In my annual review of big themes in sustainability and business — in other words, how companies manage environmental and social issues and opportunities — I’ve always included a changing climate as a big story. But it’s now not an annual story; it’s permanent. The list of extreme, tragic, and very costly weather events this year — record heat in Europe, hail in June in Mexico, record floods in Nebraska, endless Australian bush fires, and epic destruction from storms in Mozambique and the Bahamas – was shocking. But sadly, it’s now the norm.
A changing climate is and will always be the top story, the context behind everything (at least in the near future). But that said, there was a shift this year in how seriously the world took the issue, which does merit highlighting. With that broad context, let’s look at 8 fascinating developments in sustainability from 2019.
1. The climate protest movement explodes
At the end of the year, Time Magazine named 16-year-old climate activist Greta Thunberg as their youngest “Person of the Year” ever. Beginning in late 2018 and stretching into 2019, she created a global movement, spoke truth to power, and collected more than 10 million followers on social media.
Here’s what her leadership helped accomplish: In January, tens of thousands of Belgian teens heeded her call and marched weekly on the EU headquarters in Brussels. On March 15, millions marched all over the world. In September, people gathered around the U.N. climate meeting, which Greta traveled by boat to attend (highlighting a growing “flight shaming” movement).
Young people are leading the way on climate action, and businesses should take note. These Gen Z kids will soon become voters and buyers, and Gen Z and Millennials are already half the global workforce. It should be unsurprising, then, that another critical protest movement that grew this year came from employees. More than 8,700 Amazon associates signed an open letter to CEO Jeff Bezos demanding the company develop an aggressive climate action plan. Microsoft employees staged a walk-out in September to protest the company’s “complicity in the climate crisis.” Companies that want to attract and retain the best talent must have a strong climate strategy.
2. Awareness of the seriousness of the climate crisis rises
Environmentalists have long debated whether “gloom and doom” messaging motivates action or just depresses people. It’s hard to say, but this year we did get some high-quality doom. In the well-publicized book The Uninhabitable Earth, author David Wallace-Wells made the case that panic may be warranted, showing what warming of 3, 4, or more degrees Celsius could look like (and it’s not pretty).
The scientific community weighed in heavily, giving us, as the New York Times editorial board wrote, “a trifecta of frightening reports.” We learned we’re (1) changing the earth’s land so much that we threaten our food security and the land’s ability to capture carbon, (2) heading toward devastated oceans that are coral-free, and (3) not cutting emissions even remotely fast enough to avoid these outcomes. Nature magazine chimed in, saying that we’re hitting “climate tipping points” and the bank HSBC estimated trillions of dollars in potential health costs.
People are taking notice. Growing numbers of Americans now see it as a crisis (not surprisingly, climate despair became a thing in 2019). We also saw more data on the economic costs of a changing climate. Big companies disclosed and described significant risks in a report from the CDP (formerly the Carbon Disclosure Project) – such as banks expecting defaults on mortgages in flooded regions, storms damaging AT&T’s equipment, and water shortages making life difficult for Coca-Cola. The costs are not theoretical any more. But companies also told CDP about an upside: trillions in potential markets for low-carbon tech.
3. Government and corporate ambitions on climate and sustainability grow
The year was bracketed by two big proposals: (1) sprawling legislation dubbed “the Green New Deal” in the U.S., and (2) the EU’s Green Deal, with circular economy principles at the core. People can debate whether policy proposals like these are unrealistic, but the scale of the thinking is welcome, and it’s pushing the debate.
The same is happening with company goals, which are getting bolder. The “table stakes” for sustainability leadership are rising. A good indication is an accelerating pace of corporate commitments to 100% renewable energy (through the group RE100), setting science-based targets (more than 740 companies now), and pursuing the most aggressive carbon reductions in order to hold global warming to 1.5 degrees Celsius.
Here are a few specific examples of big new and interesting commitments in 2019:
- Amazon will be carbon neutral by 2040 and will buy 100,000 EVs.
- Ikea added another €200 million to its investments in being carbon neutral by 2030.
- German cement company Heidelberg pledged to create carbon-neutral concrete by 2050.
- Ingersoll Rand, the owner of the big HVAC brands like Trane (and a client of mine), pledged to reduce customer carbon footprint by 1 gigaton.
- Kellogg Company will improve the lives of 3 billion people through a variety of efforts around food and nutrition and provide donations to feed 375 million people.
These goals can seem like a stretch, but companies keep hitting big targets — like Citi’s goal of $100 billion in climate-related financing – earlier than expected.
4. Business leaders question shareholder primacy and capitalism
In August, nearly 200 CEOs of giant multinationals who are part of the Business Roundtable declared an end to a decades-long obsession with shareholder returns. The purpose of a corporation, they said, is “to create value for all of our stakeholders.” There may be some element of empty rhetoric here, but it still felt like a watershed moment. In Accenture’s annual and extensive survey of global CEOs, for example, the mood shift was clear. As the CEO of Pernod Ricard said, “I need to recognize where consumers want us in ten years…businesses that are only targeting profits will die.”
