3 ways to ensure voluntary business initiatives support climate action

weforum.org, 13 December 2022

Voluntary business initiatives that tackle climate change need support from policymakers and consumers. Image: Unsplash.

Voluntary business initiatives can be a critical component in the fight against climate change.

  • Finding solutions to complex global challenges requires support from policymakers and consumers.

  • Three key enablers could make these initiatives more effective and build cooperation between nations.

Voluntary business initiatives that tackle climate change cannot bring about urgently needed systemic change fast enough unless they are supported by policymakers and consumers. But it would be wrong to discount them as mere greenwashing exercises or distractions.

First, these initiatives create awareness and shape public opinion and thereby prepare the ground for policy changes. Second, every well-intended and executed initiative counts and every single ton of reduced carbon emissions and every preserved watershed or acre of forest makes a difference, even if the overall outlook continues to deteriorate. Third, green investments and transformations take time to become the new normal. Every investment and firm level commitment counts as they help to build momentum towards a better outlook for the future.

How can we make voluntary business initiatives more effective?

There are reasons to rethink the role of business initiatives and to explore how they can become more effective. Against the background of ongoing political and economic changes, and based on my experience of two decades building global business networks in support of public goods, the following considerations could be relevant:

1. Connect with policymaking

Incremental improvements matter but time is running out. Large-scale changes require policy measures such as effective carbon pricing. The case for voluntary business initiatives to align with policy measures is becoming even more important as hundreds of businesses have made net-zero pledges. Clearly, without major policy changes to reward carbon reductions, the great majority of these businesses would go bankrupt.

Amazingly, only a few of these businesses made their pledges in the context of such essential co-dependents. Have they built a trap for themselves? Was the intent behind these pledges not serious? Or was it simply fear of missing out that made them join net-zero pledges? Whatever the reason, businesses will benefit from leveraging good intentions with policymaking. Moreover, an increased focus on policymaking would force those businesses who have only joined the ride for improved public opinion to rethink their tactics.

2. Focus on technology and innovation

Innovation and technological change doesn’t slow down in times of uncertainty and disruption. On the contrary, crises situations lower the barriers for change. The big transformation towards low-carbon markets is at its core a question of technology shifts. The intersection of technology and environment is already attracting much attention across many sectors and industries.

Major technology shifts in the energy and transport sector are well on their way and at last finance – enabled by technology platforms such as the Arabesque ESG Book – is starting to use valuations that support future-fit business models. It is now key for voluntary business initiatives to focus even more on technology, the most fundamental of the forces that shape human progress.

3. Operate in the sphere of multilateral cooperation

Today, the lessons of history seem to be forgotten and power rivalry, economic nationalism and protectionism are on the rise. State propaganda and the projection of external enemy images are feeding narratives that could become self-fulfilling prophecies. Sadly, those who control power – often just for the sake of power itself – seem to not realize that humanity has a new enemy: climate change, which does not respect national boundaries or spheres of influence.

At some point in the future, nature will force their hands. But in the meantime, the new role of voluntary business initiatives is to help to prepare the ground for policymakers and societies to take more decisive actions on the climate front. With the help of global organizations such as the World Economic Forum and the UN Global Compact who are well positioned to act as enablers, voluntary business initiatives connect people from different cultures and regions and political divides and help to counter the dark forces of power and thereby contribute to safeguard peace, the most important of all public goods.

From Emissions Cheater To Climate Leader: VW’s Journey From Dieselgate To Embracing E-Mobility

DRESDEN, GERMANY - JUNE 08: A worker wipes the VW hood ornament clean on a Volkswagen ID.3 electric caron the assembly line at the "Gläserne Manufaktur" ("Glass Manufactory") production facility on June 08, 2021 in Dresden, Germany. The Dresden plant

DRESDEN, GERMANY - JUNE 08: A worker wipes the VW hood ornament clean on a Volkswagen ID.3 electric caron the assembly line at the "Gläserne Manufaktur" ("Glass Manufactory") production facility on June 08, 2021 in Dresden, Germany. The Dresden plant is currently churning out 35 ID.3 cars per day. The ID.3 and ID.4 cars are also produced at VW's Zwickau plat located in the same region. (Photo by Sean Gallup/Getty Images)

GETTY IMAGES

In September 2015, the US Environmental Protection Agency charged Volkswagen with installing software in their diesel-powered cars that allowed the vehicles to cheat on EPA emissions tests. The vehicles’ real-world Nitrogen Oxide (NOX) emissions were 40 times higher than U.S. standards permitted. The ensuing scandal, known as “Dieselgate,” proved to be the most expensive - over $30 billion in fines and damages - and largest in the history of the automotive industry. The discovery sent the 80-year-old industry leader into a spiral—its brand was battered, huge fines threatened its survival, VW officials were caught lying in an attempted cover up, and VW’s CEO Martin Winterkorn resigned.

