It’s time for businesses to move beyond simply managing risks to addressing opportunity as the world reels under a growing climate crisis, a global pandemic, threats to democracy, and increasing income inequality. But how can companies move into this opportunity responsibly in support of both business value and transformative impact? Business leaders will need to develop a keen understanding of how these interrelated forces, especially the climate crisis, affect the lives of workers, customers, and society at large. Only then will companies be able to respond with the innovation and value creation that can, without hyperbole, change the future of the world.
Since its first publication in 2015, the Fortune Change the World list has honored dozens of companies that are tackling the threats to our planet through innovation, new business models, and unexpected partnerships. When we look at this year’s list, we are heartened by the continued contributions companies across the globe are making to address climate change.
Yet corporate leaders need to do more. Much more.
Look through corporate sustainability reports, and under “Climate Change” the content is at best about a company’s science-based targets and what they’re doing to reduce scope 1, 2, and 3 emissions. Those are important efforts, to be sure, but highly technical and often not inclusive of the populations and communities most affected by the impacts of climate change. At the same time, the purpose statements for these same companies generally focus in some way on making life better for people.
This missed connection between the technical and the human can be striking; to make meaningful positive changes in climate, business leaders need to understand that intersection. By doing so, companies can unlock opportunities to create value and improve human lives around the world. We offer a few thoughts for leaders on how to get started:
Redefine your business purpose
Companies need to closely look at their purpose, and their raison d’être, to redefine their business models. For instance, is a car company solving for better cars or personal mobility or mobility more broadly? Is a food company seeking to nourish people, indulge people, or improve people’s health? Such questioning can allow companies to redefine their business purpose—including the impacts on both profits and people (e.g., employees, partners, and local communities) and spur innovation. For example, in 2021 Nestlé announced its ambition to foster regenerative food systems, in alignment with its commitment to addressing the two-thirds of its greenhouse gas emissions generated from agriculture. Nestlé described the transition to regenerative food systems as a “mission” for its business and others in the industry, paving the way for Nestlé to align its business assets and functions toward this purpose.
Connect with stakeholders
Understanding the human impact of climate change requires companies to be in a relationship with the problem. Companies need to leverage all their assets by connecting with employees, extended value chains, and the local communities in which they operate. Listening to employee, partner, and community voices, companies might ask questions like: What are people’s greatest concerns for themselves and their families? How are employees and community members experiencing the impacts of the climate crisis? Have their lives and/or livelihoods significantly shifted because of climate change? Answering these questions is one important way to understand how to innovate and build long-term business value in service of both climate mitigation and the well-being of employees and local stakeholders.
When it comes to their own value chain, companies can incentivize and enable their partners (including medium-sized, small, and micro-enterprises) to adopt low-carbon processes. One example is Walmart’s supply chain finance program, which uses science-based targets and preferential lending terms to incentivize its private brand suppliers to decarbonize. The program particularly aims to serve medium-sized and small businesses in the supply chain by providing tools, standards, and capacity building to help businesses align operations and reskill workers.
Pursue the co-benefits of addressing social and environmental goals together
By recognizing the intersection between climate and equity-focused goals, companies today can realize co-benefits for both. For instance, women and girls disproportionally experience the greatest impacts of climate change, yet global data from 2018 shows that only 32% of renewable energy jobs are held by women. As wind, solar, and other renewables grow in the coming decades, tens of millions of jobs and many companies will be created. The opportunity exists for businesses to support training, recruiting, and talent management practices to help address gender inequities, most especially in STEM-related fields and the renewables industry. The investment creates returns for women’s livelihoods and for businesses themselves since research has shown that gender-diverse teams perform better and women demonstrate stronger leadership abilities in both normal and crisis times.
Align networks and the ecosystem
While individual businesses can drive innovation by leveraging insights about how the climate crisis impacts people, business leaders can extend their climate-positive impact by using these same insights to drive change in partnership with other players in the business, civil society, and government domains. Transforming the status quo at scale requires companies to partner to change the policy, regulations, and norms in the market system. An example is the Better Cotton Initiative, a multi-stakeholder coalition working to improve the sustainability of cotton globally. The coalition members span the cotton supply chain, from large corporations to smallholder farmers, and the coalition’s governance is representative of its many stakeholders. In 2021, more than 2 million farmers associated with Better Cotton produced 20% of the global cotton supply. As companies continue to drive large-scale progress on climate goals, including recent private sector commitments to end deforestation and significantly reduce methane emissions, effective networks and collaboration provide examples of how companies can make progress at the scale and pace needed.
In today’s world of seismic upheaval and change, there are often winners and losers, with the most disenfranchised people too often bearing the cost. A process that excludes the most marginalized will not result in an equitable outcome. As we collectively confront the climate crisis, we urge business leaders around the world to take action toward a just transition, addressing both the human-centered and technical aspects of decarbonizing our economy and mitigating the climate crisis.
Rishi Agarwal is a managing director and head of Asia at FSG, based in Mumbai.
Chirlie Felix is a managing director at FSG, based in New York City.
Laura Tilghman is a director at FSG, based in San Francisco.