How to use our economic power to save humanity.

A lesson from Rome?

Legend has it that in the summer of 64 A.D. Nero fiddled while Rome burned. Nineteen and a half centuries later, we appear to be in danger of repeating Nero’s sin, but on a global scale.

As 2020 began, following the failed twenty-fifth session of the Conference of Parties (COP-25) in Madrid, as widespread bushfires—some of the worst in living memory—were rampaging across the Australian continent, the analogy to Nero’s predicament was on my mind.

The Australian bushfires are a type of heat-related disaster that is increasing in frequency, intensity, and impact. A growing body of research known as Extreme Event Attribution draws a link between such events and climate change [1]. For this, and a multitude of other reasons, it’s time that we step up and address this critical issue.

The combination of these events, and frustration at the politicised debate and empty promises from our governments, motivated this article. And, from this, the zero-carbon 2030 Project was born.

Waiting for Godot.

The failure in Madrid should not be a surprise to anyone. The United Nation’s (UN) COP framework is a multilateral forum in which more than 11,000 people from 196 countries (based on Madrid statistics) try to reach agreement on international policies. In this case, on a range of measures to address climate change—probably the most critical and complex challenge we will face in our lifetimes.

As the name suggests, COP-25 means that this was the 25th time that these countries had met without success. In fairness, the UN has come away with agreements twice—the “Kyoto Protocol” at COP-3 (1997) and the “Paris Agreement” at COP-21 (2015). 

But, by any measure, these successes were heavily qualified: First, the “commitments” are based on consensus and have been criticised widely for their lack of clarity and ambition.

Second, the “commitments” are voluntary, meaning that after all that hard work, often involving years of negotiation, governments can unilaterally withdraw without consequence. And they have done so, most notably the USA’s decision in 2019 to withdraw from the Paris Agreement.

Climate negotiators have been long on promises of ambitious emissions reductions. But, as Hayley Stevenson notes, those promises are rarely supported by sincere ambition and serious action. [2] Unfortunately, “…it’s clear that many policymakers … don’t seem to appreciate the scale of what’s required.” [3]

The fault here is not with the UN. The problem is that we have left the fate of humanity to the vagaries of politics. We waited passively for the UN and governments to deliver the solution, instead of acting ourselves.

There are several reasons for this. In our collective mind, the challenge of climate change seemed too big and too complex to be solved by individuals. These characteristics make it appear to fit neatly in that box for problems that governments should solve. Until now, we also seemed to lack the critical mass of public opinion to make any meaningful dent in the issue or to steer politicians to do so.

I have bad news for you: The UN and governments are not going to solve climate change. According to Climate Action Tracker, only two countries (out of those 196) are implementing policies that are compatible with meeting the 1.5oC Paris target – Morocco and the Gambia. Together these two countries account for only about 0.2% of 2018 global carbon emissions [4].

We’re in deep trouble. If we wait for governments, we will wait in vain. We need a different approach. It will fall to us to save humanity. And we will need to work together to do it.

There is some good news though: We can do it. What you and I do matters a lot. And the weight of public opinion is now shifting in our favour. But we’re running out of time. The ingredients for us to find creative solutions are all there if we adopt a jugaad [5] mentality.

Public opinion at a tipping point.

in April 2018, a Pew Research Centre survey of 26 countries (representing about 30% of the world’s population, but 63% of global GDP) found that a median of 68% of people in the surveyed countries consider climate change to be a major threat (63% on a GDP-weighted basis), while 87% consider climate change to be a threat. Pew reports that climate change “…is seen as the top threat in 13 of 26 surveyed countries, more than any other issue the survey asked about.”

This was pre-COVID-19. But a subsequent survey undertaken in April 2020, when a large proportion of the US population was in lock-down, confirmed that a record-tying 73% of Americans think global warming is happening. The study concludes that there was no erosion of public engagement on climate change due to COVID-19 [6].

The Pew finding is crucial as it indicates that the majority of people in the surveyed countries now understand the threat climate change poses, it’s just that in some cases this message has not been communicated effectively to their governments. Or perhaps their governments aren’t listening.

It feels like we have reached a tipping point. It is now not only you and me but most of the people in the largest economies in the world that may be ready to act on climate change.

Can we overcome what Kari Norgaard describes as 'socially organised denial' [7], and translate a growing public awareness into public action?

Using economic power to change behaviour.

If we want to address climate change, we need to start believing that our actions matter. We can reduce our carbon footprint in the usual way—by recycling, buying renewable energy, hybrids and EVs, eating less red meat, etc. But now we need to do much, much more.

