Taylor Gray, Ph.D.
The world is a better place when companies are good corporate citizens. I remain focused on developing meaningful and actionable insights from empirical data in pursuit of a better world.
Sustainability is about risk management. We don’t know everything we need to know about the impacts of today or the needs of tomorrow to act with certainty, so we strive to minimize risks and preserve optionality. Through this lens, climate change is a risk and largely one of the most significant risks we face today. But it is more than just a risk--Climate change is also a risk multiplier.
Climate change is a risk and a risk multiplier--and one of great significance--within sustainability, but it is not the only one.
Soil erosion, deforestation, aquatic eutrophication, ocean pollution, and acidification, social and cultural inequality, inter- and intra-national migrations, political stability, human rights abuses...the list of risks we face is daunting and often anxiety-inducing. These are all issues which require urgent attention and action in their own right, but these are also issues which are made worse--or whose severity is multiplied--by climate change.
In this sense, it is imperative that we address climate change. Through nearly two centuries of accelerating industrial activity and lifestyle inflation and, more recently, decades of willful ignorance, skepticism, and cognitive dissonance, climate change has continued to develop unabatedly to now reach the point of being a critical risk: A risk factor with magnitude, severity, and urgency. The time for review, consideration, and incrementalism has long passed; decisive, committed, and meaningful action is needed now.
Progress in the Making
Thankfully, we are seeing a growing share of companies taking meaningful steps toward better understanding and managing their contributions to climate change. Companies are accelerating their commitments to net-zero emissions (although there is still cause for skepticism in many such commitments), and a record number of companies are voluntarily reporting on their climate change impact through the CDP in 2020. Similarly, more venture capital and investment money is flowing into Clean Technology than ever before--enough to herald what is being called the era of CleanTech 3.0.
This is all great news, but we must remember that climate change, although fully systemic in nature, is itself not sustainability. It is a risk and a risk multiplier--and one of great significance--within sustainability, but it is not the only one. Other risk factors are not put on hold while we focus on climate change, although it would seem this is what we wish to happen.
It is important to address the risk multiplier nature of climate change now because it seems like climate change is starting to eclipse most other risks.
Reducing the rate of GHG emissions into the atmosphere--and ideally reducing the absolute volume of GHG in the atmosphere--is the primary goal in addressing climate change. Doing so is a positive response to addressing climate change as a risk in its own right as well as in reducing its multiplicative effect on all other risks...but it does not address the root causes of these other risks.
Climate change pushes more people into dangerous immigration trajectories but is not the primary catalyst of all immigration, just as it also intensifies deforestation but it is not the cause of all deforestation, as examples. As climate change is addressed, so too must all other risks to sustainability be addressed.
We feel it is important to address the risk multiplier nature of climate change now because it seems like climate change is starting to eclipse most other risks. Although a record number of companies are reporting on their climate impacts, as addressed above, only 31% and 7% as many are reporting on their impacts on water and on forests, respectively. Similarly, reviewing the headline deals on the nascent CleanTech 3.0 investment boom shows that all are related to alternative energy or innovations to reduce the impacts of non-renewable energy--so is it CleanTech or CleanEnergy?
The recent attention to climate change is much needed and is certainly commendable, but it must not come at the expense of other issues equally needing urgent attention. Many companies’ sustainability reporting is starting to read like climate change reporting. These two are not synonymous nor mutually exclusive.
Rather than focusing only on the most headline-grabbing issue of the day, we encourage all companies to review their operations, structures, and cultures and identify all issues they may have an impact upon or which may have an impact upon them. This is a process we know as a materiality assessment. For a company to truly and meaningfully manage their impacts they must do so across all issues that matter to sustainability.
As our collective attention is turned to climate change, other issues material to sustainability are not put on hold.
All companies are multifaceted and complex. In their simplest form, each company is a collection of a variety of stakeholders and resources--human, natural, and financial--brought together to solve a problem. In this sense, there is no company in operation that only impacts climate change. Within a sustainable Business & Society relationship, a good company is one which manages its impact on the issues that matter, including the issues that may not always receive as much press coverage as others.
As an example, consider BMW, Honda, and Toyota--three companies in the same industry sector and of similar scale. Looking at their impacts through the Motive RealScore lens, BMW is leading the way in managing their impact on climate change (score of 76) followed by Honda (60), and lastly Toyota (41). All three of these companies have demonstrated a commitment to managing their climate impacts, and more so than the majority of the brands rated within the Motive RealScore database, but it would seem BMW may be “better” than the other two.
If we expand our analysis to include not only impacts on climate but also on water security, natural ecosystems, employment standards, community engagement, business ethics, and human rights--all issues material to sustainability--Toyota reports an aggregate Motive RealScore of 28 to Honda’s 21, and BMW’s 18. So BMW may lead in their approach to climate impact management, but Toyota is doing a better job managing their impacts across categories. From a climate perspective, BMW is leading, from a sustainability perspective, Toyota is leading.
As our collective attention is turned to climate change, other issues material to sustainability are not put on hold. We need action on climate change--it is a risk and a risk multiplier--but we also need action on the risk factors whose severity may be multiplied by climate change yet which exist and persist independently from climate change. Sustainability is complex.
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