Adapt to Survive: Business transformation in a time of uncertainty

We are witnessing dramatic changes worldwide in the environment, technology, the economy, and in society. The COVID-19 pandemic has amplified concerns about the highly interconnected and vulnerable state of the global economy and has made it clear that a resilient economy must be one that prioritizes and supports the well-being of nature and people.

By James M. Donovan, CEO, Envirosite Corp and ADEC Innovations

On behalf of GEO for Business, a UN Environment Programme publication

The scale of global environmental challenges is unprecedented. In fact, the World Economic Forum’s 2020 global business risk reports identified environmental risks as the main threat to economic growth and prosperity in stark contrast to its 2010 assessment, in which environmental risks were not even discussed. The more climate changes, air and water are polluted, and biodiversity is lost, the greater the damage to health and the economy.

Business transformation is critical and shifting towards a nature positive approach is the best way for business to transform. While business has been severely disrupted by the COVID-19 pandemic and the associated economic crisis, this moment does not have to be a return to business as usual. Businesses that are able to leverage this time to explore, experiment, collaborate and ultimately begin to adapt to change will be ahead of the others. This is as true for small- and medium-sized enterprises as it is for large corporations.  What this means in practice will be different for every business, as the policy, market and social drivers that accelerate sustainability transitions are context- and sector-dependent. Failing to create an individual transformative pathway risks a business’s future.

Transformation in the world is already happening, albeit slowly. Some incumbents have leaned into this change with great success. Denmark’s Dong Energy, rebranded as Ørsted, sold almost all of its fossil fuel interests, and is now thriving as a sustainable energy business, on track to be carbon neutral in energy generation and operations by 2025. Others, such as RWE and Eon have had to write off billions of dollars and break up to separate stranded assets, mainly investments in coal and lignite, from cleaner parts of their business. Many major energy players are now rapidly shifting course. In August 2020, BP announced its plan to transform itself into an integrated energy company, investing $5 billion per year in low carbon energy and raising its renewable generating capacity to 50 gigawatts by 2030, up from 2.5 gigawatts in 2019. And major food manufacturers such as Unilever are driving sustainability principles in their supply chains.

The global push for sustainability transition creates an enabling business environment for new types of entrepreneurship: for purpose driven businesses that are committed to delivering positive impact for societal challenges. For those that fail to adapt, survival is at stake. Amplified by a global pandemic, there is now a struggle for business survival and recovery.

Initiatives, such as the United Nations Principles for Responsible Investment (over 3,000 signatures), offer metrics and reporting frameworks to further strengthen corporate transparency and accountability, better track progress, inspire leadership, foster goal setting, and provide learning opportunities.  The United Nations set out six principles to ‘Build back better’ capturing what is required:

1. The huge amounts of money to be spent on recovery from the COVID-19 pandemic must deliver new jobs and businesses through a clean, green transition.
2. Where taxpayers’ money is used to rescue businesses, it must be tied to achieving green jobs and sustainable growth.
3. Fiscal firepower must drive a shift from the grey to the green economy, empowering societies and people to be more resilient.
4. Public funds should be used to invest in the future, not the past, and flow to environmentally sustainable sectors and projects that help the environment and the climate. Fossil fuel subsidies must end, and polluters must start paying for their pollution.
5. Climate risks and opportunities must be incorporated into the financial system as well as all aspects of public policy making and infrastructure.
6. All need to work together as an international community.

Other initiatives, like the Taskforce for Climate-Related Financial Disclosures (TCFD) framework, allow business leaders, investors, insurers, and others to better understand a company’s exposure to climate-related risk.

Companies that are preparing to address the challenges and opportunities in the transition to a nature positive approach are closer to the social expectations and the preferences of key customer groups and are already building the mindset and capacity to compete in this new economy. By contrast, the transition will be much more disruptive for those missing or ignoring the signals. They will struggle to win back customers, funders and talent, whose priorities have shifted.

Companies and their leaders will face pressure from boards and shareholders, for instance, to continue operating in the same old way. Current circumstances demonstrate how vulnerable the economic system is and how connected people are to each other and the planet. This is the time for thinking longer term, for leadership and for action from all corners of society – but for business especially.

Whether one is a long-lived multinational corporation or a new small business, as the economy embarks on this nature positive transformation, it is increasingly desirable to question long held assumptions about business growth, efficiency, consumption, and profitability.

Business is at the forefront of this nature positive transformation. Looking at the science and the state of the world today, there is only one direction it can take.

Courtesy of: United Nations Environment Programme (2021). Adapt to Survive: Business transformation in a time of uncertainty. UNEP, Nairobi.

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