The Challenges of Business in our Times
The Climate Pact rhetoric and pledges are making progress, the Energy Transition pathway as it is currently foreseen will not however be the answer to the impact of industrialisation and ‘growth’ on the deteriorating global climate, in anything like the timeframe that has come to be expected. The huge cost of the energy transition will be shared by governments, from funding raised in most places by taxes and by businesses, which in some part will be borne by the consumer in higher prices — broader societal comfort with this has yet to be tested.
The OECD/EU-led initiative to achieve Net-Zero in the 2050 timeframe via the energy transition in the so-called developed world will unfortunately be inadequate to abate the impact on the climate. It is unrealistic to expect developing nations to be able to achieve net zero emissions by 2050, which has been held up as the requirement to limit temperature rises to around 1.5 deg C.
It’s likely that developed, and rapidly developing, countries and forward-thinking businesses will pursue electrification of transport and targeted industries where electrification is readily achievable. The fuels and lubes industries will adapt to these initiatives, in the same way the lubes industry has adapted to enabling a degree of reliability in offshore wind, for example. The substitution of traditional fuels by hydrogen provides an interesting development but is unlikely to be widely adopted globally, or to realistically ‘move the needle’ with transition initiatives as currently foreseen.
Technological capability has a habit of surprising and sometimes exceeding expectations, but the realities of the scale of the looming climate issue and the unrealistic expectations of the pace of the energy transition should be faced and managed.
While climate change is currently seen as the largest issue facing the planet, energy transition is just one solution — and the solution that most impacts our industry. Other issues facing the planet and our industry are manyfold and challenging, such as the disposal and expected recycling of plastics and other industrial wastes.
The United Nations has 17 sustainable development goals, SDG, the first of which being the eradication of poverty which traditionally and ironically would follow a degree of industrialisation. Simply addressing climate change will need trillions of dollars in additional investment to be effective and for the most part this is unbudgeted — an enormous challenge and an opportunity for some.
While there are no simple solutions to these challenging issues of sustainability, the time for businesses to prepare and act is now. A foundation step for a business is developing a sustainable approach which will maintain its ‘social license’ to operate. Then establishing this throughout the organisation and maintaining it through good governance. Guidance on such a path, starting from the top, can start from simple governance frameworks.