RG: You have argued that “we need to release the power of the business world” to help governments solve some of the planet’s biggest problems." What is the nature of that power and how can private-sector expertise be mobilised?
MS: The planet is showing signs of stress. Emissions continue to rise and extreme weather conditions are becoming ever more frequent. The Philippines super-typhoon Haiyan was remarkable for the speed of its winds (recorded at over 200 mph), which whipped up tidal waves and caused mass devastation. Typhoons and heat waves are getting more common. The Arctic ice caps are melting. Temperatures look set to rise more than 2°C.
On current trends we could be looking at a rise of 4.8°C by 2100, with sea levels up 0.98 metres and extreme heat waves occurring every two years rather than every 20 years, as today.
As the physical symptoms become more evident each year, the political process moves at an uncomfortably slow pace. The tactic of holding the climate change talks in countries with a dubious track record on emissions reduction – such as Doha (in Qatar) and Warsaw (Poland)– in the past two years, has not produced much progress towards an international agreement. The signals remain mixed as to whether we can reach one by the end of 2015 (to begin in 2020) that will deliver the necessary scale of emission reductions.
Developed and developing countries disagree as to how the pain and the opportunities should be shared. This means that a top-down global agreement cannot be the only route to addressing climate change.
We have to find bottom-up ways to complement the political process. This is where business has a critical role to play. Many companies have devised practical ways to curb emissions, from cheap solar panels to fuel-efficient cars. Everyone can learn from successful green businesses, and smart regulation can encourage the widespread adoption of good ideas.
To cut global emissions, organisations like the United Nations (UN), World Economic Forum (WEF) and World Business Council for Sustainable Development (WBCSD) have identified seven critical areas. These include zero net deforestation, reducing climatic pollutants such as methane, using and generating power more efficiently, financing at scale for developing countries, promoting low-carbon urban transport and factoring carbon information into decisions about how to allocate capital.
No single stakeholder can make things happen on their own, but business has a key role to play in delivering solutions in all areas.
Four agricultural commodities – soy, palm oil, beef and pulp / paper – account for 50 per cent of tropical deforestation, and approximately 15 per cent of global greenhouse-gas emissions. Consumer-goods companies buy and sell a huge amount of these commodities. Happily, they are working to make sure that their supply chains no longer contribute to deforestation by 2020.
The world is rapidly becoming more urban. Some 1.5 million people are moving to cities every week: the equivalent of building a new New York every two months. Mayors of the C-40 cities climate leadership group are collaborating with private companies on city initiatives – especially on transport schemes to reduce emissions. The previous decade saw plenty of bike schemes; this decade we can expect more car-sharing schemes, electric vehicle parks and new clean transport schemes – all developed by public-private partnerships. Municipalities are using private firms to get the job done.
The world cannot wait for diplomacy to curb climate change. Reductions in emissions will be driven by private companies changing the way they do business. That includes stopping deforestation, introducing new technologies and using materials more efficiently. Businesses are taking good ideas and figuring out how to apply them on a larger scale: cleaner engines for cars and trucks, less power-hungry lights in buildings and plants that turn waste into energy. All this will deliver real environmental benefits at scale where it matters.
RG: You said that ‘the real challenge with sustainability is that whilst a lot of the benefits are general, many of the pain points are specific’. Please could you elaborate on the economics of climate change?
MS: The financial crisis that started in 2007 has resulted in many policymakers and citizens questioning whether growth is truly compatible with climate security. Many see the aspirations to achieve growth and a low-carbon economy to be in conflict rather mutually reinforcing.
The defining work on this subject dates back to Nick Stern’s report to the UK Government in 2006,i which estimated that global warming could cause the world double-digit losses in economic output, whereas containing the problem would cost only 1% of global income.
Since the Stern report the situation has deteriorated: emissions have risen faster than anticipated. But technology has also made significant progress – solar prices have come down by a factor of six and new fracking techniques have opened up new gas reserves and transformed the underlying competitiveness of the US economy. We have also learned that as much as 30 per cent of our food gets wasted in the supply chain and that companies or housing associations can pool their power purchases of green energy to get better deals from suppliers.
The macro costs and benefits of climate change need to be reassessed as we head towards 2015. The challenge is that the macro costs of taking action seem frightening to politicians dealing with electoral cycles and squeezed living standards. However we can already see some fascinating examples – even in the most unlikely places-- which can begin to make people think about the opportunities of a low-carbon economy rather than its costs.