The solution is simple. We just need to align our spending with our values. Each of us can leverage our economic power (our consumption and investment decisions) to influence companies to address climate change by adopting the zero-carbon 2030 Commitments (see Figure 1).

If companies don’t commit, we shift our consumption and investment to companies that do buy-in. Money talks. And the more of us who move our money to send a message, the more businesses will be obliged to listen and act. Once we have persuaded some high-profile companies, we can incite a social movement to bring about real change.  

Figure 1: The zero-carbon 2030 Commitments

And there is more good news: we don’t need 100% of a company’s customers to join this movement. We should be able to shift a company’s behaviour with the spending decisions of as little as 5-10% of a company’s customers given the leveraged impact that a loss of sales of such magnitude would have on a company’s profitability and financial position. Consider this, our analysis of profitability ratios suggests that for the average US-listed company, a 5-10%% fall in sales could lead to an approximately 21-100% reduction in net profit (See Figure 2) [8]. That's enough to change the conversation in the board room.

By communicating that sustainability and a proactive response to climate change make good business sense, customers can influence company directors to change their companies’ strategy and behaviour to prioritise these objectives.

Any board director worth their salt should already have climate change risks on their radar. At the beginning of the year, the Australian Institute of Company Directors identified climate risks as one of eight issues for board directors to keep their eyes on in 2020. [9]

Figure 2: The leveraged impact of a loss in sales on a company's net profit

And in his letter to CEO’s in January 2020, Larry Fink, Chairman and CEO of BlackRock (C. USD 6.8 trillion assets under management), predicted that climate risk would fundamentally reshape finance. He noted that BlackRock “… believe[s] that when a company is not effectively addressing a material issue, its directors should be held accountable.”[10] Louise McCoach, special counsel at Gilbert + Tobin law firm, put it this way “Ignoring foreseeable climate-related risks could lead to a breach of directors’ duties”. [9]

Making ripples.

By recognising that businesses operate within an ecosystem of suppliers, distributors, investors, and lenders, we can create a ripple effect throughout the global economy.

Firstly, we can require companies to extend the zero-carbon 2030 Commitments across their value chains – Scope 3 emissions, including across their supply chains and distribution channels (Commitment #4). In this way, a small proportion of consumers can bring about meaningful positive change, even among companies with whom they have no direct relationship.

We can extend this ripple effect by having financial institutions and insurers impose the zero-carbon 2030 Commitments to their corporate customers (Commitment #9).

How we invest will also change the behaviour of companies. If we invest only in companies that embrace the zero-carbon 2030 Project or perform well on our Carbon Ratings, companies will be obliged to adopt these Commitments to access capital. We can achieve this through our direct investment decisions and by influencing the decisions of investment managers investing on our behalf (Commitment #10).

We can also influence companies to make governments take responsible action to tackle climate change by shaping the way that companies exercise their economic votes. Perversely, in many 'advanced' democratic economies, companies have more influence over governments than voters. We can direct companies to lobby governments to adopt progressive climate policies (Commitment #8) and withhold new investment from countries where governments fail to do so (Commitment #6).

The tide is turning.

Many companies have started to take leadership to address climate change.

• A group of 264 leading companies [11], making up the RE100, have committed to source 100% of their electricity from renewable energy sources, some as early as 2020 [12].
• Some companies report that they have achieved carbon neutrality (e.g. Pearson, TD Bank Group, NAB, Philips) while others have committed to achieving it (e.g. Canary Wharf Group PLC). [13]
• Microsoft has taken a step further. In January 2020, it announced that it is committed to becoming carbon negative by 2030 and to removing its historical carbon emissions by 2050.

These examples demonstrate that there is a willingness among companies to take climate action. And, where the will exists, a 2030 target is achievable.

We need to nudge other companies to act more boldly and more quickly on climate change.

The Roman statesman and Stoic philosopher, Lucius Annaeus Seneca, would put it thus: "It is not because things are difficult that we do not dare, it is because we do not dare that they are difficult." [14]

The zero-carbon 2030 platform for change.

We’ve created the zero-carbon 2030 project, with three pillars to mobilise and amplify your economic power for faster, bolder action on climate change.

• We’re calling on all businesses, financial institutions, and investment managers to sign up to our zero-carbon 2030 Commitments.
• We’re assessing and rating businesses on their action on climate change so that consumers and investors can make carbon-informed decisions. And we're developing an innovative tool for Chrome and Safari that puts our ratings at the fingertips of consumers in their search results, empowering them to support companies taking climate action (see Figure 3).
• And, through our campaigns, we’re enabling our collective voices to be heard in boardrooms around the world to press companies to act on climate change and adopt the zero-carbon 2030 Commitments.

Figure 3: zero-carbon 2030's

Carbon Rating Finder

Walk the talk.

