In the 20 years since the Rio Earth Summit, environmental issues have been seared into our conscience. It was, perhaps, Rio’s greatest achievement. But the often complex, technical and often fractious nature of international negotiations has made effective engagement difficult for interested parties.
You’ve therefore got to give credit to the business community for its growing commitment to sustainability. And at Rio+20, business leaders will be present in force. The question is why and what difference can business make?
The United Nations Secretary General’s Sustainable Energy for All (SE4All) agenda may provide an answer. By 2030, Ban-Ki Moon wants to double renewable energy’s contribution to the energy mix, double the rate of improvement in energy efficiency, and deliver universal access to sustainable energy. Consider that 25 million people in South Africa do not have access to electricity and are therefore excluded from economic activities. The SE4All initiative refocuses the debate by bringing together energy, environmental preservation and economic development. The SE4All goals are seductive because they provide a genuine platform for business to create ‘shared’ value, both in terms of economic growth and employment and in terms of resources efficiency and preservation.
Where should business focus its action? According to a report published this week for the Sustainable Energy for All initiative by Accenture and the United Nations Global Compact (UNGC), 50 percent of recommended actions target energy efficiency, 38 percent target renewable energy and 12 percent are focused on improving energy access.
Operationally, it is only when you look at the contribution of each industry sector that actions can be identified and followed though. That is why we will soon publish follow on reports for 19 industries. Only within each sector can adequate agreements be made without compromising competitiveness or distorting competition. Only within each sector can a small number of market leaders and pioneers agree steps that change the game for everyone else.
Of course, the contributions differ markedly for each sector and it soon becomes apparent how these turn into significant commercial opportunities. Consider the automotive industry, where transport accounts for half of global energy use and where demand for energy is expected to rise by 50 percent by 2030. Or the chemicals sector which touches 96 percent of all manufactured goods. Look at the construction industry that accounts for 50 percent of all waste generated prior to recycling and the healthcare sector, where hospitals use 2.7 times more energy than typical office buildings.
Cost savings are the primary way to drive business value from the UN’s goals. We calculate, for example, that by using energy management systems the mining sector could reduce its energy spending by 10 to 15 percent, the retail sector by 15 to 20 percent and those operating building portfolios by between 25 and 35 percent.
But, perhaps more importantly in an age of continuing globalization, revenue growth – "green growth" – is often understated. Providing energy to the 1.3 billion people without electricity or the 2.7 billion without clean cooking facilities represents an opportunity to develop massive new markets.
Adopting energy efficient solutions also reduces risks and renewable sources can act as a hedge, enabling companies to shift their energy budget from a variable to a fixed cost.
Protecting and enhancing brand reputation continues to be important to environmentally conscious companies. As David Jones says in his latest book, ‘Who Cares Wins’, we are entering the Age of Damages, in which social media can tarnish a company’s reputation in no time. But the focus needs to turn to direct interventions that deliver tangible bottom line benefits. Investing in underprivileged rural African communities, for instance, through supply chain engagement or creating employment opportunities, will pay long term dividends for those looking for emerging pockets of affluence at the bottom of the pyramid to sustain long term business growth.
While the green agenda promises a new era of technology innovation, it is in fact innovation in finance and business models that will determine the success or failure of sustainable economic growth. Innovative business models will also be needed. Take corporate procurement, for instance, which today often favors short term apparent cost savings over the lower lifetime costs associated with energy efficient solutions. Here, redesigned procedures will need to focus on longer term metrics like total cost of ownership and more sustainable practices.
When we look back twenty years from now, it is likely that the names and faces we associate with achieving sustainable energy for all will be CEO visionaries and entrepreneurs. There’s a high chance that the innovations we will be praising will have emerged from the finance and investment sectors as much as from laboratories; from civil society and informal community initiatives as much as from business. In 1992, businesses were under pressure at Rio. It’s clear that the pressure is now coming from a range of stakeholders, including businesses themselves.