Sales trend 3 from the Barrett 12 Sales Trends Report for 2020 discusses why climate action now makes good (business) sense and why it’s important to focus on achieving desirable outcomes and not just avoiding negative impacts.
The following text has been slightly modified to cater for the changes that have taken place since it was first published. You can read the full version here.
By guest author TOBY KENT // Chief Resilience Officer, Melbourne
It is 2020, the year for which countries and businesses were all frantically setting climate change reduction targets less than a couple of decades ago. Because surely we would have developed technological and other solutions by then, I mean by now. And yet….at the end of 2019 the World Meteorological Organisation (WMO) announced that our 2018 concentration of carbon levels in the world’s atmosphere were at record highs. Our collective trajectory is getting worse.
Referring to the report, Secretary General of the WMO, Petteri Taalas, pointed out “that the last time the Earth experienced a comparable concentration of CO2 was three to five million years ago. Back then, the temperature was 2-3˚C warmer, sea level was 10-20m higher than now.”
To be fair, the time is now for many issues, including gender equality, broader human rights and inclusion, and a need to look much more closely at corruption at all levels of our institutions and society, to name a few. But climate change gives us unusually clear targets and performance measures. One could go as far as to call them scientifically underpinned.
Trust
The theme of Barrett’s Sales Trends in 2019 was trust. This simple word, yet sometimes complex point of difference, is at the core of why the time is now.
Trust in politicians is at an all time low. Looking across various polls, it appears that on average only about one third of Australians trust our Federal Government. The three biggest grievances with federal politicians, according to pollsters Ipsos, based on research they conducted in 2018 are: 1) broken promises; 2) they don’t deal with the issues that really matter; 3) big business has too much power. Climate change anyone? A national drought and catastrophic fires before 2019 even ended and Australia’s so-called ‘fire season’ was meant to have started.
So, people look for leadership and meaning elsewhere. As Yuval Noah Hariri writes in Sapiens and his follow-up Homo Deus, as a species we homo sapiens seek out narratives behind which we can convene and coalesce. The lack of coherent policy and narrative on climate change specifically, and perhaps more broadly in Australia and the USA, at the political level leaves people searching elsewhere for meaning.
The business case for climate action
As consumers, we all inhabit various spheres – we are family members, employees, employers, colleagues, voters, as well as purchasers of goods and services. More and more of us are demanding that the places that we work for reflect our values: In a conversation with one of the Big Four consulting firms, a senior partner told me that the principal driver for the firm’s sustainability commitments was that the behaviours of the business, its social and environmental credentials are the second most commonly asked question by graduates at interview – after pay rates; the revolution is not that extreme. He said that in a war to attract and retain talent, sustainability is critical. The next most important reason is that the firm’s clients expect it. So, the pursuit of sustainability outcomes is overwhelmingly commercial.
In the Future Business Council’s (FBC) 2018 report FBC highlighted a range of sectors on which Australia should focus to try to secure the benefits of a profoundly changing economy. These included: shifting to a clean energy-driven economy by taking advantage of improving renewable technologies and the falling costs of generation and battery storage; transitioning to electricity-based mobility, across public transport and personal vehicles; focusing on exports in new energy, food and agriculture, as well as financial services; being a leader in the new economy “to support ‘brand Australia’ as a clean, green, progressive global citizen”.
In the FBC’s previous “The Next Boom” report of 2015, it had made an even greater play for Australia to brand itself as ‘clean and green’. There is an implied way in which we do this but too often it is a rather lazy approach, one reflective of Donald Horne’s ‘“lucky country”, in which our large land mass and clear blue skies are meant to speak for themselves. Never mind that we have entirely mismanaged our waste and recycling, continue to log old-growth forest (well done Victoria for announcing an end to this) and have the second highest per capita carbon emissions in the world.
The perception of a clean, green Australia is particularly important as we consider the return of Asia as the world’s economic centre. According to McKinsey & Co, in 2000, Asia accounted for just under one-third of global GDP (in terms of purchasing power parity), and it is on track to top 50 percent by 2040. By that point, it is expected to account for 40 percent of the world’s total consumption. Yes, our economy is profoundly influenced by the amount of minerals that we sell to support Asia’s growth, but we fail to live up to perceptions at our peril.
People around the world, and particularly in Asia, buy Australia’s produce based on a belief that they are procuring what has been nurtured in a pure environment, by producers that adhere to the highest standards.
Stories of wildfires threatening Sydney, stock being slaughtered because we cannot cope with drought, and Australia’s waste being dumped on – and now sent back from – key trading partners, including China and Indonesia, do nothing to reassure international consumers of our intent or commitment to maintaining the purity of our products, nor of our role as good neighbours. So, the time is now to support our relationships with our key trading partners, in the interests of both short-term returns and medium to long-term prosperity.
We can see that significant proportions of Australian consumers want action on a broad range of social and environmental issues, in particular climate change. Companies are responding and are positioning their brands to align with the public’s interests. But this goes well beyond public sentiment and broad perceptions of the country Australia is, as represented by its businesses.
As a November 2019 article by law firm Norton Rose Fulbright, which also declares that “the time is now”, highlighted, all listed Australian companies already have a fiduciary duty to declare climate risks. ASIC Regulatory Guides 228 and 247 should you wish to pay closer attention. The article goes on to state that under the Corporations Act, all companies, listed or not, have to file financial accounts and to state any material changes to their operating environment, which the firm believes may well include climate change risks – and the actions being taken to mitigate those risks. The article concludes “the time for awareness is over as we now enter a new phase of positive action.”
So where to now?
As certain politicians like to point out, our population is relatively small. That’s often paired with the proposition that we therefore don’t need to worry too much about our climate impacts. An alternative way of looking at this narrow view is that we have a small market and we have to be at the top of our game to make sure we meet international expectations and overseas consumer demands. At the time of writing, Australia is failing to secure a trade deal with the European Union because of our lack of action on climate change. We are being let down by our current political leadership but our businesses have to lead and win commercially, in spite of political intransigence.
As in life, so in business: when Australian companies are at their best, they are innovative and world leaders. Think Lend Lease, Mirvac or Stockland in the property sector. Or the way the construction and engineering industries have driven the Infrastructure Sustainability Council of Australia and its associated ISCA standards. A few years back, one might have highlighted our Big Four banks, but that time seems long past. And yet, despite the at-times excellence of these corporations, we are witnessing urban sprawl in our major cities and infrastructure that takes inadequate account of its impacts. To address the pressing needs of today, avoid letting individual market opportunities slip, and to help secure an economy with real prospects for ongoing growth, we all need to act. The market is merely a reflection of the collective spending and investment decisions of a large number of people. Expectations and decisions are shifting. Some of the actions and opportunities for businesses were mentioned above and are spelt out in more detail in FBC’s The Next Boom reports. Tools are also available through the Business Council for Sustainable Development Australia.
And let me be clear. This focus on the future, through action today, is far from just avoiding the negative. This is about achieving desirable outcomes at multiple scales and contexts. In Melbourne, we are creating a metropolitan-wide urban forest, working with corporations, government and at community levels. The urban forest will improve amenity, increase access to green space and consequential improvements in physical and mental health. It will also help to keep the city cooler during periods of extreme heat and to reduce flood risk, but fundamentally, it is desirable and a ‘good news story’.
“A rising tide lifts all boats”, so they say. Well, our tides are literally rising and Australian businesses of all sizes need to operate consistently as if the world mattered. Those that grasp the opportunity will prosper and those that continue to quibble over science, timing, or need, will lose out. It is that stark. You could say, it’s as clear as the science of climate change.
Remember, everybody lives by selling something
New Article Email Notification