The business community, the media reported, was “panicked” and “worried” about capitalism, questioning whether it’s the right model in a world of climate change and inequality. The Economist dedicated an entire issue to the climate crisis and the Financial Times launched a site to “reset” capitalism. The FT’s editor also proclaimed the death of trickle-down economics and “unchained capitalism.”
5. Sustainable investing advances
Sustainable investing got more popular and, some might say, mainstream. The data shows that deposits into sustainable funds have accelerated. And anecdotally, I’ve seen the shift affecting big financial institutions. At a client event for a large bank that I spoke at, the global head of private wealth management said that the number one demand coming from customers was more options for impact investing. There’s also been an “explosion in green bonds” that allow companies to issue debt to invest in sustainability projects.
The other big shift this year was a clear sprint for the exits from fossil fuel investment. A group of investors with $11 trillion in assets, the $1 trillion Norwegian Sovereign Fund, one of China’s biggest state-owned investors, the French insurer AXA, and the European Investment Bank all pledged to stop investing in coal or fossil fuels. There’s a growing realization that climate change itself, and the policies that are coming to tackle it, represent a profound financial risk and a permanent shift in valuations.
6. More companies take a stand
In the wake of yet another horrific mass shooting, this time in a Walmart in El Paso, Texas, the world’s largest company changed its policies on guns. Walmart’s CEO Doug McMillon wrote an open letter to his 2.2 million employees, explaining how the company would stop selling short-barrel rifle ammunition. Other big retailers like Walgreens and Kroger asked customers to stop openly carrying guns in their stores and 145 CEOs called on the U.S. Senate to pass common-sense gun laws. Is there a financial risk in taking a stand? Perhaps, but Dick’s Sporting Goods announced 2019 that it had its best quarterly sales in six years, apparently unencumbered by its two-year exit from assault-style and hunting weapons.
Companies jumped into other tough societal issues as well. Tech giants Microsoft, Google, Salesforce, and Apple pledged billions to help with a housing crisis and homelessness near their headquarters. And Walmart, again going out front, called for a higher minimum wage. Nearly 200 CEOs even waded into the abortion debate saying that restrictive legislation was bad for business. It’s an era of what some call “woke capitalism.” Of course, not all attempts at taking a position went as planned. Men’s shaving brand Gillette, with good intentions, ran an ad encouraging men to avoid “toxic masculinity,” which drew some praise, but a lot of criticism as well.
7. Plant-based burgers take center stage in a new food system
This year, vegan offerings from Impossible and Beyond Meat quickly jumped from niche curiosities to featured players on the menus of Burger King, McDonald’s, Dunkin’ Donuts, Subway, White Castle, KFC, and Carl’s Jr. They’re also sold in tens of thousands of grocery stores. Burger King credits the Impossible Whopper for its most successful quarter in four years. And Beyond Meat, when it went public in May, had the best IPO of the year up to that point. The alternative protein trend is also global, with Hong Kong-based Omni Pork offering vegan substitutes across Asia. This shift is important because the conventional, industrial food and agriculture industries (including the cows) produce a quarter or more of global carbon emissions. Both Impossible and Beyond have dramatically smaller footprints than industrial beef.
In response, the conventional food business is talking more about regenerative systems and specifically “regenerative agriculture.” These new methods of production promise to grow food and raise cattle while sequestering enormous quantities of carbon, which makes the soil richer and helps tackle climate change. Regenerative agriculture was a key topic at the annual meeting of the National Farmers Union which I spoke in March. And big food buyers are looking seriously at this as well: Danone’s CEO, Emmanuel Faber, speaking at the UN, said that “the food system we’ve built over the last century is a dead-end for the future.” It’s early days but watch this space.
8. Clean tech grows even more, especially electric vehicles
There are a few big themes here:
Clean technologies keep getting cheaper. As the cost of building new solar and wind continued to fall, we reached a “coal crossover” point, as three-quarters of U.S. coal plants are more expensive to run than new renewables. In April, the U.S. got more energy from renewables than coal for the first time, and low-carbon energy has overtaken fossils in a number of countries like the UK, Sweden, Denmark, Portugal, Nicaragua, and Costa Rica. Corporate purchasing of renewables continues to accelerate as well, with first-half 2019 buying outstripping the previous year by 20%.
Electric transportation is expanding. The next fossil fuel to face price pressure from cleantech is oil, driven (sorry) in part by a major shift in auto technology. In January, there were reports that the sales of internal combustion engine vehicles may have peaked in 2018. EVs are still a small part of the car fleet, but other modes of electric travel are growing fast (including the much-hyped Tesla pickup). China has more than 400,000 electric buses on the road (the U.S. has only a few hundred) and 60 million Indians are getting rides on electric rickshaws every day, in a slightly chaotic replacement to three-wheelers running on diesel and gas. Going all-in, Daimler announced it would no longer develop internal combustion engines with all R&D going to electrics. And in a symbolic first, a gas station in Maryland converted to become exclusively a charging stop.
Innovations might help reduce emissions in the heaviest, most energy-intensive industries. German steelmaker Thyssenkrupp tested using hydrogen in manufacturing, and a Bill Gates-backed startup focused the sun’s rays to create heat of 1,000 degrees Celsius, hot enough for making cement, steel, glass, and more.