Australia is being ravaged by the worst wildfires seen in decades, with large swaths of the country devastated since the fire season began in late July 2019. In January 2020 at least 28 people have died nationwide, and in the state of New South Wales (NSW) alone, more than 3,000 homes have been destroyed or damaged. State and federal authorities are struggling to contain the massive blazes, even with firefighting assistance from other countries.
One year earlier, the summer in Sweden of 2018 was extremely hot, which pleased the vacationers that chose to stay in Sweden. But that it was the warmest July in 262 years – also caused concern. Can this have been a temporary variation or is it a clear sign of a growing climate crisis? We don’t have the answer to that question yet, but many studies clearly indicate that man’s large emissions of carbon dioxide increase global average surface temperatures, which in turn has many negative consequences.1 Like Australia, the high temperatures in July caused over 50 forest fires in Sweden. Globally, there are many examples of the climate crisis, such as warmer oceans, shrinking glaciers, sea-level rise, extreme weather events and the death of coral reefs.
This development has led to many companies focusing more on reducing their environmental and climate impacts, either voluntarily or due to regulation or customer demands. Traditionally, company management has not had to worry about this. They have only had one goal: to make as much money as possible. To be profitable. To reach budget goals. To beat last year. This has been particularly true for companies on the stock market, where every quarter they must appease shareholders with the highest numbers possible. But this short-term pursuit of profit is being increasingly questioned, by both customers and personnel. Many, perhaps especially value-driven youth, are demanding more. For them, companies must also contribute in some way to improving the world.
The business of business is improving the state of the world. | Mark Benioff, CEO and founder of Salesforce.
Taking responsibility for the environment is not only about the climate, but also an understanding that the world’s resources are limited. While billions of people in the world are raising themselves out of poverty and becoming part of a global middle class, it is becoming increasingly obvious that we must use resources in a smarter way. Today’s economy is built to a large extent on extracting resources, transforming them into products, and finally throwing the products away. It is a linear flow that is characterized by having a clear be- ginning and a clear end: at a landfill, in a waterway – or way in the back of a closet. To break this evil cycle from an environmental perspective, the concept of a circular economy has become increasingly popular. This means that products should either be biologically degradable or be possible to re-introduce into the chain of circulation in some other way. It is about reducing, re-using and recycling.
An interesting example of circular economy is modular cell phones. Several such projects have been presented by, amongst others, Google, Phonebloks, and Fairphone. The idea is that standardized components can be attached to a base model. One of the reasons for modularity is that one can replace individual parts instead of the entire phone. To go from 4G to 5G you could simply replace the radio part. If you want more memory you can upgrade your memory module and if better batteries become available you can easily swap for a better one. If you are interested in photography you can choose a bigger camera lens. The core idea is that you keep most of the components and don’t need to throw the phone away as soon as it becomes obsolete. And if a component breaks it can easily be replaced. Today it is usually more expensive to repair a cell phone than to buy a new one. There are strong environmental arguments for this type of design.
On the whole, demand for different forms of taking moral responsibility seems to be increasing. Today’s customers expect, to increasing degrees, that companies that they buy from undertake, at least partially, to take care of some of the problems that politicians haven’t succeeded in solving. Globally, 55 percent say that they would consider paying more for products and services from companies that invest in sustainability issues.2 The Swedish Trade Federation found similar results in a survey that showed that seven out of ten customers in Sweden feel that it is important that the companies behind products work with both environmental issues and social and ethical responsibility.3
As a result, Corporate Social Responsibility (CSR) has become increasingly important in many companies. The CSR concept means that aspects of social, environmental and societal responsibility are woven into business strategies and operations. Some companies even develop CSR from being a separate initiative to becoming a fundamental strategic part of their business. More and more companies are also adopting the so-called “triple bottom line.” The intention is that financial reporting should not only value economic results but also environmental and social ones. An international study performed by KPMG shows that 75 percent of all companies currently include data about their CSR initiatives in their annual reports – a number that has increased dramatically over the past ten years.4
Initiatives that promote environmental responsibility are like- ly to become more necessary in coming years. The reason is that many customers and partners are starting to establish criteria for who they want to work with. Sustainability and social responsibility are turning up more often in requests for bids, particularly in public procurement programs. If a giv- en organization actively works with sustainability issues it is likely that they expect the same from their suppliers. And the more companies that invest in this, the less room there will be for companies to not do so.
In addition, many start-up companies are investing in social entrepreneurship. They are integrating activities involving taking responsibility into the company’s purpose from the outset. One example is The Ocean Cleanup, whose goal is to collect plastic waste from the world’s oceans. There are approximately 80,000 tons of plastic in the Pacific Ocean, divided into 5 trillion small pieces (a 5 followed by 12 zeros). Their first system was launched in September 2018 and they expect to be able to clean up at least half of the plastic. The plastic is sorted and re-used in new products made with “ocean plastic”.5
In summary, we can say that companies must of course earn money – but they can’t only earn money. Company leaders must to an increasing degree balance not only the owners’ demands but also the wishes of their customers, employees, media and stakeholder organizations. Everything that a company says and does – both positive and negative – eventually reflects back on them. And with the transparency of today’s society this happens sooner rather than later. In the coming decade, companies will both need to make money and make a difference.
1 NASA (2018). Climate change: How do we know? Downloaded 2018-10-22 from https://climate.nasa.gov/evidence
2 Nielsen (2014). Doing well by doing good. Nielsen Marketing Institute
3 Svensk Handel (2014). Det ansvarsfulla företaget.
4 KPMG (2017). The road ahead - the KPMG survey of corporate responsibility reporting 2017.
5 The Ocean Cleanup (2018). We are the Ocean Cleanup. Downloaded 2018-10-22 from https://www.theoceancleanup.com/about/