discussions on Ukraine and how to reduce the dependence on energy from Russia. However, there were actually other topics on the agenda as well, including the climate crises and the food crises (in the footsteps of the war). Reading through the final communique, a fair amount is devoted to these topics as well, for example:

We recognise the importance of innovation in driving deep decarbonisation. We commit to a highly decarbonised road sector by 2030 including by, in this decade, significantly increasing the sales, share and uptake of zero emission light duty vehicles, including zero emission public transport and public vehicle fleets

New GRI standards

The sustainability reporting standard GRI has just launched a new standard that sets reporting expectations on sustainability in agriculture, aquaculture and fisheries. This is the third out of 40 planned sector standards launched by GRI. Though it may feel overwhelming with 40 different sector standards, it is my expectation that these different standards will make it easier for companies to report as the questions will (hopefully) feel more relevant. Solid reporting standards will also support or even ensure that companies adhere to relevant regulations.

Sustainability manifesto for the pharma industry: something others can learn from?

The Swedish pharma-sector, through the industry association Lif, has recently issued a sustainability manifesto. I have followed the pharma industry for some time and while I’m simultaneously intrigued and, at times, disappointed with some of the actors in the pharma business, I believe this is an initiative that deserves some attention. Not that the commitments are mind-blowing, but if all pharma companies take them seriously, the manifesto will have managed to move an industry, at least in one part of the world. But as pharma companies often tend to have a global outreach, chances are that it will impact other countries as well.  And that will imply material impact.

My experience is that business associations often settle for something slightly better than the lowest common denominator, which doesn’t really move the industry forward that much. In this case, however, my sense from talking to a few people in the pharma industry in Sweden, is that they are prepared to look at how the commitments in the manifesto will be reflected in their own sustainability plans, and that they are prepared to cooperate in the implementation and follow-up of the commitments.  If that happens, it will be a great example of how cooperation, peer pressure and peer-reviewing can make a difference despite the same companies being competitors!