Lesson 3: Build more resilient markets
We are at a point where investment in resiliency and sustainability is now cost-effective. It is time to stop thinking of regulatory environmental protection as an unnecessary burden that will harm business. Instead, these investments can be seen as enabling private sector innovation and adaptation to global risks.
More public-private collaboration is needed to "de-risk" markets that support sustainability. The last few years have seen some interesting test models, but they now need additional funding and expansion to have a real impact.
Consider, for instance, the Green Climate Fund. It is aimed at helping developing countries — tomorrow's growth markets — to access funds to accelerate a transition to low-carbon energy and prepare for mounting climate change impacts. Similarly, last year's commitment of $175 billion from multilateral development banks could help catalyze sustainable transportation innovations across the world. To reach that scale, however, these markets will need private sector leaders who see these as attractive investment options.
Lesson 4: Don't follow — lead
The riskiest thing a company — even leading companies — can do today is continue to follow business as usual. New risks will require new best practices.
Several companies are now shifting to longer-term analysis of risks and benefits. For example, UPS has relaxed the minimum rate of return it requires that enables the company to invest in a new vehicle fleet that has reduced fuel use and other costs over time. Johnson & Johnson likewise cut its internal rate of return requirements for greenhouse gas-reduction projects by half. And Unilever CEO Paul Polman no longer provides quarterly financial reports to its shareholders, stressing its focus on the long-term.
Meanwhile, some businesses are finding new ways to turn risk into opportunity. For example, Siemens exceeded ambitious revenue targets from its green products in the midst of a global recession. And Alcoa saw its market for green building products grow, even as the broader construction market slumped during the recession. WRI will be profiling some other companies moving toward best practices in its forthcoming working paper, "Aligning Profit and Environmental Sustainability: Stories from Industry," to be released later this week.
Companies who get a handle on environmental risks can talk about sustainability as a means of cutting costs and driving profits. In doing so, they protect their bottom lines — and the planet — for current and future generations. This is how we should be talking about sustainability.
Elliot Metzger, a senior associate at WRI, contributed to this post.
This article is cross-posted at World Resources Institute.