There are clear reasons why so many European businesses buy into the European Green Deal as a growth strategy. The question now is how to make a success of it, writes Eliot Whittington.
Eliot Whittington is the director of the Corporate Leaders Group Europe (CLG Europe), a leading cross-sectoral business voice convened across the EU in support of a climate neutral economy.
The EU has maintained faith in the European Green Deal as its strategic compass for better recovery from the COVID-19 crisis. This is as striking as it is smart.
It is indicative not only of an overwhelming body of evidence that demonstrates the global necessity and economic advantages of a rapid transition to climate neutrality but also specifically the benefits to Europe of leading this transition.
And that is why it has such strong support from so many businesses in the EU. The 200+ CEOs and other organisations who have now signed the open letter calling on the EU to agree an emissions reduction target of at least 55% are just the tip of the iceberg.
There are more European companies among more than 1,200 major global companies that have called on governments to invest in climate action and resilience to create jobs and recover better than from any other region of the world.
Calls to green the economic recovery came from across Europe – including in Germany, France, Spain, Slovenia, and the Netherlands. The same is true of the number of European companies committed to set science-based targets, spanning nearly 50 sectors, including power, automotive and industry.
And indeed European companies involved in the global We Mean Business coalition for ambitious climate action include not just CLG Europe members but those who work with WBCSD, B-Team, CDP, The Climate Group, BSR and CERES.
In the financial services sector, we are also seeing action across the world with companies with $9 trillion in assets involved in the Institutional Investors Group on Climate Change or the Transition Pathway Initiative supported by investors with more than $22.8 trillion under management.
It is likely that such initiatives, embedded as they are in multiple networks which come from and influence both the EU and beyond, are actually now more representative of mainstream business opinion than traditional umbrella associations that tend to overly reflect the positions of their most conservative members and are losing others – and credibility – as a result.
This was illustrated in the recent report by Influence Map.
There are clear business reasons why so many great European businesses buy into the European Green Deal as a growth strategy. High ambition on systemic transformation delivers the highest growth over the medium to long-term according to the EU’s own assessment for its Clean Planet for All communication on 2050 climate strategy.
And the Impact Assessment for the proposed increase to at least 55% emissions reductions is even considered relatively conservative by specialist analysts from Climact.
Moreover, bold climate policies are also clearly good for growth at the time when the EU economies need them most, in recovering from COVID-19. We know policy ambition on renewables has delivered dramatic cost reductions and exponential renewable generation growth with jobs benefits and future export opportunities.
Businesses themselves have experienced how taking bold climate action has unlocked green and digital innovation and growth – not to mention employee motivation.
And when CLG Europe analysed modelling commissioned by the We Mean Business coalition and conducted by Cambridge Econometrics, it showed that green recovery plans boost income and GDP better than return-to-normal stimulus measures.
They also stimulate employment in the value chains and industrial ecosystems that will thrive and grow most in the transition to climate neutrality globally. In the EU this means a Green Recovery Plan could save 2 million jobs, while reducing CO2 emissions by more than 15%.
As we set out in a recent paper on the notion of ‘competitive sustainability’, this is more important than ever at a time when the international competitive race to climate neutrality is clearly increasing given the commitments of China, Japan, South Korea, and the prospective new US Administration.
The EU has already showed that it can lead in many areas, and has potential to excel in competitive terms in this race. It has technology and value chain leadership in key new global growth markets such as wind, heat pumps and bio-materials.
It has plans to invest in climate neutral infrastructure such as e-charging and hydrogen that will generate increased GDP and productivity. And its industrial innovation plans can enable high-quality and resilient domestic employment in regional ecosystems that concentrate assets through their networks, whether in giga-factories, buildings renovations or the bio-economy.
This is time for a confident approach, not one of complacency or one that is undermined by hesitation at such a crucial moment.
A green growth strategy involves creating lead markets at home through the highest climate-related and other sustainability standards for both goods and services. It also requires driving investment to these markets through sustainable finance initiatives along with many other elements of industrial strategy.
But it all must start with an ambitious timeframe for achieving climate neutrality, back-casting rather than forecasting. European companies understand this – and see the gain for Europe will come not just from emissions reductions that will lead the world, but from economic dynamism that will attract investment and drive growth and jobs.
The question is not whether it is a growth strategy – but how to make a success of it.