Climate Change: Should governments or business make the first move?

It’s hard not to notice the climate crisis, no matter where you are. Either you are seeing the physical changes in our environment or at the very least, you see the public demonstrations taking place in cities across the world. As the physical changes become clearer, a growing proportion of people are demanding immediate action, and these demands tend to focus on either governments or business.

It can be confusing to know who should do what and what type of action by either party will be most effective. Does the urgency justify draconian mandates from governments to companies? Or should companies’ ability to innovate be incentivized? Who should lead and make the first move? To answer these questions, it helps to understand how the relationship between these two actors has evolved over time.

Already early in the evolution of our species, we learnt the value of collaboration. Working together allowed us to gain better access to resources and survive. Larger communities also gave us the opportunity to specialize, eventually creating the first cities and civilizations. And this collaboration requires accepted rules based on prevailing values.

As most societies have striven to gain access to ever more resources, commerce emerged as a powerful tool to maximize well-being, becoming a value in itself. You can see the immense power of this value in our discourse today, through concepts such as Gross Domestic Product (GDP) and the focus on its growth.

With the high value placed on commerce in most societies today, companies are seen to hold immense power. The prevailing value system dictates that they are in a position to create or withhold well-being. But before anyone goes on to lay too much responsibility on business, let’s remember that the distinction between governments and business is not always so clear.

Companies and commerce have always had a heavy hand in policy-making because they are a means towards and allies in a pursuit of well-being for societies. Similarly, many very powerful companies have been and still are government owned. With 20/20 hindsight (and as our values have evolved over time) we can see that this alliance probably made some big mistakes historically.

Enter a new value on the scene: environmentalism. Starting at the Rio Earth Summit in 1992, business realized that new rules were being set globally and they were not at the table. The companies that were more sensitive to the shift in business landscape began to observe the UN decision-making process in addition to regional and national environmental rule-making more closely. This was the dawn of organizations such as the World Business Council for Sustainable Development.

As our impact on the environment has grow exponentially, so too has the impact on people. The exponential rise in ICT has raised awareness of these impacts and organized new groups of people, growing the environmental movement to what it is today. Critically, the center of this movement has been outside the world of business, making the integration of two different value system all the harder due to a lack of a common language.

Two worlds have collided, and they have only just started to understand each other.

By and large, today business understands the need to adjust their models to take into account the shifting values of the societies in which they operate. We are talking about customers, investors and future talent after all. The good news is that a growing proportion of business recognizes the need to lead, or else they will be out-maneuvered by their competition.

Governments would do well to ensure that the more sustainable companies are more successful. But his task is difficult as many governments lack the technical expertise to design the most effective policies for ensuring sustainable societies. Our definition of sustainability has become so all-encompassing that we must draw on all sectors of society to access the knowledge that will help us make the right choices.

To stand a chance of succeeding, we need to go beyond old models of collaboration. It is no longer enough for individual companies to work with government. Entire value chains must be aligned with a common vision, shared by governments as well as academia and civil society. This is a relatively new way of working and can seem daunting. However, if we pick specific problems to focus on and gather the right people together we can find optimal and lasting solutions. Given their technical expertise, business needs to initiate these collaborative groupings, but must involve others to ensure their (political) sustainability.

What interests me the most in this evolution is how our prevailing values have been shifting over time. In particular, it will be interesting to see how commerce is shaped by environmentalism. We are already seeing a shift towards more companies that have aligned their purpose with positive impacts on society. Large multinational are seeking B Corp. status even.

It makes you wonder what they’ll be teaching in business classes a generation from now. We’ve learnt that market forces are very powerful levers for change, and we are starting to harness these for action on climate change. But even market forces will change over time, as they are subjected to the rules imposed on them. Rules defined by our values.