As the fight against COVID-19 develops, decision makers are increasingly recognising that it demands a systemic response; one that addresses the circumstances in which COVID-19 crossed from wildlife to humans, and in which the virus then spread to all corners of our blue planet. Critically, that means tackling climate change. As we explore below, leadership, innovation and technology are going to be critical.
That this degree of human suffering and economic chaos could arise from one microscopic virus was beyond the imaginations of most people until April this year. What cannot any longer be ignored is that the escalating warming of our planet threatens to trigger a thousand more such calamities, and that our political, economic and social systems are woefully ill-prepared to respond to these. The melting ice caps and increasing frequency of forest fires are icons of a warming planet. The consequences of whole landscapes becoming uninhabitable – including human suffering, political instability, disease and mass migration – are already being felt, in sophisticated economies of the Global North, as well as by the most vulnerable communities in the Global South.
So rapid change by every government, business and person to restrict global warming to 1.5 degrees, in line with the Paris Agreement, is imperative. Our collective response to COVID-19 has shown us that we are capable of it, but we need to do it properly. Pandemic lock-down has reduced carbon emissions by perhaps 4-7 %, but it has deepened inequalities and is not sustainable. To avoid the worst consequences of global warming, we need to reduce our emissions by half over the next decade. This requires intelligent approaches, which drive innovation and create jobs at the same time as safeguarding human rights and equality.
The 2020s will be the decade in which we succeed or fail in safeguarding our planet – it is the decade of leadership and of technology.
Technology – a route to sustainability?
The single common change that all businesses have to make over the next 10 years is to decarbonise. For most, that means cutting their emissions by over 50%. For all, that will require innovation and the use of technology.
Organisations around the world are increasingly looking to technology to help them reinvent their practices in more efficient, sustainable ways. The recently launched Earthshot Prize, championed by The Duke of Cambridge and Sir David Attenborough, seeks to incentivise further innovation around five 'Earthshots', which are described as "simple but ambitious goals for our planet which if achieved by 2030 will improve life for us all, for generations to come." Each goal is inter-related, but none is achievable unless the fifth is met: to Fix Our Climate.
Entech companies such as Electron and Energy Web are working to create consumer-centric digital infrastructure to enable flexible, local energy marketplaces and facilitate the integration of distributed energy sources, lowering both the cost and the carbon intensity of managing energy grids, and increasing the use of renewable energy.
AI and the Internet of Things are also becoming important tools for organisations to monitor and manage their use of energy. Smart appliances are increasingly being used to promote efficient and transparent energy use, thereby providing a clearer understanding to organisations and customers of their energy consumption in real time. This in turn enables them to make behavioural changes to reduce their energy consumption and, crucially, eliminate energy waste.
Blockchain too can play a role, for example in relation to providing supply chain transparency that enables consumers to make more discerning spending decisions. Provenance, one of our M:Tech companies, has recently been awarded €1m in grant funding by the European Commission to continue its innovative work in this space, for example.
While M&A and investment activity has taken a hit across the board in light of the COVID-19 pandemic, a recent report produced for London Tech Week (and supported by the Department for Digital, Culture, Media and Sport) shows that UK tech companies are continuing to raise hundreds of millions every month in 2020, having raised record amounts of venture capital in 2019. As at June 2020, there had been 15 UK rounds over $80m in 2020 alone (and notably, one of the top UK rounds of this year was a $360m round in Octopus Energy, a renewable energy company).
Importantly, the way people and businesses choose to invest also appears to be changing. One of the biggest trends in M&A and investment activity over the last few years has been the rise of ESG into mainstream consciousness and, in particular, the rise of climate-related ethics as an important consideration for investors (and for companies seeking investment). And even purpose-driven companies with sustainability at the core of their brand can fall foul of this trend – a well-known example is the investment in Oatly, the popular vegan milk company, by Blackstone Investments in July of this year. The news prompted boycotts and protests against Oatly, with previously loyal customers quick to point out Blackstone's links to a controversial Brazilian infrastructure investment accused of ongoing destruction and deforestation in the Amazon. Companies need to consider all of their stakeholders in a way they perhaps didn't before.
The environmental impact of technology
Technology requires energy – and sometimes the most promising solutions are also the most power hungry.
Green energy providers and green web hosting companies can provide an environmentally friendly alternative to the larger companies in these spaces; going further than this, inroads are being made by climate conscious start-ups and tech companies to give businesses even more ways to mitigate the carbon footprint of their energy use.
One such company is Digital Detox, a digital design and development studio which, earlier this year, launched The Green Report. The Green Report is a service designed to review the vital business functions and culture of a company to understand, and therefore find ways to mitigate, the carbon footprint of many everyday technology-enabled practices. Digital Detox has already applied The Green Report in partnership with Vodafone, together achieving 79,000kg of carbon emission savings. Tazz Gault, Head of Marketing at Digital Detox, says that:
"We do not advocate building less, but instead to build smarter. Business leaders now have the opportunity to consider all of their technology uses to ensure the right decisions are made for people and the planet, from which emerging technologies are important within digital transformation or start-up creation, through to user experience, code, cloud and connectivity to customers."
The regulatory environment
The pandemic has resulted in huge levels of state intervention, fiscally and legislatively. Governments have a critical role to play if we are to succeed in radically decarbonising our economies in such a short space of time. Policy objectives will inevitably be backed by increasing legal, regulatory and, importantly, tax incentives. For example, in 2019 the UK passed into law a commitment to be carbon zero by 2050, which has been followed by a growing number of other countries. Recognising the central function of the financial system in driving change, the main organs of the 2018 EU 'Action Plan on Financing Sustainable Growth' are starting to take effect: under the EU Taxonomy Regulation, a common language to describe and identify 'environmentally sustainable economic activities' is in development, and, from March 2021, The EU Disclosure Regulation will require certain financial market participants to make disclosures about the sustainability of their investments and products.
Much of this legislation will build on the standard-setting done by non-state actors, such as the Financial Stability Board's Task Force on Climate-related Financial Disclosures (TCFD) which developed voluntary, consistent climate-related financial risk disclosures for use by companies in providing information to investors, lenders, insurers, and other stakeholders.
For emerging technologies such as machine learning and blockchain, the solutions being developed often sit within complex regulatory environments where cyber security, data protection, data ethics, and system governance are fundamental factors to consider.
Our Technology and Data teams are experts in advising on the design, development and implementation of tech-based solutions, and work hand in glove with our sustainability experts in Mishcon Purpose to advise on the development and implementation of sustainability strategies for businesses. Get in touch to find out more.