2019 was a pivotal year in the journey towards a more sustainable future.
The recent wave of public attention generated by the nature documentary series ‘Blue Planet II’ has helped to create a backlash against single-use plastics. Sustainability issues have made front-page news courtesy of environmental movement Extinction Rebellion and Swedish teenage climate activist Greta Thunberg, among others.
Yet 2019 saw the highest carbon emissions on record, and there remains global discord on the action needed to combat climate change.
I am far from alone in believing that solving sustainability challenges will be era-defining for the world’s companies. Most, if not all, sectors need to adapt in order to continue to thrive. As we look ahead to 2021, here are three sustainability themes that investors ignore at their potential cost.
1. Moving towards a circular economy
Not only are many important resources finite, but their extraction and single use can have costly implications for the environment. An alternative to the “take, make and dispose” economic model is moving to a more circular economy, where waste from production and consumption becomes a resource to be recycled, repaired and reused.
This transformation will take more than a change in mindset. Durable goods must be designed so they can be repaired, not replaced, and global supply chains will have to be reimagined to enable the reuse and recycling of materials. Some companies and sectors, as in the packaging industry, have already made great progress towards closed-loop processes.
Ultimately, transforming waste into a resource should not only address major sustainability concerns, but could also unlock greater value for businesses and their investors.
2. Solving environmental challenges
There is a persistent tension between fostering global economic development and reducing costs to the environment. After all, a rising population that consumes more as it grows richer heaps greater strain on the planet. For growth to be more sustainable, it is imperative to lower our carbon footprint. There are therefore powerful opportunities where companies can successfully develop solutions to environmental challenges while enabling the modern economy. These solutions do not need to be revolutionary – it is often the incremental innovations that can have the greatest impact. Technologies that make common processes more energyefficient, for instance, can have a significant effect.
Not only can products and services that enable us to conserve energy or water, for example, help solve the world’s environmental challenges, but they have the potential to generate sustainable profits.
3. Combatting climate change
Arguably, there is no more critical challenge facing global society than climate change. The environmental risks of climate inaction may be evident, but the financial risks should not be overlooked. Where companies fail to act, they not only expose their investors to financial loss, but they will miss opportunities that lie in action to combat climate change.
Where companies can tap into trends like rising demand for green electricity, they can pursue more sustainable financial returns for their shareholders while contributing to positive change. I believe the transition to a lower-carbon economy will be more effective if incumbent companies are coaxed into playing an active part.