In the suburbs of Birmingham 37 tower blocks have been reclad, insulated and had their old heating systems replaced with new biomass wood-chip boilers. The project has improved the appearance of the tower blocks as well as providing residents with much more efficient and cost-effective heating and hot water systems. The work involves installing thermal cladding to the outside walls of the blocks to provide better insulation. The old storage heaters have been replaced with radiators and the system is fuelled by wood pallets and supported by a gas back-up system. The project is being financed over a 20-year period and involves British Gas and a local Community Housing Office (CHO). The CHO manages the energy for the residents through meters and pre-payments and pays British Gas through savings over a 20-year timeframe for the financing of the project.
The future is about combining a macro view on the costs and benefits of sustainability with practical micro examples, as in the case of the Birmingham tower blocks. The UK has made significant macro progress with the introduction of carbon budgets, but much more still needs to be done. Governments need to look hard at how to support the decarbonisation of the energy system in an appropriate timeframe without creating large open-ended financial obligations. Business needs to do more to improve its financial, social and environmental accounting and reporting. For too long it has used natural capital for free and not reflected the true cost of environmental damage in its financial statements. But individual citizens also need to change their habits. We need to recycle more, waste less, insulate our homes and use energy more efficiently. It will be the combined effort of government, business and all of us as citizens that will shape the economics of a more sustainable planet.
RG: Working ethically alongside local communities can be time consuming and expensive. How do you balance the need to make profits with the duty to avoid harming local people or the environment? Please describe how your company is handling this trade-off.
MS: Sustainability is about looking at the world through the lens of financial capital but also social and natural capital. Roughly 73 million young people around the world are jobless today; they are three times more likely to be unemployed than their elders. That raises massive questions about how we approach creating jobs, developing skills and utilising our abundant social capital.
The test of this decade will be about inclusive growth – how we ensure that young people get a better deal. That means more education that is relevant to the workplace, more effort to match young people’s skills with job openings, and the necessary support to help them stay employed.
One example of how companies are addressing this problem is Accenture’s Skills to Succeed programme.
Accenture is in the business of developing talent; it employs about 260,000 people around the world and recruits more than 50,000 people each year. However the company has also realised that it can apply some of its know-how more broadly and improve the links between vocational education and training, especially in the IT sector. This helps build a “skills pipeline” that benefits society. It is also good for our staff, who enjoy taking part in a range of social projects.
Accenture is on a five-year journey to equip 500,000 people by 2015 with the skills to get a job or build a business. The company works with partners across the public and private sectors. We deploy technology to increase the accessibility of programmes to foster employability and entrepreneurship. The aim is to work in multi-partner coalitions, which reach more people, are more effective and generate deeper insights into what really works.
In the UK, the Skills to Succeed Academy is a free, interactive online training programme, designed to meet the needs of young jobseekers. Through 35 modules of practical, realistic skills training, its aim is to help thousands of young people understand career choices, find a job and stay employed. The content is media rich and uses the most advanced technologies including gaming techniques, simulations, telestrations, videos, quizzes and interactive exercises in fun, bite-sized pieces.
Working in partnership with employment experts from across the public, private and voluntary sectors, a leading software specialist, a creative media agency, and young people themselves, the Academy aims to reach at least 20,000 young people, in particular those furthest from the job market, and offer them high-quality training to help improve their employability and confidence by the end of 2015.
There is a growing array of initiatives in place to help young people. In Spain, Juntos por el Empleo de los Mas Vulnerable, or ‘Together for employment for the most vulnerable’, is a cross-sectoral initiative that fosters the entrepreneurial spirits of the most vulnerable people. Some 32 social organisations, 30 companies and 14 public administrations are collaborating to diagnose the problems and find solutions.
Increasingly, corporations are realising that they have to do more than just deliver shareholder value. They have to consider their licence to operate and responsibilities to local communities. To succeed in many emerging markets, multinationals have been learning that a big global brand is necessary but not sufficient. Today you need not only a market brand but also an employment brand: you have to be known locally as a good company to work for. Corporate boards now have to pay attention to youth unemployment and inclusive growth. Many are thinking hard about their wider duties as good corporate citizens.
The Skills to Succeed programme is one example. It is a real live demonstration of the power of global citizenship. It works because the leaders involved have a passion for talent and a distinctive expertise which they want to share. Moreover employees these days expect companies to contribute to society. It is part of the employee proposition; it builds loyalty and good will among staff who can contribute personally and also see the company make a difference.
i Nicholas Stern, The Stern Review: The Economics of Climate Change, 2007 (Cambridge: Cambridge University Press)