Two Steps Forward

2019 was the year that…

ShutterstockAaron-Schwartz
Climate activist Greta Thunberg participates a youth climate protest at the White House in September.

It is always difficult to encapsulate a 12-month period, let alone the 365 turbocharged 24-hour news cycles that seem to have become the new normal. So much happens in the course of a year — from governments, companies, activists and many others — that it all becomes a blur.

That certainly is true in the world of sustainability. From the launch of Loop, the circular economy wunderkind, in January to the colossal failure of COP25 in December, from the burning Arctic and Amazon to the dizzyingly weird weather, it’s another year of ups and downs, reasons for both optimism and despair.

As I have done each year for the past decade, I’ve recently plumbed the more than 1,200 stories, columns and analyses we published on GreenBiz.com since the clock struck 2019, accentuating the positive, seeking signs of progress and hope.

It represents my humble (and possibly futile) attempt to put a happy spin on an otherwise troubling year, and to remind us that whatever forces are stacked against progress in sustainability, there’s a wellspring of encouraging, even exciting developments spearheaded by purposeful, persevering and passionate professionals.

That’s you, dear readers.

Here, in no particular order, are five storylines (and some others) that exemplified the promise and progress of sustainable business during 2019. (All links are to stories published on GreenBiz during the year.)

Ocean health spurred a new wave of activity

Concern over the 71 percent of Earth that’s covered by saltwater crested in 2019. A United Nations report published in September found that the planet’s oceans, snow and ice are in dire trouble, and the damage is causing harm to the people who depend on them.

The issues are many, from the scourge of microplastics and other marine debris to the impacts of oceangoing vessels to the decline of fisheries — not to mention Sustainable Development Goal 14, which calls for conserving and sustainably using ocean resources at all levels.

The value of oceans in mitigating the impacts of climate change may be garnering the most attention, and for good reason. One study pegged the value of coral reefs in providing flood production along the U.S. coast at $1.8 billion a year. A research team at Louisiana State University found that "blue" carbon ecosystems — the area above water at low tide and underwater at high tide — along the world’s coastlines sequester 3 billion metric tons of carbon, more than the planet’s tropical forests.

Oceans also represent a growing business opportunity — the blue economy, as it’s been dubbed — from which fish, seafood, minerals, plants, energy and other goods are being harvested. Whether it’s done sustainably is an open question, but there’s nonetheless a swell of activity. Already, aquaculture is nearly a quarter-trillion-dollar annual industry that employs 20 million people worldwide and feeds nearly half the global population. There’s oceans more where that came from.

Carbontech became a business

Can we make money from thin air while we solve the climate crisis? The notion that technologies can remove and sequester greenhouse gases (GHGs) from the atmosphere is certainly compelling. At least, that’s the premise behind carbontech, a range of products, services and fuels made from captured GHGs.

During 2019, the companies and markets for these products emerged from the conceptual to the commercial. GreenBiz Group launched VERGE Carbon, the first conference on the business of carbon removal, bringing together many of the players of what is expected to become a trillion-dollar market opportunity.

Those markets are still nascent, but we’re beginning to see their potential — everything from soap made from carbon dioxide captured from heating systems to a shipping container that sucks in CO2 and water vapor and turns it into useful hydrocarbons, including gasoline and diesel.

And then there’s the business of carbon farming, where farmers use methods that push more carbon dioxide underground, where it enhances soil while making the soil more productive and resilient. One entrepreneur sees the potential for soil to absorb a trillion tons of GHGs in soil. Another expert suggested planting 1 trillion trees to absorb climate gases.

As you can see, when it comes to carbontech, trillion is the new billion.

Sustainability food systems found a growing appetite

Sustainability in food and agriculture is nothing new, but the topic seems to be setting deep roots thanks to a growing global population, a rise in income leading to people to eat higher on the food chain, the recognition that hundreds of millions working at the ends of agricultural supply chains live below the poverty line, and growing concerns about the impact of climate change on ag — and of ag on the climate.

In 2019, these issues presented themselves in the form of new startups, a shift in farming techniques and new commitments by Big Food companies.

The year saw a new crop of sustainable food production commitments and initiatives from some of the world’s largest food companies. Tyson Foods announced an initiative to accelerate sustainable food production and make its recent climate and land stewardship goals a reality, in part through the large-scale deployment of what’s come to be known as agtech.

Tyson wasn’t alone. Molson Coors, Stonyfield, Campbell Soup and Kellogg are among leading food companies experimenting with different models for motivating growers to adopt new sustainable farming practices. Danone is among a group of 19 multinational food companies planting the seeds for a global push to protect and promote biodiversity. Smithfield Foods, the world’s largest pork producer, is turning pig manure into biogas and renewable natural gas. Indeed, scores of tech companies are seeking to help farmers use data to increase yields and reduce emissions.

There’s good reason for all this. An analysis by the Food and Land use Coalition found up to $4.5 trillion a year in economic benefits by 2030 available to companies that can translate the hidden environmental costs of current systems into new markets and purpose-driven strategies.

