Is the profit-over-planet business model dead?
EXCLUSIVE: The business model of the 20th century that considers the services rendered by nature to be free, available and infinite is dying.
At least that’s the view of Phillipe Joubert, a senior advisor and special envoy for energy and climate for the World Business Council for Sustainable Development (WBCSD) and chair of the Prince of Wales EU Corporate Leaders Group on Climate Change in Brussels.
Joubert believes that the build up to COP21 in Paris has generated so much momentum for tackling climate change that businesses are preparing themselves for fundamental change, no matter the outcome of the conference itself.
He told edie: “We have forgotten why we create companies and business. We tend to think companies are made to produce profit. I don’t think this is the right way to present a business. There are many different stakeholders. Shareholders are only people with a certain piece of paper representing the company at any moment.
“The model we have considers that the services rendered by nature are free, available and infinite. This business model is finished. The energy sector, for example, will soon not be able to burn fuels without paying the true costs of that fuel.
“First and foremost you cannot send CO2 into the atmosphere free of charge. This is no longer possible for the very simple reason that the costs of CO2 in the atmosphere are now too high. It’s a moral issue. It is not acceptable to leave the bill to next generation.”
Joubert envisions a new business model developing where executives reconsider the fundamental responsibility of a company, whether that’s providing jobs, improving the lives of customers are making a positive environmental impact.
“Environmental and social responsibility should come first before you even think about making profit,” he said.
Joubert, who is also the executive chairman of the Global Electricity Initiative at the World Energy Council, says there are many examples of listed corporations already making this transition.
Unilever for example, recently ranked by experts as the most climate-responsible company in the world, saw its ‘sustainable’ brands account for half of the company's growth in 2014, growing at twice the rate of the rest of the business.
Other examples highlighted by Joubert included Siemens and its goal to become ‘net zero’ by 2030, Coca-Cola and its goal to replenish all the water it uses by 2020 and Kering with its environmental profit and loss accounting.
“You have plenty of examples of partial solutions, of companies going in the right direction,” said Joubert. “We don’t yet have a lot of companies doing the full scope of everything, but I think the climate lever is helping us to go in that direction.”
Conversely, Joubert was also quick to point out the risks for companies that weren’t adapting their business models.
“Volkswagen is an example of the type of company that thought they were cleverer than the regulations, and it cost them billions," he said. "You also have examples like Shell in the Arctic, or the Keystone XL pipeline.
“The insurance industry is moving away from insuring that kind of risk and we are seeing the emergence of green finance at HSBC, Citibank and Santander among others and the increasing recognition of a carbon bubble.
“You have statistics showing that a high proportion – some people are saying more than 60% – of MBAs and engineers want to work for companies that are bringing a meaning to their lives and jobs.
“There are plenty of signals that the business model at large is changing right now.”
Road to Paris and beyond
In the context of the forthcoming climate talks in Paris, this transition means that businesses are more involved than ever before.
“This is the first time that I can remember where governments are really asking businesses for help,” said Joubert
“It was not at all the case in Copenhagen in 2009. As the CEO of a big company in the power sector (Alstom), at Copenhagen I was not involved at all. Now it’s completely different.
“Is it enough? It’s never enough. But you can see that businesses are going far and are involved with initiatives. They are asking for a carbon price, asking for the end of fossil fuel subsidies. There are organisations like CISL and groups like WBCSD springing up. This is all new and really I am quite optimistic.
Joubert therefore sees Paris as an opportunity for governments to reinforce a message that the old ways of doing business are no longer acceptable.
He added: “To be very concrete I hope we see the end of subsidies for fossil fuels and a CO2 price. On a broader scale, we also need to stop this cynical approach about adaptation and mitigation and recognise that the rich countries need to help the poorest countries to deal with the consequences of our actions.”
COP21 begins in Paris on 30 November.