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Role Of Business For Solutions To Climate Change

In the pre-Covid world, it was becoming difficult for a company not to talk about Corporate Social Responsibility (CSR) in relation to the environment. Today, it is impossible to keep quiet. Despite some progress made over the last two decades, the indicators are clear: we are far from the mark. What are the limits of the current approaches? Is it finally time to change? The scale? The approach? The model?

Since its origin, CSR has relied on the unilateral efforts of companies to reduce their negative impact, whether by reducing the pollution created by their activities or by selling products that are less harmful to the environment and to society. There has been some progress, driven mainly by the demand for more responsible consumption in all its dimensions: sustainable, ethical, fair, considering indigenous rights, and so on. 

Ørsted, formerly Danish Oil and Natural Gas, made a radical change to transition from fossil fuels, achieved a 30-year goal in a decade, and became the world leader in offshore wind power. Ethical banks such as Triodos, which finance companies that add value to both people and the environment, are flourishing as consumers demand greater transparency from the industry. The clothing company Patagonia recently transferred full ownership to a non-profit dedicated to fighting the environmental crisis and defending nature.

However, scepticism of the reality of corporate practices is gaining ground, particularly among the young. The steady increase of CSR communication cannot indefinitely hide the pressing reality: bad news is piling up, whether on biodiversity loss, the increase in the number of extreme climatic events, and the widening of inequalities.

More than the actual CSR approach, it is its effectiveness that is called into question. Palm oil initiatives is just one of the many examples. After 20 years of commendable efforts, only 7% of the world’s palm oil is certified as sustainable. The same holds for deforestation, which has not improved despite decades of efforts. And the latest frenzy of offsetting schemes and its myriad controversies does nothing to inspire trust (more than 90% of rainforest carbon offsets by the biggest certifier are worthless, see https://www.source-material.org/vercompanies-carbon-offsetting-claims-inflated-methodologies-flawed/).

Laudable but (un)achievable goals?

Governments and organisations have nevertheless multiplied initiatives: Paris Agreement, Sustainable Development Goals (SDGs), Global Compact, the Global Reporting Initiative, the Carbon Disclosure Project, and several others. But how can ambitious goals be effectively achieved without engaging the responsibility of each company?

Let us take the example of the SDGs, defined in 2015. While extremely important, five years is too short a period to observe real transformations. Even among European countries – which globally are leading the trend – none is on track to achieve the carbon neutrality by 2050 that Europe is aiming for.

Unsustainable products (energy, agriculture, forestry, fisheries, and many more) dominate by far all markets; climate, biodiversity, and circular economy goals remain very distant targets. Efforts of companies most often relate to their own direct activities and not of those of their supply chain.

How do we ensure that companies commit in a consistent way? The role played by CSR no longer seems to be sufficient. It is still too often treated as a business project rather than a corporate behaviour. And the thousands of CSR and sustainable development consulting firms, with an associated market of more than a billion dollars, do not seem to have fundamentally changed the situation.

A race to the top needs to replace the race to the bottom. A race in which companies give themselves, their suppliers, and customers the means to contribute fully to the transformation of our economy and society towards a low carbon one.

“The question we have to ask ourselves every year is: what decisions have I made this year that have sacrificed my personal advantage and my gain for the benefit of all? If you found zero, you probably have a problem,” Ngaire Woods, dean of the Blavatnik School of Government at Oxford University, said recently. A problem that the young generations and, more broadly, citizens no longer seem ready to forgive.

By Dr. Diana Mangalagiu

Professor, Environmental Change Institute, University of Oxford, UK & Neoma Business School, France