Farmers are increasingly dug in, too. In Iowa — a leading global producer of corn, soy, pork, beef, eggs, ethanol, biodiesel, biochemicals and agricultural technology — they are actively working to reduce agricultural inputs while increasing outputs by seeding narrow strips with native prairie plants in and around corn and soybean fields. Their customers — Big Food companies — are advancing changes in a hard-to-change field, leveraging both new technologies and old techniques to help growers preserve biodiversity, protect land and increase climate resilience in an increasingly unstable world.

And then there’s plant-based protein, which hit the mass market in 2019, with alt-meat burgers making their way into fast-food chains and other venues. Part of the interest comes from millennials, a generation that appears more willing than their elders to embrace such innovations.

Again, technology is playing a role — both the synthetic biology enabling plant-based burgers as well as the mainstreaming of hydroponics that can grow food at scale indoors. The initial public offering in May of Beyond Meat, a leading contender, helped build the momentum, as did its stock: By year-end, it roughly had tripled, something investors could sink their teeth into.

Risk and liability became a climate hotspot

Companies and their financial partners appeared in 2019 to more fully embrace the risk to companies from the climate crisis. A small library of reports, surveys and white papers measured and tracked this growing interest, which was accelerated by at least one major corporate casualty.

The January bankruptcy filing by California utility Pacific Gas & Electric started the year. The utility giant’s service area already had suffered devastating wildfires that were deemed to be caused by PG&E’s faulty equipment. The company immediately was called the first corporate climate casualty.

But likely not the last. Indeed, banks, insurers, shareholders and others have begun wondering whether more companies will be held liable for damage caused by the climate crisis. And the impact that might have on the global economy stretches the imagination: Globally, countries and companies face economic damages of $54 trillion if the world gets 1.5 degrees Celsius warmer between now and 2040, according to the U.N.’s IPCC report.

That shaky risk profile is getting the attention of banks and insurance companies. At least one large U.S. insurer declared it no longer will back new coal plants. Others are offering new kinds of policies or loans that reflect a world where historical data is less reliable than it once was.

Still, there are blind spots among financial institutions, some stemming from their shortsightedness or lack of understanding about the risks their corporate customers face to their supply chains, operations, reputation or physical infrastructure — not to mention the risk of litigation from long-ago routine business decisions now seen as contributing to the climate crisis.

So, capitalism is stepping in, doing what it does best: aligning markets and prices with risks and opportunities. How it will change the fortunes of companies across geographies and sectors will be a key story to watch in the new decade.

Investors (finally) woke to climate change

The aforementioned risks and uncertainties are starting to have an unsettling effect on some of the world’s largest investors, too, who are variously rewarding or punishing companies for their vulnerabilities to climate change and its impacts. During 2019, we saw growing efforts by mainstream asset owners and managers to better understand and assess companies’ environmental, social and governance (ESG) performance.

For years, the conversation has centered around the benefits to investors for placing their money in companies with high ESG scores. What’s changing is the understanding by companies of the direct benefits to them, too.

For example, about half of European companies are incentivizing executives to deliver wide-ranging climate strategies and to better understand their climate and cleantech transition risks. In North America and elsewhere, financial institutions are offering ESG-linked loans, providing capital to companies to improve their environmental or social impacts. For companies, ESG- or sustainability-linked loans, also known as positive-incentive loans, provide a lower lending rate or other benefits for a company’s sustainability leadership.

Banks and investors have good reason to reward proactive companies. Screening investments using ESG criteria positively can affect investment returns and stock market performance, according to an analysis by one of Europe's largest asset managers. The study found ESG screening does not affect all stocks but tends to affect the best-in-class and worst-in-class assets.

As a result, the organizations that rate ESG metrics are ramping up their efforts to provide better information to investors. For example, S&P Global Ratings said it now includes ESG sections within corporate credit rating reports.

But those efforts aren’t foolproof. PG&E, the bankrupt California utility, had been a star of the ESG world, receiving high marks from several leading ratings and rankings organizations. This suggests that the world of ESG has a way to go before it truly can help investors make risk-based asset-allocation decisions.

And most corporate directors aren’t yet on board. Nearly four in 10 corporate board members responding to a survey by advisory firm PwC said that climate change shouldn’t be taken into account when forming corporate strategy; roughly 30 percent think shareholders pay too much attention to this topic.

Still, there’s progress, and the year ahead will be interesting to watch on this front. The stakes for sustainable business activity couldn’t be greater. When being an environmental leader results in a lower cost of capital: game on.

There’s more…

Those weren't the only 2019 stories of note on the sustainable business front. There’s also the growing interest in sustainable aviation … the growth of electric vehicles among corporate fleet owners … the expanding interest in the early stages of the circular economy … and, not least of all, the explosion of energy created by the climate youth movement.

Finally, here (in alphabetical order by company) are 19 other hopeful headlines of 2019:

True, there is no shortage of stories and trend lines that are distressing, to say the least. But let’s not dwell on those for the moment.

Instead, let’s stop and celebrate these largely under-covered stories of progress in the clean economy and sustainable business, and all of the committed and largely unsung professionals who made them happen. Against considerable odds, with minimal resources, insufficient political leadership and precious little fanfare, companies continue to move forward.