Harnessing our economic power relies on two things for success: Focused collective action, and follow-through. We need to walk the talk.

If a company does not adopt the zero-carbon 2030 Commitments, we must shift our consumption and investment to the competition that does.

If we continue to reward bad, unsustainable carbon behaviour, there is no incentive for companies and others to shift to a sustainable pathway. If we follow-through and ‘move the money’, we will change the behaviour of businesses, investment managers and governments.

What can you do?

The solution to humanity’s greatest challenge is not overwhelming. It’s simple. It’s using our economic power to make acting on climate change make good business sense.

For individuals, join our zero-carbon 2030 community. Download our Chrome and Safari tools. Join our campaigns. Or help us initiate campaigns targeting businesses that aren't taking action on climate. Let the power in your pocket do the talking. Move the money to support the positive change-makers.

For businesses, get on board with the zero-carbon 2030 Project. Get carbon rated and sign up to the Commitments. Show your customers and investors you’re the kind of leader, change-maker and human being they want to support.

For investment managers, the smart money is thinking more seriously about the future of humanity. Join the zero carbon 2030 Project, get your investee companies carbon rated and sign up to the Commitments. Make sure you're backing the resilient, future-ready winners. 

Together we can save humanity!

This article was first written in early 2020 and published on 7 August 2020 to coincide with the launch of the zero-carbon 2030 Project. It was updated on 31 October 2020.

[1] Carbon Brief’s analysis suggests that 68% of all extreme weather events studied to date were made more likely or more severe by human-caused climate change www.carbonbrief.org/mapped-how-climate-change-affects-extreme-weather-around-the-world.

[2] Hayley Stevenson (2020): Reforming global climate governance in an age of bullshit, Globalizations, DOI: 10.1080/14747731.2020.1774315

[3] Nature. (2018). Negative thinking. Nature, 554 (22 February), Pg. 404.

[4] Climate Action Tracker indicates that eight countries are implementing policies that are compatible with meeting the 2oC Paris target, accounting for approximately 6.9% of 2018 global carbon emissions.

[6] “Jugaad” is a Hindi colloquialism. It means an improvised arrangement or work-around necessary because of a lack of resources (definitions.net).

[6] Leiserowitz, A., Maibach, E., Rosenthal, S., Kotcher, J., Bergquist, P., Ballew, M., Goldberg, M., Gustafson, A., & Wang, X. (2020). Climate Change in the American Mind: April 2020. Yale University and George Mason University. New Haven, CT: Yale Program on Climate Change Communication.

[7] Norgaard, K.M., We don’t really want to know. Organization & Environment, Vol. 19 No. 3, September 2006 347-370 DOI: 10.1177/1086026606292571. 2006 Sage Publications?

[8] Based on an analysis of the S&P profitability ratios for the year ended 2019, assuming gross margins and overheads remain unchanged. And an analysis of Ready Ratios profitability ratios. These ratios may vary substantially across industry sectors.

[9] Efrat Z., The big issues facing directors in 2020. The Board Room Report, Australian Institute of Company Directors. Volume 18, Issue 2.

[10] https://www.blackrock.com/corporate/investor-relations/larry-fink-ceo-letter

[11] As of 18 June 2020.

[12] For example, according to RE100, the following companies have achieved 100% electricity from renewable sources: swiss post (2008), swisscom (2010), Canary Wharf Group PLC (2012), Pearson (2013), kpn (2013), Vestas (2013), Microsoft (2014), Danske Bank (2015), TD Bank Group (2015), Autodesk (2016), Elopak (2016), M&S (2016), amalgamated bank (2017), Capital One (2017), Google (2017), Jupiter Asset Management (2017), Lego (2017), Wells Fargo (2017), Apple (2018), Aurora Dairy (2018), City of London (2018), lyft (2018), British Land (2019), Organic Valley (2019), and Visa (2019). The following companies have targeted to do so by 2020: Alstria, Bank of America, Bank Australia, BayWa, BT, Califia Farms, Citi, Coca Cola European Partners, Derwent London, Estée Lauder, Facebook, Goldman Sachs, ING, JP Morgan Chase & Co, La Poste, Sky, Swiss Re, and UBS.

[13] In some cases, through the purchase and retirement of carbon offsets. Some caution is required, however, as some claims of carbon neutrality may be superficial. For example, a financial institution claiming carbon neutrality is not truly carbon neutral if it continues to finance carbon intensive-activity (e.g. coal and hydrocarbon extraction and power generation).

[14] Seneca, Lucius Annaeus, approximately 4 B.C.-65 A.D. Moral Letters to Lucilius, Letter 104. On care of health and peace of mind. Verse 26.