August 1, 2020
By Alexa Roccanova
Though the COVID-19 pandemic has disrupted business as usual, it has also heightened awareness of the fragile balance between nature and humanity. To some, the magnitude of the virus’s impact represents a culmination of enduring environmental, economic, and social issues. Sustainability presents a globally beneficial path forward; however, not unlike the pandemic, its extensive scope demands responses that both tackle and develop complex and interconnected systems. Public and private sectors are now seeing the COVID-19 economic recovery as an opportunity for an operational reset.
Ambitious Actions Needed: Sustainable Development Goals
The United Nations Sustainability Goals (SDGs) are helping both sectors to pursue environmental and humanitarian targets by providing a universal framework of seventeen integrated objectives needed to facilitate global environmental, social, and economic well-being by 2030.
On June 22nd, the United Nations Department of Economic and Social Affairs (UN DESA) released a policy brief, urging decision makers to continue pre-pandemic SDG progress and center recovery plans around building a more sustainable, equitable society. The brief identifies three priorities that will “enable the world to build back better in a unified way:”
- Maintain past progress made towards eradicating basic deprivations: continue to help those who are at immediate risk for poverty, hunger, and disease; promote the safe return to work and healthcare access for those who are disadvantaged; address the root causes of these deprivations; eliminate social/legal barriers for marginalized groups; prevent life-long setbacks, such as malnutrition and denial of children’s education.
- Accelerate the universal provision of quality essential services: build resilience and combat inequalities by facilitating universal access to water, sanitation, clean energy, internet, and services that provide healthcare, education, and basic income security.
- Reverse course on the degradation of nature: prevent GHG emissions (7.6% decline needed per year to meet 1.5ºC limit), land degradation, biodiversity loss, wildlife trafficking, absolute material footprints, overfishing, and deterioration of coastal waters.
Locally, New York City’s Commissioner for International Affairs, Penny Abeywardena, said the city is basing its path to recovery on the SDGs with specific emphasis on no poverty, zero hunger, good health and well-being, quality education, and gender equality. “As cities around the world consider a fresh start, let us come together with the Sustainable Development Goals as our guide,” said Abeywardena, “so we can rebuild stronger and better, and, indeed, leave no one behind.”
No More “Business as Usual”
In their recent collaborative report on corporate management of risk, resilience, and sustainability, Greenbiz Group, a sustainability/business-focused media and events company, and NRG, the second-largest conventional power generation company in the U.S., reiterated the importance of maintaining the 1.5º Celsius limit on the global average temperature increase first established in the 2015 Paris Agreement. As industry accounts for about 22% of our country’s GHG emissions, there exists significant opportunity for the private sector to reduce its contribution.
Sue Allchurch, The UN Global Compact’s Chief of Outreach and Engagement, reported in a recent GreenBiz webcast on scaling business impact that of the 84% of companies currently taking action on the SDGs, only 20% are on track to meet their goals by the set deadline of 2030. 46% have integrated goals into their business strategies.
However, now that the COVID-19 pandemic has halted momentum with setbacks including a projected global GDP downturn of 5.2%, widespread extreme poverty, and food insecurity, the time time is ripe for propelling sustainable efforts forward and build societal resilience.
Risk Management Takes on Added Features
In strategizing for resilience, the private sector is incorporating climate change into corporate risk analysis. Global leaders have recognized climate change as a “top long-term risk” to both prosperity and safety. To ensure their survival, businesses increasingly realize that they must be able to adapt in the face of changing environmental and economic circumstances.
The United Nations Global Compact has introduced SDG Ambition, a six-month accelerator program aimed at helping companies implement more ambitious sustainability initiatives within their strategies and operations over the next decade. The program features a reporting platform for participants to track their progress and emphasizes business value, resilience, and long term growth. SDG Ambition also presents the opportunity for smaller businesses with limited resources to learn from the insights of leading institutions. Companies such as SAP and Accenture are using SDG Ambition’s benchmarking guidelines to keep on track for actioning bolder goals.
The Task Force on Climate-related Financial Disclosures (TCFD) provides a framework for reporting climate-related disclosures to investors with specific emphasis on governance, strategy, risk management, metrics, and targets. Its recommendations are already being utilized by corporations around the world.
Enter Scenario Analysis
Scenario Analysis allows for experimentation with multiple possible outcomes in order to predict competitor, customer, and regulator behavior for various situations, ultimately preparing for an array of possible circumstances. It enables companies to build agility into their business planning by taking into account the kinds and levels of uncertainty brought to light by the pandemic.
Scenario Analysis, as described in Greenbiz’s Webcast on overcoming barriers to climate goals, is one method being used by companies such as NRG, Verizon, and Oliver Wyman to enact the TCFD recommendations and obtain science-based targets aligned with their climate objectives. It involves the evaluation of individual event-based scenarios that can pose either “physical” or “transition financial” risks. Physical risks are those which result from extreme climate/weather events, whereas transitional risks come from the financial consequences of institutional changes that would result from policy, technology adoption, consumer behaviors, investor demands, etc.
Once a business determines the implications of such climate risk scenarios they can then “project scenario-adjusted financial statements,” and ultimately estimate scenario-adjusted outcomes. Sustainability “success means communicating in the language of dollars and cents, risks and opportunity, and regulatory need,” notes Edwin Anderson, Partner at Oliver Wyman. There is a need to push for “quantitative rigor.”
A Long and Winding Road is Not the Way Forward
The path forward will no doubt have to be a collaborative one, requiring private and public sectors to swiftly merge their efforts under the common goal of recovery, and addressing the immediate hardships while also planning strategically and scientifically for a complex long term. Integrating COVID restructuring with the green economy is the comprehensive and ambitious action we need. It’s really the only way to tackle the double helix that threatens our very existence on an increasingly fragile planet.
Want to explore a career that calls on your own “quantitative rigor”? Join GreenHomeNYC Careers online on August 11, for a presentation and discussion about careers in Green Finance. For more info and to register: Click here