The power to do evil is bargaining power. The exploitation of that power is diplomacy, cruel diplomacy, but diplomacy wrote the American economist and Nobel laureate Thomas Schelling in 1966. That Russia is using its energy sector as leverage to lift the West's heavy economic sanctions should surprise no one.
Doing business in an economic war and the midst of climate change forces companies to become more sustainable and build resilience into the value chain on which their very existence depends.
It comes down to the question of who can endure economic war the longest, for whom the stakes of the war are highest, and who will stand tall at the end. From Russia, we know that it is willing to forego hard because it sees an existential threat in the Westernization – read: democratization – of Ukraine and in that country's potential NATO membership. Whether Europe is willing to renounce badly and long-term for the Ukrainian cause is the question.
From Russia, we know that it is willing to renounce hard. Whether Europe is willing to renounce badly and long-term for the Ukrainian cause is the question.
The war-fueled energy crisis is a Darwinian game changer in several sectors in Europe. It is forcing EU member states and businesses to find creative and sustainable responses to the sudden supply-side shocks that are pushing inflation to unprecedented levels, with consequences for consumer purchasing power, the cost of production for businesses, and social peace.
In biology, those who can adapt to changing conditions in time can survive most easily. The same is true in situations like this. The war in Ukraine was no surprise and neither was the disruptive consequences of climate change. Doing business in such circumstances is only possible if you have an eye for sustainability and build resilience into the value chain on which your business depends.
The future of European companies depends on how well they manage to make their organization and the ecosystem in which they operate sustainably. On that front, reputable corporate data provider Graydon recently made a top transfer with ESG expert Hind Salhane.
According to Salhane, sustainability is about staying relevant in changing circumstances, resilience, shock resistance, continuity despite disruptive external (climate) effects, and, for companies, access to growth capital.
Climate-neutral
In 2020, the European Commission launched the Green Deal through which it aims to make the European Union climate neutral by 2050. By 2030, it wants to reduce greenhouse gas emissions by 50 percent versus 1990 levels. Many companies are required to go through a rapid transition between now and 2030.
How will they finance those changes? Recently, the European Central Bank has put ESG at the forefront. ESG – Environmental, Social, and Governance – is a set of criteria for a company's activities and is the main way to measure the sustainability and ethical impact of an investment in a company or economic field.
From 2024, SMEs will also have to report on the environmental and social impact of their business activities. An intervention with quite some consequences.
Since April 1, under the Corporate Sustainability Reporting Directive (CSRD), large companies covered by EU law or listed or based in an EU member state must report on the environmental and social impact of their activities. As of 2024, that requirement will also apply to SMEs. An intervention with quite some consequences.
A company that shows that it is well prepared and resilient to, for example, the effects of climate change, the stricter legal framework around the environment and changing customer expectations will have more stable prospects. This makes the company less risky and more attractive to lenders and investors.
Adapt or perish, now as ever, is nature's inexorable imperative, wrote H.G. Wells in 1945. The author of The War of the Worlds was a visionary and futurist in addition to being a master storyteller.
There has never been a time when the demand for people who are informed about environmental, social, and governance concerns has been higher than it is right now; in fact, the demand is significantly more than the supply of competent personnel. And precisely therein lies a problem for the further development of climate solutions and sustainable practices.
