The European Green Deal gives CEOs a major opportunity to lead their companies in ways that can build their brands while also cutting carbon. So what, exactly, should they do? Thomas Pellerin-Carlin and Peter Sweatman have three suggestions.
Thomas Pellerin-Carlin is director of the Jacques Delors Energy Centre in Paris (@DelorsInstitute). Peter Sweatman is CEO of Climate Strategy & Partners, a leading climate consultancy based in Madrid (@ClimateSt).
Just before the holidays, Ursula von der Leyen proposed the European Union’s most significant endeavour since the creation of the single market – the European Green Deal. With the goal of achieving a climate-neutral EU by 2050, the Green Deal has the potential to align the economy of the world’s largest market with the goals of the Paris Agreement.
This week at the World Economic Forum in Davos, Switzerland, CEOs from hundreds of major companies from around the world are gathering for the first time since von der Leyen’s important announcement.
As we describe in a just-released policy brief, the European Green Deal gives these CEOs a major opportunity to lead their companies in ways that can build their brands while also cutting carbon. So what, exactly, should CEOs do? While climate change presents every company with its own unique risks and opportunities, there are three main actions CEOs can take right now:
First, envision your company in a world with net-zero emissions. How does your company operate with the realities of climate change embedded in all material business decisions. Are managers evaluated on climate-neutral economic performance?
Second, don’t wait – innovate! The transition to climate neutrality and alignment with the myriad policies spawned by the European Green Deal will require ambitious research and innovation in key economic sectors, from finance and energy to materials and mobility. Since it can take a decade or more to get ideas from the lab to market, companies must act now – and they must shift research and innovation funding to projects that won’t be stranded by climate change.
Along those same lines, businesses should be more vocal in advocating for increased public R&I funding. The EU’s flagship R&I program is called Horizon Europe, and 35% of it will be earmarked for climate change-related projects. CEOs should stand with the advocacy group BusinessEurope in calling for Horizon Europe’s next funding period (2021-2027) to reach at least €120 billion – up from the €94 billion proposed by the European Commission. After all, the more funds the program can access, the more climate-related innovations will hit the market.
Finally, bring your people with you – and provide them with a place to work worthy of their efforts. As the economy shifts toward a clean future, skills in demand change, too. This means some workers will be retrained, especially in regions traditionally reliant on coal. And with the European Green Deal calling for a wave of renovations to the continent’s aging building stock, it will become easier – and cheaper – to modernise.
Fortunately, as we’ve seen in the past week alone these kinds of messages are reaching C-suites. For example, last Tuesday the CEO of a global investment firm with more than $7 trillion of assets under management wrote a letter arguing climate change is forcing a massive reallocation of capital – and much sooner than people realise.
“I believe we are on the edge of a fundamental reshaping of finance,” wrote Larry Fink of Blackrock.
On Thursday, Satya Nadella of Microsoft told CNBC that environmental sustainability must factor in a company’s growth plans, or else economic systems “will fundamentally be in jeopardy.”
In Davos, climate change will likely dominate the conversation, and you can be certain the European Green Deal will be part of it. But when the week is done and CEOs return to their offices, that’s when the real work begins.