Is this the Death of Dirty Business?
Written by Matt Ward and Gerd Leonhard
Since the advent of the microprocessor, and even more so since the dotcom boom and bust cycle of the 90s, the economy has been transforming from one based on hard goods, assets, and rxaw materials to one focused almost entirely on digital technology and infrastructure. Once Fortune 500 companies have been reduced to ash as innovative startups have swallowed up ever larger portions of the economic pie, many like Netflix vs Blockbuster, online news, or AirBnb vs any hotel chain, simply by removing the real-world physical costs of real estate.
This trend is accelerating. Today, everything must be asset-light and digital. As they say, “Software is eating the world,” and digital transformation has been the topic choice for large organizations and industry leaders for the better part of two decades.
The end of digital’s dominance?
But, the era of digital-only transformation is coming to a close. It is no longer “enough” to focus on digital and on improving the efficiency of operations, production, supply chains, etc… Software serves a purpose, but only to a certain point. Eventually, efficiency tops out and other priorities trump taking things to the cloud or systematizing processes. We are entering that era.
It is no longer about who offers 5% cheaper pants, 2-day shipping, or a better user experience. In most industries, these are table stakes and consumers are starting to demand more, especially in the area of climate change. Even in a low-cost, fast-food place like Burger King, people are paying more for plant-based meat than its more pollutive real-meat competitor. Imagine once these more-sustainable meat substitutes reach true cost parity.
Just look at Tesla and push for electric vehicles. As the cost has come down, the demand has skyrocketed, further lowering the price. At the end of 2020, Tesla was worth more than the next six automakers combined and more and more cars purchased every year don’t run on fossil fuels.
This is an enormous step and there are more examples like it every day, in every industry as organizations seek to attract modern, environmentally-conscious consumers.
Even companies like Facebook, Uber, Amazon, IBM, Microsoft, and Adobe are joining The Climate Pledge for carbon neutrality. That means agreeing to:
- Measure greenhouse gas emissions and report them on a “regular basis.”
- “Decarbonize” operations through a combination of “efficiency improvements, renewable energy, materials reductions, and other carbon emission elimination strategies.”
- Purchase “additional, quantifiable, real, permanent, and socially-beneficial offsets” for any carbon emissions a company is unable to operationally eliminate by 2040.
It is a big step, but we are making great progress, because everyone wants, not only to be part of the solution, but at least, to not be seen as part of the problem. Plus the PR is great.
Perhaps even more important are the investors and capital allocators. ESG stocks are thriving, LPs are divesting from oil and gas, and a majority of venture capitalists and startup founders have outright refused funding from the trillion-dollar Saudi Arabian sovereign wealth fund — one of the largest (and the dirtiest) pools of capital in the world.
That is what we call putting your money where your mouth is.
This is only the beginning
As Gerd likes to say, Covid-19 was like a test-run for climate change. We encountered a horrific foe that shook the foundations of our society, straining the institutions and organizations we rely on for basic survival. But thanks to solidarity and unified efforts, thanks to innovation and hard choices, we have mostly managed to come through and have developed life-saving vaccines in record times.
But climate change is much more devastating, and at least initially, it is much less tangible. It is something we only really see in hindsight — once it is too late.
There is much to do if we are to have a chance of limiting global temperature rises to livable levels. That is why we must act today, as consumers, as business leaders, as citizens. This planet is our future, and our childrens’ future, and their childrens’. It is the legacy that we leave behind to future generations.
So, what kind of world are you prepared to leave behind?
And if you’re in on creating a better future, here’s a guide to build better impact-oriented businesses!
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