Harrison Jowett: Sustainable Industry- what's really going on? (Part 2)

Part 2: How business is embarking on the sustainable journey.

The ‘great lockdown’ is having an unparalleled impact on the economy, it has caused a ‘sudden stop’ and forced governments to bail-out employees at an unprecedented rate. However, in a way that no crisis has done before, it has presented every industry with an opportunity for growth. As operations stall, there is scope to review processes and adopt more sustainable and efficient practice in order to succeed in the ‘new normal’ that will arise after the pandemic. So, what is actually happening in the public and private sector and how is the legal sector keeping pace?

We saw in the previous instalment that governments were on the back foot when it came to sustainability. This article looks to outline some of the steps businesses are taking to progress their strategies moving into a sustainable era.

In the wild world of strategic business advice, leaps have been made by independent sustainability organisations. Most notably has been the growth of the International Renewable Energy Agency (IRENA), the Energy Transmissions Commission (ETC), and Nordic Sustainability. IRENA is currently working across the globe on 7 initiatives geared towards developing renewable energy, and encouraging those with financial capability to realise sustainable ideas – they have even put together a post-Covid recovery plan.[i] The ETC, having taken a different approach, have outlined a plan based on the transition for net-zero[CA1] emissions by industry.[ii] Nordic Sustainability is a consultancy which uses sustainability to inform business strategies; they have paired with Future-Fit to further implement their advice. The growth and prominence of these institutions suggests that a structural change is underway, which is really exciting as they appear to be backed by investors.

Investors are becoming increasingly involved in the development and commercialisation of sustainable portfolios.[iii]Black Rock is the case in point here, teaming up with MSCI to create portfolios based on the ESG (Environmental, Social and Governance) rating, which is determined on the exposure of the asset to each risk. They claim that there has been a rise in clients seeking sustainable investment options and they have created a suite of portfolio opportunities to inter aliascreen for unwanted markets (tobacco, oil, etc.) and estimate the social value of particular investments.[iv]

This suggests that investors are taking the climate risk seriously and this commitment to sustainable investing is promising for emerging our new-age industry. However, it does raise an interesting moral question around traditional industries: do we remove capital from them in favour of their sustainable counterparts, thereby promoting new industrial ideals in businesses built from the ground up? Or, invest more in the struggling firms to afford them the capacity to conduct necessary innovation – thus preserving jobs and commercial infrastructure and the sunk costs of ongoing research projects. This is not something that one person can decide upon and I am grateful that I am a mere commentator here; it is interesting to consider and will depend, I believe, on the pressure investors levy to make their investments more ‘sustainable’.

[i] IRENA, Post-COVID recovery: an agenda for resilience, development and recovery (2020) <https://www.irena.org/publications/2020/Jun/Post-COVID-Recovery> accessed 06/2020 [ii] ETC, Reaching net-zero carbon emissions: mission possible (2020) <http://www.energy-transitions.org/mission-possible> accessed 06/2020 [iii] Mooney, A., Coronavirus forces investor rethink on social issues (FT, 2020) <https://www.ft.com/content/bc988e0e-687c-4c72-98eb-ae2595e29bee> accessed 06/2020 [iv] Kjellberg, S., Making sense of sustainable investing (Finimise, 2020)