Bosses must prioritise long term sustainability over quick gains in elections
Organisations are losing hundreds of millions in market value. Hundreds of billions are being wiped off supply chains by climate disruption. This election year decision makers have a duty to look beyond short term, four year political cycles for a long-term, climate-first view of our economic future.
In a major election year, with 40 per cent of the global population living in countries that have voted in 2024, flux in the climate-and-nature regulatory space continues to create uncertainty. Meanwhile, the international community simmers with volatility.
I write this article just days before Britain goes to the polls and uncertainty as to the future mood of the political, economic and environmental landscape is tangible, both home and abroad. In the UK, a change of political power looks likely but what that will mean for environmental policy remains to be seen.
Following losses in the EU elections, France is preparing for a snap legislative election this summer risking results that could potentially derail progress in the EU’s climate policies. Meanwhile, the US is ramping up campaigning noise ahead of the all-important November vote that could see meaningful opposition to the future of the Inflation Reduction Act.
As a backdrop to global business, this dynamic landscape presents challenges. The cyclical nature of governmental approaches to sustainability can create a timeline mismatch that hinders business progress as relates to sustainability goals: when a new government comes to power, vacillating policies only add complexity and confusion.
Despite constant uncertainties, business leaders need a strategy to maintain growth and build resilience throughout the value chain, while aligning with regulation and meeting expectations of investors, shareholders and consumers.
It’s no small task but not taking decisive action, despite political uncertainties, may hamper future success. Science points to the evidence that transitioning to a net-positive future is urgently required. The planetary boundaries framework shows that six of nine critical earth systems are changing rapidly and facing catastrophic harm. In fact, we’d need about 1.6 earths to maintain our current demands on nature, to include climate, biodiversity, land and water.
Business leaders waiting for political decisions to confirm direction of travel for environmental policies risk losing valuable time laying the ground for commercial success, while competitors grasp the nettle towards transitioning their business for a net-zero and nature-positive future.
In fact, for some businesses, a failure to respond to climate-and-nature risks could see their value proposition lose relevance or their business model become unviable; Risilience analysis shows that the value of organisations could fall by as much as 30 per cent over the next five years if this very real and immediate threat is not acted upon.
There are other factors driving the environmental agenda. We’re living in an era of heightened climate and nature awareness and rising stakeholder scrutiny. Societal demands for corporate responsibility are intensifying and businesses are expected to demonstrate a genuine commitment to reducing their environmental footprint, prioritising sustainable practices across their operations and supply chains.
Consumers are also on the side of sustainability. Awareness of the climate and nature crises is shaping what consumers are choosing to buy and they are flexing their purchasing power by way of action. A new PwC survey finds that some are willing to pay 9.7 per cent more, on average, for sustainably-produced or sourced goods, despite cost-of-living and inflation concerns. As market conditions change, market share is up for grabs and organisations that successfully pivot their value proposition to align with the future market will outperform their peers.
The era of climate-and-nature disruption is already upon us and the risk to business is real. The global economy is dependent on a complex web of interconnected supply chains that are vulnerable to the physical effects of climate change. Material physical risks can include damage to facilities, reduced production and disruption to global trade routes. The Carbon Disclosure Project (CDP) warns that environmental supply-chain risks could cost companies $120bn by 2026.
Ideally, robust regulation and policy should provide organisations with a stable and fair framework that supports transition to a net-zero and nature-positive economy. That said, the scope and scale of this transition should not be underestimated; companies today face one of the greatest disruptive challenges to business models seen for generations.
At our recently held Sustainable Futures conference, we heard from sustainability, finance and risk leaders from leading global brands discussing how to solve the greatest sustainability challenges facing business today. Many spoke to the power of regulatory frameworks and recommendations that can support good business practice, while advancing sustainability, by breaking down silos and unlocking the connectivity required to make organisational change towards profitable sustainability.
Many organisations are now familiar with climate-related reporting but the more recent regulatory focus on nature adds an additional layer of complexity and requires careful navigation at corporate level. Get this wrong and the consequences can cost dearly. BloombergNEF’s 2023 report, When the Bee Stings: Counting the Costs of Nature-Related Risks (2023) names ten companies across a range of sectors that ‘incurred financial losses as a result of poorly handled interactions with nature’. This includes billions in legal liabilities, drop in share price, loss of brand value and fines. These examples demonstrate the financial importance of a business understanding and managing its impacts and dependencies on the natural world, and the need to integrate climate-and-nature-related risks and opportunities into financial reporting.
Merely paying lip service to sustainability will no longer suffice; companies need to embrace transparency, accountability and data-driven decision-making to substantiate their claims and efforts. This transition sees the business ecosystem in perpetual motion. There are vast changes in policy and activity in legislation with human-rights law coming into play and shareholder activism finding its way into the boardroom.
In short, the consequences of not addressing climate and nature disruption are increasingly evident – and too financially disruptive for companies to ignore, no matter what the political pace and policy mood.
While policy plays a significant role in the business landscape and can provide essential support to drive environmental progress, organisations must operate to support net-zero and nature-positive outcomes, regardless. The vitality of our natural world is not a ‘nice to have’ for business but a central pillar of economic stability; companies need functioning markets and critical ecosystems to flourish. Maintaining the staples for business success provides organisations with a strong incentive to play their part in addressing the dual climate-nature crisis by developing credible transition plans rooted in business integrity that will reward companies with a social licence to operate into the future.
Dr Andrew Coburn is CEO of Risilience. Risilience is a Sustainability Intelligence solution that delivers better disclosures, risk insights and transition strategy for global businesses.
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Image: Matt Noble