Only a few people would disagree with the fact that our behaviors should be both socially and environmentally responsible, but between saying and doing there is a big difference.
Often, we tend to make the mistake of understanding the environmental issue as a philanthropic surplus and nothing more. However, it is now clear that the Earth is showing unmistakable signs of suffering: the continuous release of greenhouse gases into the atmosphere is causing a significant increase in temperatures, and, without an immediate reduction in the emissions of carbon dioxide and other gases, we will see an increase in global warming.
Climate change, unfortunately, is just the tip of the iceberg of what is happening to our planet: the pollution of the oceans, the acidification of our seas, the negative effect of the use of fertilizers, and the increase of eco-catastrophes such as fires and floods, are just some of the phenomenons that are affecting our planet.
For this reason, with the Green Deal; a roadmap toward an eco-friendly Europe, the European Commission has presented a series of proposals to transform the European Union’s climate, energy, transportation, and taxation policies to reduce greenhouse gas emissions by at least 55% by 2030.
The focus on environmental challenges and the drive towards a more sustainable economy is also becoming an integral part of management practice, influencing the strategic decisions and behaviors of individuals within the organizations; regardless of the industry, in which they operate.
Being a manager in a world facing an eco-catastrophe
Climate change also has an economic cost that is and will continue to cause significant damage to businesses. A group of nearly 7,000 companies (CPD)has reported that they estimated the risks associated with climate change to be nearly 1 trillion USD. Therefore, a growing number of stakeholders are continuously pressuring companies to include credible plans for regional sustainability. In this context, the modern world leader must be able to analyze the reality that surrounds them, on a global scale, while reflecting on the implications of their decisions for the environment.
The questions that senior executives are being asked today are: What future do I create with my company beyond business activities? Are my company’s strategies and policies sustainable? How does the shift towards the green economy impact my business? These answers are articulated carefully to the risks of climate change and to a strategy that is mindful of the options available to alleviate them; whilst identifying new business models and opportunities.
Creating value in the transition to a green economy
In this transformation towards sustainability, it is necessary to develop strategies to leverage the potential benefits of climate change. For example, global decarbonization is an absolute powerhouse in terms of investment: McKinsey‘sanalysis states that the capital expenditure to achieve net-zero emissions will increase from 5.7 trillion USD per year to 9.2 trillion USD per year over the next 30 years. Such a massive reallocation of capital is expected to lead to a period of rapid innovation and growth, while also changing the way companies create value. In particular, there is evidence that a business that cares about environmental needs is subject to a strong drive towards progress. Tech companies, for instance, have the power to significantly change the market by being the world’s largest customers for renewable energy to run their data centers.
It is quite clear that a whole new sector is emerging, one that aims to develop the new green economy, accessible also to those industries that, can participate in the sustainable transformation.
But how to train your organizations to change?
Minimizing the CO2 effect
The fronts on which a company can act to seize the opportunities of the transition to the green economy are numerous. In particular, climate resilience requires a combination of two different actions: a wide range of activities that bring our routine to a sustainable lifestyle and a set of actions that drastically reduce human-induced greenhouse gas emissions. Since the mid-18th century, with the Industrial Revolution, humans have released nearly 2.5 trillion tons of CO2 into the atmosphere, increasing CO2 concentrations by 67%. Carbon dioxide remains in the atmosphere for hundreds of years, so global warming is a permanent occurrence unless action is taken on a larger scale.
Companies and organizations are investing resources to reduce or prevent greenhouse gas emissions related to their business. In particular, they are being asked to shift energy consumption toward renewable sources such as solar and wind power and to replace the use of fuels with the use of electricity.
On this front, Fiia Nurminen, Business Development Coordinator at Toroto and expert in CO2 reduction, says: “The first step that companies must take is to estimate their carbon footprint and, based on this data, to distinguish the most significant sources of emissions. The results will change depending on the type of industry and business processes.”
How is the company’s carbon footprint calculated? “Emissions are categorized into three scopes,” says Nurminen, “the first is about direct emissions and these can be controlled by the company and most easily affected. However, it is not always the most significant class because so many companies do not produce these types of emissions. Emissions in the second category come from purchased energy and by purchasing green energy you can reduce the impact of this category. Finally, the third class contains the indirect emissions that come from our actions and emerge from the company’s value chain. For example, a factory that produces direct emissions may have an additional impact because of the production and transportation of the materials it uses for its products or because of business travel by its employees.”
“When starting the green shift you need to understand how and which classes we impact so you can take action. For example, one tip might be to decide to travel by train rather than plane or to use production machinery that is more efficient and consumes less. In any case, it is important to understand the cost of investment and the outcome that can be generated”.
“After calculating emissions and reducing emissions as much as is reasonable with the most sustainable choices, companies can also offset the remainder to become carbon neutral,” Nurminen says. “A company that wants to offset its emissions chooses which offset project to join. A reliable supplier must be chosen. An important aspect of this is the transparency of activities, of documents produced, clarity of actions, which in turn must be verified by third-party entities.”
“In the case of Toroto, we follow international standards to measure the increase in biomass, that is, the growth of the forests we take care of. Trees, through photosynthesis, use CO2 for their nourishment, decreasing the amount in the air.“
It is estimated that the cost savings from potential reductions in the use of materials and product packaging, for example, could be as high as 45% (Deloitte) to hundreds of millions annual USD.
It is also fair to ask what materials we use either for our products or to do our work? In Italy, companies are investing in the circular economy; the Circular Economy Network (CEN) 2022 report showed that the country has decreased the use of raw materials by 36%, increasing resource productivity to 42%. Moreover, at equal purchasing power, every kg of resource consumed generates 3.5 of Italian GDP or 60% more than the average EU.
The spin-off effect of the company’s shift to greener products
The transformation towards a more eco-sustainable entity also passes through the brand. An action to increase one’s business is to exploit the company values in favor of a strong brand identity. According to a study by Deloitte, the majority of consumers say they are willing to pay more for products from socially responsible companies. Brands with a demonstrated social commitment and that care about the environment are seeing average sales growth that exceeds four times that of unsustainable brands.
Finally, alignment between corporate and employee values increases employee engagement; leading to better revenue through increased productivity. A focus on sustainability motivates employees because they feel part of a community where they take pride in their work. On the other hand, companies with the highest level of involvement of their teams have 25% more profits than organizations with poor involvement of their resources leading them to lower turnover (Deloitte).
The environment and its well-being is a global challenge that requires the contribution of each one of us. Although the situation is serious and discouraging it is important to act now and with optimism: we have the tools and the technology to avoid the worst scenarios and the time, even if little, to save the Earth!
Success will depend not only on technological progress but also, and above all, on a personal and daily change in acting responsibly. In this, the leader has a fundamental role in setting an example and guiding his team towards eco-sustainability. With the guidance of a conscious leader, extraordinary results can be achieved both in terms of business and environmental benefits.