Despite President Trump’s ‘profit over sustainability’ mantra, climate-related disasters and young people are forcing businesses to become more sustainable.
November 2, 2020,11 a.m. EDT
Written by Sarah Chu
For investors, climate change is one of the most disruptive impacts on investments. With the California wildfire apocalypse burning more than three million acres in San Francisco, and intense hurricanes destroying Louisiana, the climate crisis has ruined the livelihoods of millions of people, and has led to severe business disruptions worldwide. The catastrophic effects of climate change — coupled with the coronavirus pandemic — are rattling investors to safer assets, putting a quick post-covid recovery in doubt. Policymakers and businesses, on the other hand, are left wondering how to best tackle the economic repercussions.
Since the 1980s, business leaders have taken a free-market approach to climate change, deterring any form of government regulation in the economy. Modern GOP policies have originated from Milton Friedman, a conservative economist who believed the sole purpose of a business is to maximize shareholder value. Under Friedman’s ideology, environmental regulations and other government interventions suppress economic growth, which stalls technological innovation and development. Research and development into renewable energy are also risky and may not have a high return on investment, as shown by GE’s third failed attempt at a wind farm. It is this ideology that fossil fuel enthusiasts, like President Trump and over 130 current members of Congress, have adopted as their rally cry, arguing that the market will correct itself.
“I’m not going to lose that wealth, I’m not going to lose it on dreams, on windmills, which frankly aren’t working too well,” -President Trump at the G7 summit in France
Pursuing a relentless fossil fuel agenda, the Trump administration has eliminated over 150 environmental protection measures put in place by his Democratic predecessor President Obama, claiming that American wealth is dependent on fossil fuels.
The Trump Administration’s propaganda, along with the GOP’s history of denouncing climate change, has inherently built a wedge between sustainability and profitability, arguing that the two cannot co-exist. Are they right?
While it is true that energy and oil jobs have been the backbone of the American economy since the first Industrial Revolution, the energy industry has slowly shifted toward eco-friendly and energy-efficient practices. Before the coronavirus pandemic, renewable energy was America’s fastest-growing industry: with over 2.3 million American workers in 2019, energy efficiency was responsible for one of every four jobs in the energy sector. Though clean energy jobs are tanking by nearly 600,000 jobs due to the economic devastation brought by the pandemic, many researchers predict the market is forecasted to grow from $184.3 billion to $226.1 billion by 2021.
New business insights have also emerged as leaders are looking for new and innovative frameworks beyond the traditional focus on environmental, social, and corporate governance (ESG) metrics. Blackrock CEO Larry Fink pressured investors and executives to “bring the problem forward” in his 2019 letter to CEOs and clients, claiming that financial connoisseurs seldom ignore risks to their businesses. That following year, three global companies, Verizon (VZ), Infosys (INFY), and Reckitt Benckiser (RBGLY), teamed up with tech giant Amazon to achieve carbon neutrality by 2040, 10 years ahead of the Paris Agreement. 87 global companies, which include Hewlett Packard Enterprise (HPE), Burberry (BURBY), and AstraZeneca PLC (AZN) pledged an ambitious goal to reach net-zero carbon emissions no later than 2050.
Some successful companies devote their entire business operations to ethical business practices, proving that sustainability can be profitable. American clothing retailer, Patagonia, focuses on high-end outdoor clothing products with an emphasis on eco-friendly branding. The Venture-based company donates 1 percent of all proceeds to the preservation and restoration of the natural environment. Although Patagonia is not a publicly-traded company, the Financial Times estimates the company approaches $1 billion in revenue each year.
Patagonia’s success is largely due to the increasing demands from millennials and the Gen Z demographic, also known as “the climate change generation.” For those born between 1986 and 2020, climate change has always been an existential threat to their well-being, unlike their GOP elders, Baby Boomers, who tend to have more conservative-leaning values when it comes to environmental protection and energy production policies. The fundamental differences within our multigenerational society are the way to address climate change from a political, economic, and social standpoint.
In a world where America’s west coast is burning and hurricanes are leaving a trail of destruction at rapid velocities, debating whether to incorporate sustainability into business is no longer an option. The bottom line, as Patagonia successfully figured out, is that accounting profitability is not the same as economic profitability. The negative externalities of burning fossil fuels, such as unprecedented heat waves, rising sea levels, and disastrous are far direr than higher quarterly earnings. As this chaotic and often satirical year comes to an end, Congress and executives must find a way to transition our economy in a way that is both resilient and sustainable. The climate crisis waits for no one — until political institutions and business leaders set aside their pride and negotiate viable solutions, the world we know is a ticking time bomb.