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Mitigating long-term environmental risks: the crucial role of corporations

From transitioning to clean energy to encouraging greener consumer choices, there’s a lot that can be done to mitigate long-term environmental risks.

As unsurprising as it is shocking, environmental risks account for the world’s top five most critical ‘long-term’ threats, according to the World Economic Forum’s 2022 Global Risks Report. Climate action failure, extreme weather, biodiversity loss, natural resource crises, and human environmental damage sit squarely ahead of societal, technical, and geopolitical risks, such as involuntary migration and geo-economic confrontations, over the next 5–10-year period. At COP 26, world governments promised USD130 trillion to pursue global climate goals. How can multinational corporations help reach these climate goals?

The unique role of corporations

Corporations are in a unique position when it comes to the climate crisis. On the one hand, they are some of the world’s largest emitters with a 2020 study by UCL and Tianjin University finding that a fifth of CO2 emissions come from multinational companies’ global supply chains. On the other, corporations have unprecedented global reach - operating across borders, demographics and time zones - with the scope to make meaningful changes beyond their in-house operations; what the US-based Center for Climate and Energy Solutions refers to as corporations’ ‘carbon footprints (the emissions from producing their products) and their handprints (emissions from the sales and use of their products)’.

The uptake of sustainable energy by corporations would be a huge driver for mitigation since corporations in their various forms are the major emitters.

Ajay Gambhir, Senior Research Fellow at the Imperial College Grantham Institute for Climate Change and the Environment

What’s more, corporations can use their voice, platform, and intricately linked supply chains to publicly engage key decision-makers and the wider public on climate-related issues. Their decision-making structure is set-up for swifter responses than introducing legislation or regulations. For example, Wärtsilä recently produced a report on how different countries can build 100% renewable energy systems, taking into account their distinct socio-economic dynamics and challenges.

With time a precious commodity in the climate struggle, corporations are in the front seat to make impactful change.

How corporations can make a difference

 According to a 2021 Energy and Climate Intelligence Unit (ECIU) report, one-fifth of the world's largest public companies have made net-zero commitments, although these pledges vary in time frame, depth and detail. One of the most impactful actions is transitioning to clean energy internally, be it for factories, industrial processes, vehicle fleets, warehouses or offices. 

“The uptake of sustainable energy by corporations would be a huge driver for mitigation, since corporations in their various forms are the major emitters,” says Ajay Gambhir, Senior Research Fellow at the Imperial College Grantham Institute for Climate Change and the Environment. “Of course, consumers also emit CO2 and other greenhouse gases at their point of use, such as in gas boilers or petrol cars, so it’s important that corporations also drive the take-up of low-carbon end-use technologies like heat pumps and electric vehicles.” 

If these corporates commit to providing sustainable options as well as reducing the carbon footprint of their own operations, they can make an outsized contribution to a greener, fairer and more resilient economy.

Sarah Colenbrander, Director of the Overseas Development Institute’s (ODI) Climate and Sustainability programme

Sarah Colenbrander, Director of the Overseas Development Institute’s (ODI) Climate and Sustainability programme, also believes that “widespread corporate uptake of sustainable energy could make a tremendous difference. First, many manufacturers and retailers are significant users of electricity. Second, many corporates shape energy use down the supply chain. The choices made by construction companies, for example, determine whether homes are expensive to heat and whether they have clean options (like heat pumps and solar panels) built in from the outset. If these corporates commit to providing sustainable options as well as reducing the carbon footprint of their own operations, they can make an outsized contribution to a greener, fairer and more resilient economy.”

Energy transitions have historically taken decades, but we really cannot afford to wait for that long.

Mari Martiskainen, Co-Director of the Sussex Energy Group at the University of Sussex Business School

Using their resources to create sustainable technologies and products, corporations can also help downstream transition to renewable energy, ensuring B2B customers and consumers can cut their emissions passively instead of having to make active decisions. This can encourage wholesale behavioural change instead of one consumer at a time. 

Leading from the front

Previously there were major barriers for corporate climate action, be it convincing boards to focus on long-term sustainability over short-term profit or the lack of available renewable energy. However, an “uptake of sustainable energy makes increasing business sense, given the volatile markets and security of supply issues related to fossil fuels,” says Dr Mari Martiskainen, Co-Director of the Sussex Energy Group at the University of Sussex Business School.

“Energy transitions have historically taken decades, but we really cannot afford to wait for that long,” she adds. 

From improving energy efficiency and cutting fossil fuel use to creating technologies that the world needs and encouraging carbon-positive consumer choices, corporations can promote climate action at various points along the value chain. While the speed and timing of changes will be dependent on each corporation's structures and operations, now is the time for multinational companies to lead the change in addressing global environmental risks. It’s a strategy that will pay dividends in more ways than one.

Written by

Beetle Holloway