Climate Change Takes the Global Stage, and Business Is in the Spotlight

By Anna Katherine Clemmons


At the Leaders’ Summit on Climate in April 2021, U.S. President Joe Biden announced that the United States would cut emissions by at least 50 percent from 2005 levels by 2030, an ambitious target that nearly doubles the level set by the Obama administration at the onset of the United Nation’s Paris Agreement in 2015.

Biden followed up on those statements in November, when he signed into law a $1 trillion-plus infrastructure bill that includes initiatives in clean transportation infrastructure, clean water infrastructure, clean power, the remediation of legacy pollution and more.

But amid the global race to achieve net-zero greenhouse gas emissions in the global economy, the question remains: Can the world take action in time?

Scientists have predicted catastrophic climate impacts in warning about the world’s potential warming to three degrees Celsius this century. And not all global citizens — including large-and-small-scale businesses — agree on what action is needed. Even when there is consensus, change often happens slowly, based on size, scope and accessibility.

The Many Faces of the Business Response to Climate Change

So what will these agreements and policy changes mean for businesses, domestically and worldwide?

Even that question, according to University of Virginia Darden School of Business Professor Vidya Mani, is too broad. “We get a little bit lost when we think of business as one monolith,” Mani says. “It’s different for a mom-and-pop store versus a large business. In general, many companies are talking about being responsible and sustainable, because that’s what they know will make their operations easier.”

Becky Duff, senior research associate at Darden’s Batten Institute, worked as a consultant for the EPA and has worked in the sustainability field for two decades. “For the longest time, corporations treated sustainability like, ‘Here’s this group over here that will focus on and address these issues, separately,’” Duff says. “Now we are seeing a trend at the corporate level where they are merging sustainability with other divisions within the organization. They are starting to realize that you need to be looking at sustainability and the risks of climate change throughout the company. It can no longer be a separate endeavor.”

In their new book, The Decarbonization Imperative: Transforming the Global Economy by 2050, Duff and Professor Mike Lenox analyze what the monumental effort to achieve net zero carbon emissions and true climate sustainability might look like for specific sectors of the world economy. They examined the agriculture, industrial, building, energy and transportation sectors, and identified major obstacles to introducing a paradigm shift in each one.

Take, for example, transportation. As Lenox pointed out, the electrification of vehicles is still nascent, but forecasts suggest a major disruption. But, as pointed out earlier, change is gradual, particularly at the policy and large-scale business level. So even if all new vehicles sold could be electric starting tomorrow (in January, GM pledged to stop making gasoline-powered passenger cars, vans and sport utility vehicles by 2035; Ford announced plans in September to make the largest ever U.S. investment in electric vehicles by any automotive manufacturer), there’s still the issue of removing combustion engine cars from the road, which can’t happen overnight.

Renewable energy is another growing business sector that can make a major impact. In some regions, solar and wind energy have achieved cost parity with natural gas-fueled energy. But a common problem with renewable energy in some regions is intermittency: the sun is not always shining, the wind is not always blowing. Thus, a modernized smart grid requiring years and billions of dollars to upgrade will be necessary to accommodate a more distributed set of energy generation reliably.

“There’s a vision of a world where we all have electric vehicles in the garage, solar panels on the roof, and a dynamic grid that is constantly buying and trading electricity from producers that can be you and I in our homes,” Lenox says. “But it’ll take a huge investment in infrastructure, the underlying architecture of grids, advancement in batteries and a huge effort to build out solar and wind farms. I’m optimistic, but there’s still a lot that needs to be done.”

The Role of Innovation and Disruption in Achieving Sustainable Business

Convincing some businesses and corporations to go green is not always simple.

“The notion that Exxon Mobil, for example, will suddenly become a renewable energy business strikes me as folly,” Lenox says. The markets are fundamentally different: an oil company selling to oil markets is not the market for solar panels. Those transitions will happen, Lenox says, through technology disruption, as the old businesses are rendered obsolete by newer technologies (landline phones and VCRs, anyone?) And again, the speed of those transitions is not a known quantity.

Large corporations not directly economically impacted by the generation of emissions can opt to aid in accelerating the necessary transitions. Amazon and Microsoft, for example, could mandate that they won’t build a new data center unless it’s powered by renewable energy.

Still other businesses may view the cost of being more sustainable as too high a price tag. Steel and cement production, for example, emits greenhouse gases by the very nature of the processes. And while there are efforts to design green cement as a substitute, Lenox says, and to make cement that absorbs carbon dioxide as it’s curing, those are not market-ready yet and the cost is still relatively high.

Change From Within Is Possible

One major push across the global businesses landscape has been sustainability accountability and transparency. Most major corporations publish social responsibility reports annually. Many have hired chief sustainability officers or are adding sustainability teams.

Ultimately, whether driven by government action, policy enforcement, societal pressures, corporate innovation or technological disruption, each business’s approach to sustainability is different. A key to success will be a system-level approach by businesses and corporations as a collective, rather than individual choice.

According to Lenox, “the speed at which these transitions have to happen is going to require substantial effort from a lot of stakeholders and players. Business and markets have to be a part of the solution.”

Lenox acknowledges it will be “incredibly hard” for nations to hit the targets set in the Paris Accord. However, there’s little choice, which businesses increasingly understand impacts their financial sustainability, too. “We’re quite literally playing with fire if we don’t address the emissions equation.”

Mani says she balances “being hopeful and realistic.”

“If we do nothing, we are headed toward doomsday,” she says. “If we continue with what we are doing, there’s enough research that says we only delay it, not correct it. It’s such a big problem that everyone has started doing things within their areas of interest and control, which is good. But that can only go so far.”

About the University of Virginia Darden School of Business

The University of Virginia Darden School of Business delivers the world’s best business education experience to prepare entrepreneurial, global and responsible leaders through its MBA, Ph.D., MSBA and Executive Education programs. Darden’s top-ranked faculty is renowned for teaching excellence and advances practical business knowledge through research. Darden was established in 1955 at the University of Virginia, a top public university founded by Thomas Jefferson in 1819 in Charlottesville, Virginia.

 

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