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I was born in 1965. Towards the end of that same year, US President Lyndon B. Johnson commissioned a report from his Scientific Committee, entitled “Restoring the Quality of Our Environment”, which reported that: “the effect of burning fossil fuels will be harmful from the point of view of human beings.”
In other words, 55 years ago, this was already clear, even though the oil companies were fighting to hide it and lobbying to prevent us from doing anything about it. And yet, knowing this we went ahead and became dependent on fossil fuels, which still represent 85% of the energy we consume today. Until very recently, we have seen little commitment to reducing that dependence or tackling the complex scenarios it has brought us.
Now, finally, we are starting to talk about the end of the oil era. At a time when we already know that our refusal to change is increasing the frequency of natural disasters all over the world, melting the ice in the Arctic and turning the Amazon rainforest into a savannah, it seems that we’re finally using the common sense so absent for many decades. We know what is happening, and we know who is responsible.
The Economist talks about 21st century energy and how it will change geopolitics. Chinese President Xi Jinping announces by surprise at the United Nations that his country, the world’s largest polluter, will peak in 2030 and reach emissions neutrality by 2060, even though it is still building coal plants. Sixty-four world leaders commit to stop the destruction of the planet. Even Pope Francis speaks of the necessary transition to clean renewable energy. More and more elections around the world are affected by the climate emergency: irresponsible leaders characterized by denialism are, at this moment, the worst threat.
Any recovery from the post-pandemic economic crisis will have to be based on renewable energies, and this will have major consequences for the business environment. The oil companies are falling out of favor: a solar and wind energy company, NextEra Energy, is already worth more than the formerly all-powerful Exxon, which has been kicked out of the Dow Jones index, and they are dragging down the industries that depended on them: last July, Tesla reached $208 billion, more than the sum of Fiat Chrysler, Ford, Ferrari, General Motors, BMW, Honda and Volkswagen combined. It is now worth almost double that, $411 billion, and defines the destinies of an industry that will have to be completely rebuilt around electric motors. Even workers in the fossil fuel industry are fleeing to renewables.
We are facing the biggest and fastest technological disruption in history: in the next 10 years it will indelibly affect the business landscape of industries such as information technology, energy, food and materials, but in practice absolutely all industries. If you think that in a decade your company will still be doing things the way it does today, you are very wrong. It doesn’t matter what you do: everything must be decarbonized, even if it seems impossible to us today. Even such energy-intensive sectors as metallurgy are abandoning coal and switching to renewable energies, and are making significant savings by doing so. Demanding clean energy from your supplier and producing as much as you can is no longer a matter of “looking good”: it is a decision that makes total business sense.
Learn how to measure the true impact of your company’s activities, and commit yourself to be transparent about reducing it. Do it for ethics, not for aesthetics. Adopt electric vehicles throughout your production and logistics chain: not only are they less polluting, no matter how you measure it, they are also cheaper and depreciate less. Ignore the myths and legends involved: pollution causes 4.2 million premature deaths annually, discounting the impact of indoor pollution, and reducing it saves lives. Decarbonization could drive a recovery agenda out of an economic crisis, because it is perfectly possible for a country to reduce emissions while its economy grows. In a world without fossil fuels, we will not go back to the Middle Ages, nor will we be left without travel: alternatives will present themselves.
You may still believe in the old myth that decarbonization or reducing emissions will cost you money and make you less competitive. Renewable energies are already cheaper than fossil fuels, and they will become cheaper. But in addition, a determined attitude in this area will improve your image and the positive preferences of your customers: don’t do it just for those reasons. At the same time it will also relegate to second place those suppliers who refuse to act. More and more consumers and even many institutional investors understand the power of voting with their pocketbook.
The generation of executives now leaving business schools are already aware of these issues, and you can see it every day in class discussions. The previous generation, those who grew up and developed their careers in an environment where fossil fuels were the main source of energy, is largely unaware of the radical change about to take place.
The climate emergency is going to be a key business variable. If you haven’t grasped this yet, you’re going to have a lot of problems, and not just with your conscience.
