Business sustainability has been around for decades, but these days, climate action is getting a laser-sharp focus. It’s not entirely surprising, either. With the visible impacts of climate change intensifying faster than expected, people are becoming more anxious about what it means for the future.
Business as usual implies a “no policy” change and no change to business operations. Of course, this is unrealistic even in normal times. Change is inevitable, whether it’s related to technology, financial markets, policy, or other factors.
Climate change is a little bit different, though. It is a scientifically proven threat to most of our human systems. There’s also a globally binding agreement in favor of climate action: the 2015 Paris Agreement.
In this context, it’s not likely that climate change action will become less common over time. To the contrary, many businesses are ramping up their efforts both in anticipation of stronger laws in the future and to prevent a backlash from increasingly climate-savvy shoppers.
As an example, the telecoms industry is taking strides to minimize energy use of smartphones by: developing 5G networks, sunsetting the use of chargers, adopting recycled packaging, and setting net zero goals.
How this translates to consumers, though, is hard to assess. Consumers struggle to distinguish which businesses are making a real impact versus which sustainability messages are mostly hype–or worse–greenwashing.
The scale of the climate change impact of smartphones is no laughing matter: the industry produced 146 million tons of CO2e (Carbon dioxide or its equivalent) emissions in 2022. Globally, this is still just a drop in the ocean at half a percent of total annual emissions.
In the case of smartphones, as with many other consumer goods, the vast majority of these emissions come from manufacturing. Consumers have very little control over this besides boycotts. This is why it’s imperative for businesses to take climate action.
From the perspective of climate science, the CO2 emissions of this industry will need to drop on average about 7% per year to achieve net zero by 2050. So how do you chip away roughly 10 million tons of CO2e per year?
This is the question smartphone manufacturers are likely to ask in 2022 and for good reason. The pressure for climate action is intensifying from all angles.
Here are the top reasons the smartphone industry is tackling climate change today and why your business should, too.
Stay tuned until the end of the article to learn some of the strategies smartphone manufacturers can apply to achieve emissions reductions.
🙅♀️ Governments become more and more restrictive on companies’ pollution
A price on carbon is one of the ways governments can address climate change across the entire economy. Worldwide, about 40 national and 20 regional jurisdictions had carbon emissions cap and trade or carbon taxes in place by 2014 (World Bank).
Even though the US still has not implemented a carbon trading or tax scheme federally, the state of California does have a carbon scheme in place.
In anticipation of such policies, many large corporations and investment firms use internal carbon pricing to prepare for future policies. Given their enormous global impact, CO2 emissions could soon become a significant liability.
Carbon pricing is not the only way that governments are adjusting to the financial risks presented by climate change.
The Network for Greening the Financial System is a group of 83 global central banks developing financial tools like scenario analysis and stress tests to understand the impact of climate risks on the economic system.
In response to their findings, the UK and the EU have already established climate risk reporting mandates for large financial institutions and corporations. The aim is to expose their level of risk to the direct and indirect impacts of climate change. The US SEC has proposed a similar mandate, too.
Collecting data on CO2 emissions is the first step to climate action. Early mover advantages include differentiation from competitors and improving your brand reputation. Becoming the best in class at anything serves businesses well.
Getting a head start also helps businesses transition smoothly. It takes time and planning to establish the new business systems, invest in helpful assets, and develop supplier and partnering organization relationships to take climate action.
Even our best case scenario requires rapid decarbonization, so starting early will save businesses time and money in the future.
👀 Investors are now looking for sustainable businesses
Business sustainability is quickly transforming from something that’s just “nice to have” to something that indicates long-term business viability. ESG investors are scouring the voluntarily reported GHG data of companies to understand who will have staying power in the future.
Institutional investors often request ESG reporting for specific factors that materially impact business performance. The reason? Institutional investors consider ESG factors as evidence of a lower risk investment in the long-term.
In fact, climate change is extending the business cycle. Investors are more likely to shift away from concentrating on short-term profits towards long-term business strategies as a result.
30 leading European VC firms have created the LFCA sustainability clause. This helps them evaluate sustainability across their shareholder agreements for closing deals with startups.
Investors are more likely than ever to implement due diligence reviews to make sure companies are on track to meet their ESG targets.
Navigating today’s investment landscape can be a challenge for businesses, but CO2 assessment is the first step in supplying the information investors look for.
Carbon assessments give investors clarity on the baseline performance compared to improvements overtime for CO2 emissions across a wide range of operational activities. Greenly can help you get started.
😎 Customers want to buy ethical brands
Green marketing is not a new trend. In fact, it has been around since the late 90s. The difference between eco-friendly products of those days and those of today is the number of customers who are “voting with their wallets” based on business sustainability.
About 66% of international shoppers believe they are responsible for purchasing eco-friendly and socially responsible products. For emerging markets 82% feel this way, and in developed markets, the number is 42%.
Another critical difference for today’s customers is their willingness to go the extra mile in researching the validity of business sustainability claims. When they cannot find the information they need to evaluate a company, they may lose trust in the brand.
