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February 23, 2022

INSIGHTS ARTICLE: GoImpact Capital Partners - The mother of (Corporate) cultural change is still to come

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The mother of (Corporate) cultural change is still to come

One of the effects of the pandemic was to push Digital transformation up in the agenda of excos around the globe. Companies with retail networks or relying on them had their back to the wall with in-outlet visits collapsing and face-to-face interactions banned. Besides the stress and anxiety this situation created for many companies, employees or customers, this was an awakening to the emergency to quickly innovate and indeed adapt to the "new normal". And there's no (or little) coming back: people are used to working from home, supply chains are mending their weaknesses and we realized there are many things we can do from our laptops, which generated huge savings and efficiency gains. So companies have been through it and many succeeded to accelerate their digital agenda and surmount the unthinkable.
 
Well, sorry to say it but, compared to the level of adaptation climate change is likely to impose, the pandemic was a mere warm-up, no pun intended. There are several reasons for this.
 
First, with the pandemic, the threat was there in your face, and it was life and death relayed by all media so there was little wriggle. Plus the casualties were (are still in some parts of the world) around you. You knew people who had been infected and you could even be unlucky to know some who had to go through intensive care or worse. With climate change, it’s still pretty remote, unfortunately. Sure, there have been many headlines about floods, fires, droughts, ocean acidifications, biodiversity collapse, or melting glaciers around the globe but, except if you were in these unfortunate zones, a few weeks later nobody was speaking about it. We are still speaking about the pandemic now.
 
Secondly, with a virus, it’s easy to understand, we know what it’s like. We’ve all got a virus at some point. And the solution is, at least, understandable: you avoid contacts, sanitize and wash your hands, put on a mask, and, when available, get the vaccine shots. It took a while to get there but the process is still straightforward and the arguments are relatively easy. For climate change, the first issue is to understand the problem. And the scientists have done a terrible job in making it accessible to the mass. There’s no more rebuke of science today, it’s overwhelmingly a result of human activity, but the average Joe doesn’t read the IPCC report or the summary for decision-makers. So the education part, from climate science to the exploration of the range of solutions, while debunking the false ones that can’t scale, is the first step to get everybody in the organization on a similar level of understanding. This takes time and investment. Then only we can start to discuss what we can do about it.
 
Third, the cost to our livelihood is orders of magnitude more important with climate change. Let me put it in numbers. By OECD estimates, the pandemic triggered a 5 to 10% collapse of activity (aka GDP) in many countries in 2020, which was mostly recovered in 2021. This was equivalent to a 5 to 6% drop in carbon emissions globally (on the scale of the drops of the 1929 crisis or 1945 …). To stay below the 1.5°C of temperature rise since pre-industrial levels committed by the Paris Agreement, economies worldwide will have to cut their emissions every year by 7.6% every year for the next 10 years (and this was the United Nations Environmental Program estimates from 2019, we’re late which means we need to do more https://www.unep.org/news-and-stories/press-release/cut-global-emissions-76-percent-every-year-next-decade-meet-15degc ). The debate is still on regarding our capacity to decarbonize our economy at scale (the “decoupling”) since the economy is largely correlated to energy consumption as several studies have outlined (ex: https://link.springer.com/referenceworkentry/10.1057/978-1-349-95189-5_3015 ) and this energy is largely coming from fossil fuels (https://ourworldindata.org/energy-mix). Long story short, abiding by the Paris agreement commitments will mean cutting our production, consumption, and thus emissions massively during the coming decade.
 
Finally, similar to Covid19, doing nothing is no longer accepted. We remember at the beginning of the pandemic when some countries were outspokenly against any drastic measure to contain it. A few hundreds of thousands of casualties later, this wasn’t acceptable anymore globally. For climate change, we’re not there, but the awakening of the overall population and particularly the younger generation is strong. As the last World Economic Forum report put out there, Climate risk is a Business risk. Alright, what does it mean for leadership and transformation teams? This means they have a steep curve ahead and will have to get ready for the ride since, like the climate, there’s no coming back.
 
How to prepare?
  • Educate yourself on these topics, ask your HR teams to help build awareness. Assess the level of awareness of your executive teams (on the science and the facts).
  • Assess the transition risks in your organizations: your supply chain, your staff locations, your clients, your investor's exposure, your technology, and energy sources.
  • Start thinking about resilience and transition: what are the immediate tweaks? What are the more long-term transitions? What does it mean to divest from some carbon-intensive activities or from those over-exposed to stranded assets? (imagine the outlook of companies specialized in the building of oil rigs)
  • Walk the walk, Greenwashing is less and less tolerated and cognitive dissonance between manager behaviors and their teams is less tolerated. 
You’re thinking “Meh, it’s ok we have time”. Look at the challenges to recruit talents or the wave or resignation in many large organizations ( https://fortune.com/2021/09/30/great-resignation-leading-with-purpose-bcg-brighthouse/ ), can you afford to do nothing? This is happening now.
 
Transformation teams have an immense responsibility to play in this journey. Through their deep understanding of the business bolt and whistles, through their understanding of the ecosystem and peers, they play a crucial role in supporting organizations to change for the better.

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