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Climate crisis blind spot for chief executives

Climate crisis blind spot for chief executives

Chief executives have a climate crisis blind spot

The writer is the author of ‘Uncharted: How to navigate the Future’

A Survey of 4,446 global chief executive officersPwC published Monday’s report, which may be cause for celebration. The group is optimistic as 77% of them expect an increase in economic growth over the next year. They care about their people, and are focused on trusting, transparency, and a higher sense purpose. They don’t seem to think about whether they will have a better future.

Only 22 percent of leaders have made a net zero commitment. More than half of those who have not set a net-zero target (57%) don’t believe their company emits significant amounts of greenhouse gases. This strongly suggests that leaders in these companies — which are likely to be in the technology, consulting and insurance sectors, the research shows — do not understand how carbon impact is measured, and think they can focus on direct emissions only, ignoring the systemic impact their business makes.

Additionally, 55% of the chief executives of companies that have not committed to net-zero admit that they lack the capability to measure carbon emissions. Only 13% of companies have incentive plans that link to decarbonisation. This is a clear message: climate change has very little strategic impact.

This wilful blindness is not surprising, but it is alarming. While business leaders may voice concerns about the climate, the survey suggests that few know where or how they can start. They are unable to identify the job or how it fits into their existing operations. Few are conversant with the categories — or scopes — of carbon emissions for which they will be held accountable.

Many business leaders that I have spoken to wish the government was more direct and clear. Although it may be surprising to hear chief executives call for regulation, they believe it will level the playing field. They fear that if they take the initiative, it could jeopardize competitiveness. Such leaders won’t act until compelled to, and governments are frequently wary of corporate pushback. This is the opposite leadership.

In some companies where the climate emergency is discussed — or has even been formally declared — change is often visible but not strategic. Water fountains are now used to replace plastic water bottles, and the canteen offers vegan options. Numerous businesses have begun to penalize the cost of air travel, even though trains would be more feasible.

For deeper, more strategic changes, businesses need to address different questions. How can profits be reduced and what are their external costs? Who and what gets hurt by a business’s decisions — and how does it address that before the damage is done? In a sustainable business, profit comes from solving problems — so how does a business solve more than it creates? What are the substitutions or redesigns that can reduce carbon emissions and make them lower?

These may sound idealistic questions, but they are the questions that companies like Interface, Tata, Danone, Mastercard, Levi Strauss, Patagonia, Salesforce and Natura & Co confront as core to the business — not as afterthoughts. It is interesting that many of these businesses are consumer-facing, and have to deal with the possibility of losing credibility among customers.

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When Terry Smith calls Unilever and other companies “unilever” for putting sustainability at the heart of its strategy, he helps those chief executives who would rather cling to the wreckage of environmental degradation than take the action required to build a positive future. It is easy to stay the same old way and it is comforting. But the new way feels more risky. Because the costs of strategic changes are not easily visible, it is easier for people to see them. But that doesn’t mean they do not exist: the status quo trap is dangerous precisely because it is so comforting.

All the chief executives that I have met are aware of the current climate crisis and believe it is real. When I asked them where they see climate collapse, very few of them had considered the civil disruption that comes with it: famine and migration, as well as social and political breakdown. This disruption is difficult to contain or escape in a globalized world. Companies rely on civil society for their survival.

Social capital is what keeps people, businesses and society going in times of crisis like the one we are currently experiencing. It is a dense network of relationships that creates social cohesion. According to the report, its erosion is a serious threat in the next two-years. World Economic Forum. The environmental, social and democratic resilience we need won’t be conjured up the moment we want it; it will be years in the making. Leadership in its literalst sense is necessary to get ahead.

Chief executives who are optimistic and caring learned a lot about how important it is to keep people safe and healthy during the pandemic. They quickly realized how crucial people were to their business resilience. But our response to climate change cannot wait for the worst to strike because even the fastest learning won’t be fast enough. We must act now to prevent the worst from happening. This means that we need to develop and execute detailed scientific plans, as well as building resilience. We must create something positive out of stagnation.

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