Big Business must Reinvent Capitalism to Address Environmental Concerns

A post-pandemic world is struggling to cope with a climate crisis that threatens our way of life and our existence, and sustainability is the buzzword of our times. A business committed to sustainability and looking for decarbonization support can turn to the WBCSD for help.

As the CEO of WBCSD, Peter Bakker has led the world’s foremost CEO-led sustainable business community for 10 years in Geneva, Switzerland. By 2050, WBCSD envisions a net-zero, nature-positive, and equitable world in which over nine billion people live well within the limits of planetary boundaries. The scale of transformation required will not be achieved by business alone. There are many famous brands and household names on the WBCSD’s membership list, including a number of those accused of polluting the environment. Creating change from within is what Bakker discussed with World Finance. 

Should businesses lead the way in self-regulation and self-regulation, or should governments implement harsh policies to force change? What is WBCSD’s view of the future, and how realistic is either proposition?

Business leadership will help drive change by combining policy and regulation. Our member companies represent all business sectors and major economies with combined revenue of over $8.5 trillion and 19 million employees. Their actions together can have a truly transformative effect. The first value chains to be targeted should be those with the most significant impact and need.

Think about energy, for instance. People can live the lives they want with the help of energy. Sustainable energy systems must provide affordable, reliable, and carbon-free energy. To keep global temperatures below 1.5 degrees Celsius, we must decarbonize the energy system as quickly as possible.

A net-zero carbon, nature-friendly and equitable energy transformation can only be designed by forward-thinking companies in the energy sector and scale innovative business models for low-carbon energy solutions. We must combine new innovative thinking with the scale and reach to drive and implement change.

What does it mean to ‘reinvent capitalism’ so it rewards true creation, not just value extraction?

Capitalism must be rethought from a non-ideological perspective. Currently, the world is facing three severe crises related to sustainability: climate instability, natural resource loss, and growing inequality. We do not measure social or environmental performance in our current model of capitalism. We have no penalty for causing damage, so no one pays for it. Governments and businesses must begin to integrate their environmental and social impacts.

In addition to measuring and disclosing ESG factors, capital markets will begin to value that performance once you reduce the environmental impact on people. Our Vision 2050 – Time for transformation publication was published a year ago. Reinventing capitalism was at the heart of that vision. As part of the creation of this document, 44 companies have endorsed it. This vision has been incorporated into WBCSD’s strategy, which was voted in October 2021.

With ‘green washing’ becoming more common, some may feel disenchanted with businesses’ self-selected green features. What are the reasons businesses in the sectors with the highest impact on climate change (oil and gas, banks, ‘big food,’ etc.) need to be on board?

In addition to being entirely voluntary, our membership is very fortunate in that it is just that – a membership. However, members must meet some criteria before they can be accepted. For big, impactful companies, we believe it is better to be inside the tent than outside it. We work with companies to decarbonize, become nature positive, and be more equitable. Still, many organizations and individuals do not believe that and judge.

Oil and gas companies, for example, remain trust-deficient in many people’s eyes. The only way to rebuild trust is to take real action and be transparent about your goals and progress. To be transparent about progress, you need to set a science-based target, then disclose and report ESG data.

The competition, activism, and consumer demands are putting a lot of pressure on companies now. After Vision 2050 and our new membership criteria, McDonald’s joined us eight or nine months ago. We would not have allowed them to join without understanding the membership criteria. To decarbonize, companies come to us for assistance.

Can you get 200 CEOs of the world’s largest companies together at the same time?

CEOs are invited to council meetings once a year. Having all of them on one or two days has never been possible simultaneously. Our roundtables bring people together with similar interests and knowledge over similar topics. However, making progress between the CEOs and CFOs is more important. Rather than a talk shop, the goal is to bring together people to figure out how to take action, identify projects to move forward, and report progress to CEOs.

You must deal with mounting inequality as one of your major challenges. What can business leaders do to prevent sustainability efforts from failing? The two are interconnected for what reason?

Whether we are genuinely committed to a more sustainable world is a question we must ask ourselves as business leaders. If the answer is yes, then sustainability cannot be a pick-and-mix approach. Committing to a circular economy will not suffice; reducing our emissions will not suffice. Regardless of race, gender, or background, everyone must have access to opportunity, justice, and income. The world can only be transformed if we achieve this. As a result of inequality, not only individual communities or companies but entire economies and societies are at risk.

People are dissatisfied and disillusioned by the wide disparities in income, wealth, and overall well-being, exacerbated by significant structural differences in their opportunities to attain them. This, in turn, is contributing to a cascade of consequences with dire implications for our societies and for businesses around the world:

• Eroding social cohesion.
• Diminishing trust is a key institution.
• Fuelling civil and political conflict.
• Undermining our collective capacity to tackle complex challenges.

Without addressing inequality, for example, climate change cannot be stopped. Several significant developments and trends worsen the situation. A number of issues are hitting the most vulnerable the hardest, such as global climate change, technological disruptions, and pandemics such as COVID-19.

Greenpeace and Extinction Rebellion are direct action groups that you work with? Which type of organization interacts with the other?

People’s minds can be moved by activism if applied honestly. There have been projects we’ve participated in with other players, such as Greenpeace, but structurally our organizations play different roles. As far as our members are concerned, I always describe WBCSD as a ‘challenging friend’ who helps our members achieve more faster. Providing best practices and redefining value terms is what we are there to do to help them. Moreover, we have now built a network of more than 50 Chief Financial Officers to work together. The CFO’s role as a bridge between corporations and capital markets makes them uniquely suited to lead markets in their transformation.

Our messages differ from activist organizations, not our agenda or end goal. Investors and consumers around the world are highly concerned with corporate sustainability. New regulations for ESG and climate disclosure are on the horizon, with global financial report standard-setters paving the way. ESG performance, transparency, and accountability are entering a new phase in business.

Over the next decade, we will need to unlock change in a way – and at a rate – that has never been experienced so far in all parts of society, including business, to ensure that nine billion people can live well. We need to prepare leading companies now.