ESG — a reckoning
Many climate scientists, in fact, believe that the link could become stronger than we anticipate. According to one scientist from the Royal Netherlands Meteorological Institute, the heat wave raised “serious questions” about “whether we really understand how climate change is making heat waves hotter and more deadly.”
What we do really understand is that the climate crisis is real.
The Intergovernmental Panel on Climate Change, in its fifth assessment report, concluded that the current crisis is caused by human activities with a certainty of 95%. (The panel represents a group of 1300 independent scientists from all over the world.)
The five human activities that contribute most to climate change are:
- Electricity and heat production
- Agriculture and other land use
- Industry (waste disposal, pollution, and the like)
- Transportation
- Use of cement; buildings and construction
The gas which most contributes to trapping heat is carbon dioxide. The gas is most abundantly produced as a by-product of generating energy by burning fossil fuels. Cement also contributes to the increase in carbon dioxide.
In rank, carbon dioxide is followed by methane and nitrous oxide, which are more deadly but produced in lesser volume. The gases are produced using fertilizers and grazing.
What makes the crisis worst is deforestation.
Trees not only absorb carbon dioxide but when cut down and burned, they also release the carbon dioxide trapped in them. And of course, how could industries, factories, agricultural lands, highways, and cities be built without cutting trees down?
The question is, who is to blame, producers or consumers?
The answer is both. Both producers and consumers should take responsibility for their actions.
Responsible, ethical, or ‘conscious’ consumerism dates to the early 1970s.
However, as information became more democratic through advances in technology (the Internet, primarily), the movement became more widespread.
As stronger evidence of climate change emerged, terms like recycling entered the daily consciousness. Consumers were urged to recycle everything, from bottles to clothes.
But what about the producers of those bottles and clothes themselves?
We can blame consumers for consuming irresponsibly, but would not a better solution be not producing non-biodegradable products in the first place?
And that is the revolution ESG has brought — sharing the responsibility and accountability between producers and consumers.
Take, for example, generating heat and electricity, the biggest contributor to climate change.
Technology giants like Apple, Amazon, Microsoft, Facebook, and Google, who require servers that span acres to store data, have pledged to reduce their reliance on carbon to zero by 2040.
Of course, the companies do not just rely on carbon to power their servers, but their entire offices. And hence, all three have made strides in building a workplace that uses energy optimally. The usage of renewable sources of energy like solar panels has reached new records. Already, Apple, Google, and Facebook have clocked 100% usage of renewable energy to power their headquarters on multiple occasions.
Although, one could argue that except for Apple and Amazon, the rest chiefly rely on data to drive revenue. It is much easier for them to flip their business model.
Read more: “The Highest Returns”: Is Big Tech’s Love for ESG Genuine or an Illusion?
However, Apple and Amazon have pledged to better optimize their supply chains as well. Moreover, transportation, where 95% of carbon dioxide is produced by burning gasoline and diesel, is also going green.
Electric vehicles will eventually become the norm. However, today, they can cost a fortune.
The solution?
Automobile companies are innovating to develop combustion technologies that consume fuel more efficiently. Advances in exhaust technologies have ensured that emissions are reduced, converting them into alternate gases before they are released.
Even airlines — yes, airlines — are striving to reduce their footprint.
Airlines like Virgin Atlantic, United Airlines, and Air France have adopted smarter technologies, serve organic food, and invest heavily in fuel research to seek alternatives to fossil fuels like biofuels.
While going 100?rbon-free is a long shot, the aviation industry has still massively helped the cause, significantly reducing their contribution to climate change over the previous three decades.
Even fashion is going green.
The fashion industry, believe it or not, contributes more to climate change than the aviation industry. Its primary contribution is the outrageous amounts of water it wastes and contaminates.
However, the industry is now hell-bent on reducing its emissions by half of what the volume is today, by 2030.
But is it enough?
It is something. But we certainly need more innovation.
The problem is, revenue generated by green innovations multiply in the long run. Many businesses ignore sustainability because they would rather chase short-term profits, since that is what they believe investors, in turn, chase.
But that is not completely true.
Modern investors, like customers, want to invest consciously. More investors are investing in climate-friendly businesses, businesses that focus on long-term, sustainable success.
For those it was not already obvious, it took a global catastrophe to make us realize the value of ‘green’ or ESG assets. Worth more than $30 trillion at the beginning of this year, ESG assets, globally, are expected to be worth $54 trillion by 2025 (Bloomberg).
Read more: The Rise in ESG Investing – a $30 Trillion Market Story
Now that sustainability is incentivized, one can hope that both producers and consumers will be aligned in their values.
Because curbing climate change will not just prevent future heat waves and wildfires, and hence save thousands, perhaps millions, of lives, including plants and animals.
Climate change is also correlated with kidney disease, heart disease, allergies, asthma, and other serious breathing disorders.
Sure, many corporations are embracing sustainability for profits instead of fulfilling a genuine desire for preservation.
But given what is at stake, we will take it. That is sustainability for you — a win-win for all.