Earth Day 2022: Investing in a Green Economy

With businesses taking a more active role in addressing issues beyond the bottom line through their ESG strategies, the choice for the Earth Day 2022 theme seems appropriate: Invest in Our Planet. While the theme is meant for individuals and organizations, it might prove especially meaningful in the business world.

More organizations than ever have created ESG policies aimed at improving their efforts on environmental, social and governance issues. The Harvard Business Review called 2021 the year that ESG and sustainable businesses went mainstream.

HBR wrote that 2021 may prove to be “the end of the beginning. No business leaders seriously doubt that sustainability should be on the agenda and companies are moving from incremental improvements to bolder, systemic approaches that create a net positive impact on the world.”

Earth Day falls on April 22 each year, and this year’s theme provides businesses a chance to take even bolder steps in the right direction.

The Earth Day 2022 Theme

In announcing the Earth Day 2022 theme, organizers of the global event called on people worldwide to take the next step forward in stewardship of the planet. In a news release on the theme, Earth Day organizers wrote that 2022 presents an opportunity to “change it all – the business climate, the political climate, and how we take action on the climate.”

They also added that people should invest in our planet “because a green future is a prosperous future.” They added that both a sustainable and prosperous future is possible, as well as “time to restore nature and build a healthy planet for our children and their children.”

The reference to prosperity likely resonates with businesses in the midst of changing corporate culture. With investors using ESG more frequently to assess whether they want to support a new venture, organizations both old and new have started working harder toward building ESG into their business model.

Kathleen Rogers, president of Earth Day Network, told the Green Matters website that the COP26 held in Glasgow, Scotland in November 2021 made it clear governments alone will not take the necessary action needed to fight climate change.

“Massive, urgent, and cross-cutting investments in innovation, technology, and restoration are necessary, which along with sustained individual political and consumer engagement, is our best bet to combat our greatest threat,” Rogers said.

Ways Businesses Can Support Earth Day, ESG

One way most businesses today mark Earth Day is by educating employees on things they can do to promote a sustainable world. They also can launch programs and projects that support sustainability, including recycling materials used by the company or providing employees incentives to carpool.

Business leaders also can take steps to make a year-round investment in the green economy. Many companies have already taken major steps toward a net-zero future through various actions. For example, the EPA maintains a list of the Green Power Fortune 500 companies that includes some of the biggest corporations in the U.S.

Other efforts taken by companies include the following:

  • Apple uses mostly aluminum because it produces fewer carbon emissions
  • Estee Lauder sends no waste to landfills, instead of either recycling waste or incinerating it to create energy
  • Google data centers use 50% less energy than most and the company diverts 91% of all waste away from landfills
  • IKEA uses sustainable materials in its products and also recycles or incinerates into energy 91% of company waste
  • Unilever, the parent company for products such as Dove, Lipton and Axe, has committed to cutting carbon emissions in half by 2030

Businesses also have taken steps to incorporate ESG into their business model. HBR cites examples that include the development of annual sustainability reports that feature setting goals and developing strategies for meeting those goals, as well as creating a science-based carbon target for operations.

In some cases, investors have demanded that corporate boards contain more members who support sustainability efforts, something that happened at Exxon in 2021. And a third of European companies have pledged to meet zero net carbon emissions by 2050.

The last item is of particular interest. McKinsey recently issued a report on what it will take to reach the goal of net-zero carbon emissions. It’s information worth considering as Earth Day approaches.

Achieving Net Zero

The report found that overall, businesses would need to spend about $9.2 trillion on physical assets every year to achieve net-zero carbon emission, which is about $3.5 trillion more than today. They listed six key characteristics to reach net zero.

Universal: All the major energy and land-use systems will need to work in concert. The report cites the example of electric cars. They reduce emissions, but only to the extent that low-emissions electricity production is in place.

Significant: Achieving net zero will require an economic transition away from fossil fuels, sharply lowering demand for coal, oil and gas production. It also means the end of manufacturing and selling cars with internal combustion engines and replacing them with battery-electric and fuel-cell electric vehicles.

Front-End Loaded: The bulk of action needs to take place over the next decade, a crucial period where humankind still can reduce the impact of climate change in the years ahead.

Uneven: McKinsey projects that economic exposure during a transition to a more sustainable economic system will impact industries, communities and individuals differently. For example, businesses with high levels of emissions in either their operations or their products will feel the impact strongest, as well as those with high-emission supply chains. Also, countries that depend on fossil fuels for their economy will feel the impact more than others, as will poorer countries that lack the financial resources to make a smooth transition.

Exposure to Risk: Risks range from physical risks resulting from delaying changes to labor market disruptions if changes are too abrupt. Financial risks include losing money if high-emission assets are replaced or retired earlier than their normal replacement cycle (the report estimates this alone could impact about $2.1 trillion in assets). Another risk is not ramping up production of low-emission alternatives to replace high-emission assets that are phased out.

Rich in Opportunity: Businesses will have many opportunities to tap into new and growing markets as the world transforms to net zero. These include costs saved through decarbonizing products and finding relatively lower-emission products, meeting the demand for low-carbon products that replace high-carbon options (such as carmakers with electric cars) and new production opportunities to manufacture low-emissions products.

Consumers also play a large role in convincing businesses to make needed changes. Like investors, they can decide what businesses to support with their money, an action that directly impacts the profitability and survival of a business. Actions can range from only buying retail products from environmentally engaged brands to removing investments from unsustainable businesses or from banks that support businesses that contribute to global warming.

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