Maintaining trust requires transparency on social and environmental issues. ESG messaging only goes so far when journalists are actively exposing the inconsistencies between corporate promises and action.
One study showed that ESG factors were the primary consideration impacting customers’ buying decisions compared to a wide range of other factors.
Social media provides a convenient outlet for activist customers to express disappointment or even boycott companies who appear to be faking their impact or taking zero climate action.
The upshot of all this is that customers are often willing to pay more for sustainable products–up to 20% more according to some estimates. ESG transparency also correlates with a 20% increase in sales revenue.
For companies, reducing packaging content, simplifying supply chains, and sourcing renewable energy can also produce financial savings for a company. Sounds like a win-win situation, right?
Customers who care about sustainability are often deeply engaged with the brands they select. They find it important for the brands they shop from to reflect their beliefs and values.
Communicating your environmental impacts does not happen overnight, however. It actually takes some strong vetting of your credentials to make claims that are valid. Successful communication starts with a sustainability assessment.
📣 Employees aim at working in companies that fit with their own values and beliefs
Today’s employees seek alignment at their place of work and for many this means they prefer employers taking climate action over those that don’t. They see the mission, purpose, and company culture of their workplaces as a reflection of their own identity.
Meaningful work helps them feel more invested in the tasks they do everyday. Afterall the majority of our lives are spent working.
To address this, companies that adopt sustainability within their mission and purpose can create a workplace that attracts dedicated, highly skilled talent. This improves the competitive advantage of a company overall, and it is an approach taken by companies such as IBM and Microsoft.
Harvard Business Review conducted a study showing how sustainability correlates with employee retention. Loyalty from employees was 38% higher in companies that address sustainability versus those that didn’t.
The study also showed that productivity increased by 16% as employees felt more aligned with their company’s sustainability mission. This shows how sustainability contributes to workplace motivation.
In order to get the message across to employees, sustainable companies adopt a variety of strategies:
- Include sustainability or climate within job descriptions.
- Provide internal communications that address sustainability.
- Host employee discussions on sustainability.
- Offer other forums for feedback on sustainability.
Employees are partners in reducing CO2 emissions, as both their contributions can make direct impacts towards meeting targets.
Having employees in your court in the workplace is a hugely valuable asset, as it ultimately improves not only the planet but the bottom line of business.
🔎 Medias and NGOs are tracking non-ethical businesses
Companies’ reputations depend on more than just their own PR. In our information-rich society, media and NGOs actively assess company performance on their own terms.
When sustainability comparisons are drawn across different companies, you’ll want to know exactly where you stand. For instance, consumer goods companies are compared for everything from their use of palm oil, to their single-use plastic packaging.
The most likely outcome of a bad evaluation from journalists and NGOs is the dreaded boycott. Campaigns from activist organizations can directly damage the reputation of a business, something that can take years to recover from.
Media outlets hold significant sway over consumer preferences and loyalty. Understanding these dynamics can help motivate businesses to take up more sustainable approaches that align with the broader demand of consumers.
Keep in mind that the journalists and NGOs target companies because of the real risks that unsustainable businesses present. The best solution is not to challenge their motives, but to lean in towards reducing the underlying environmental risks.
📱 Climate Action Example: The Smartphone Industry
So, now that we’ve covered why businesses choose to improve their climate action, let’s look at a few real world strategies businesses can take. Here’s how the smartphone industry can reduce emissions.
The majority of CO2 emissions (95%) of smartphones come from manufacturing, raw materials extraction, and shipping. This means smartphone companies need to look upstream to reduce their overall emissions.
Let’s address the key issues that need to change in order for smartphones to become more sustainable:
- Shift from raw materials extraction to using recycled materials: New recycling processes now exist for rare-earth elements. This could be a boon for smartphone producers!
- Improve the energy efficiency of their manufacturing facilities: Semiconductor manufacturing depends on sophisticated temperature control that drains lots of energy–enough to account for 30% of operational costs.
- Get suppliers to switch to renewable energy: The further up the supply chain you go, the less likely you are to find renewable energy powered processes. Creating Codes of Conduct that incorporate incentives to shift to renewable energy would improve smartphone sustainability.
- Extend the product lifespan: 2022 is likely to see a total of 1.4 billion new smartphones manufactured, accounting for most of smartphone emissions. This can be improved by extending the length of ownership. Could smartphones develop a thriving resale market similar to fashion?
All of these shifts are not merely surface changes. They really delve into some of the deepest questions businesses must ask including which business models are most likely to sustain the planet.
Inventive approaches to shifting business models will ultimately promote the level of climate action needed to keep the planet in a safe operating space.
Resale markets, lower emissions accessory sales, sales of parts and repair equipment, and even rental or leasing business models are all potential ways to tackle smartphone emissions.
The same level of ambition can be taken in any industry, with a vast butterfly effect that can spread rapidly.
🌳 What about Greenly?
Greenly specializes in sustainable business strategy across a wide range of industries. We’re here to help you get started with a carbon assessment and take your strategy all the way through to implementation.
Ready to get started? Book a demo.
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