Can People, Planet and Profit ever be friends?
At the moment, much of society accepts that we are facing social and environmental challenges of enormous dimensions. We still don’t have any simple solutions in place to improve sustainability and address climate change, however.
With the current issues plaguing the sustainable transition, one might even wonder if People, Planet and Profit can ever unite in harmony. Four ongoing challenges relating to People, Planet and Profit.
1. Environmental sustainability worsens social inequality
The first challenge to People, Planet and Profit is that a more sustainable economy doesn’t always fit in well with social objectives. For example, according to a recent PWC survey of 100 European automotive suppliers, when the ban on new ICE cars goes into effect in 2035, this will cause 500,000 jobs to disappear. This is due to the fact that electric cars require fewer components. Additional jobs resulting from the need for car batteries and EV parts cannot compensate for more than 45% of these lost jobs. For this reason, regional authorities and automotive interest groups are not happy with the European Commission’s sustainability plans. After all, how sustainable is a measure that acts to reduce carbon emissions at the cost of greater social inequality?
2. Fossil fuels continue to contribute to global warming
The second challenge to People, Planet and Profit is that nearly thirty years of climate conferences to stop global warming have failed to produce much in the way of noticeable results so far. Progress from that first 1992 climate conference in Rio to the most recent one in Glasgow in November 2021 hasn’t exactly been smooth. For instance, the COP26 Glasgow Climate Pact did not include an agreement to phase out coal as a fuel, as China and India refused to commit on this issue. Instead, it stated that countries would ‘accelerate efforts’ to reduce the use of coal.
Moreover, Amin Nasser, CEO of Aramco, the world’s largest oil company, informed world leaders that investing in fossil fuel remained necessary to avoid the risk of inflation and social unrest. He called the International Energy Agency’s Net Zero by 2050 goal an unrealistic one. With a value of 2,000 billion, Aramco, which is 98% controlled by the Saudi royal family, is the third most valuable company in the world after Apple and Microsoft. The Saudi oil company saw its profits quadruple in 2021, and is also responsible for 4.4% of global carbon and methane emissions over the past fifty years.
3. Citizens are slow to embrace sustainability
The third challenge to the sustainability transition is citizens’ behavior. Their mobility and eating habits only change very slowly. Without strict, well-coordinated government interventions, the majority will continue to opt for cheaper, less sustainable alternatives. This applies to the renewable energy transition as well. Local protestors regularly manage to delay or prevent the placement of new wind farms.
4. Greenflation delays sustainability transition
Finally, People, Planet and Profit is increasingly hampered by ‘greenflation’. This is the paradox that the faster we wish to achieve a sustainability transition, the more expensive it will be and the less likely we are to actually make our climate goals. Prices of raw materials such as copper, aluminum and lithium are soaring due to the increased demand for wind and solar energy and electric cars. Furthermore, the establishment of a sustainable economy requires more fossil fuel temporarily, while stricter environmental and social regulations are being implemented to prevent that. On top of this, not enough capital is available for new investments in sustainable technologies due to the mining industry’s generally poor performance when it comes to sustainability.
We can’t do without People, Planet and Profit
These four challenges make it abundantly clear that the sustainability transition’s economic, environmental and social aspects are all inextricably entwined. The question remains: how to reconcile the three dimensions of People, Planet and Profit into a single reality in order to achieve that sustainability transition?
This article originally appeared as a column by Prof.dr. Philip Joos in CFO Magazine Belgium, March 2022.
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