The following summer, in 2016, nine individuals, representing a diverse set of skills and backgrounds, were invited by Volkswagen group to form a Sustainability Council to help the company transform itself into a world-leading provider of sustainable mobility. Of course, some of us were concerned that the Council’s work could devolve into an exercise in greenwashing. However, the challenge of trying to positively impact one of the world’s largest auto companies made the offer hard to pass up. If VW truly committed to zero emission vehicles, other OEMs would likely follow with similar strategies - a huge win for climate change action.

The scandal and its repercussions ran deep, though. As we met for our first meeting, October 24 and 25, a US District Court in California was approving the first partial settlement with a fine of $14.7B. There was rising concern as to whether VW could survive this scandal. The nine members of the Council understood the uncertainty. It was clear to VW’s new leadership that the company had to break away from the past and its diesel-centric strategy, embrace zero emission vehicles, and enshrine ethical practices across its workforce to restore its brand.

As tantalizing as that possibility was, it was never going to be easy to realize. First, given the diversity of the council representatives - former politicians, a UN executive, an environmental regulator and a union representative, along with academics and a Red Cross executive - we faced challenges learning to work with each other in initial meetings. We spent significant time discussing and debating our role and the key priorities to focus as a group. Our discussions were arduous and went in different directions, but we quickly settled on a set of strategic changes to advocate with the VW management, which became the guiding principles for the council’s tenure over the six years.

1. Technology Shift: Decarbonization had to become central to VW’s corporate strategy. Diesels now were “radioactive,” leaving VW with few alternatives. Embracing a fundamental shift to clean, e-mobility technology was the best option for both restoring the brand and complying with tightening emissions regulations across the world.

2. Policy Shift: VW was not viewed as a “partner” by regulators or policymakers. With “Dieselgate,” their reputation had bottomed out. The best option going forward was for VW to change its position with regulators and NGOs in all key markets and become an advocate for ambitious standards that reduce pollution and drive e-mobility, rather than fighting with policymakers and regulators

3. Cultural Shift: The Dieselgate scandal was the product of a corporate culture where financial targets had to be met and failure was not an option. Inability to meet emissions regulations at the target costs could not be reported to leadership – so it was necessary to cheat. VW needed to drive a culture shift towards a more ethical, collaborative, and purpose-driven company that could learn from failures.

In the span of six years, the Sustainability Council met twice a year with the VW CEO and Board of Management and, several times with the Supervisory Board and the Worker’s Council leadership. We served under three different CEOs - Matthias Mueller, Herbert Diess, and Oliver Blume and our efforts as council were respected by all three. We saw ourselves as “sparring partners” with VW leadership. Our exchanges were always constructive, even when we took exception to their actions – or lack thereof. Company leadership remained open to our advice under all three CEOs as we continued to advocate for VW to become a leader in sustainable e-mobility and as independent experts, we felt free to criticize the company along with providing and advice on key sustainability and governance issues.

In the early days of the Council’s engagement with VW leadership on the priorities, there was predictable pushback. High-ranking VW managers—whose entire careers had been linked to diesel engines—were anxious about their future with the company. Similarly, union workers were afraid that e-mobility production and digitization would result in huge job losses.

One year after the Council began, in November 2017, VW announced its first large decarbonization commitment—50 billion euros to launch a comprehensive electrification initiative. In early 2018, Herbert Diess took over as CEO and started a massive change process, accelerating many of the changes that we had been advocating for. Decarbonization became a corporate priority and VW’s new CEO drove a rapid expansion of VW’s e-mobility capacity.

Over the next two years, Diess’ commitment to decarbonization and e-mobility strategies began to bear fruit. In 2019, for example, VW’s strategic plan for overhaul was critical to rebranding the company as a leader in sustainability. The International Council on Clean Transportation's (ICCT) said the plan was "bigger, bolder, and far more detailed" than those of major rivals. CNN business described VW as having “embraced electrics with the enthusiasm of a religious convert.”[i]

While we advocated for rebuilding the brand with a transition to e-mobility, we also worked closely with the US Department of Justice-appointed monitor, Larry Thompson, to modernize VW’s integrity and compliance programs. With VW’s changing new posture, it was also easier for us to foster a stronger dialogue between VW, NGOs, and environmental groups.

In recent years, Volkswagen has worked effectively with policymakers to address the planet’s biggest challenge, climate change, by encouraging a more rapid decarbonization of the automotive sector. In the European Union, for example, VW has supported banning the sale of new internal combustion engines (ICE) by 2035. We also supported cross-industry collaboration in the form of a CEO Alliance to support the EU Green New Deal. We met multiple times with EU policymakers and paved the way for industry collaborations, including partnerships between VW and leading energy companies, such as Italy’s Enel and Spain’s Iberdola. These collaborations helped build the foundation for clean energy supply infrastructure for EV charging stations as well as for battery cell production.

In an American political context, Volkswagen also played an important role in protecting existing decarbonization efforts. During the Trump administration, VW put its support behind California’s ambitious car greenhouse gas (GHG) standards—despite legal threats made by the White House. More recently, VW took a firm stand against the legal challenges by oil industry and conservative states in support of President Biden’s GHG car policies.

The council also commissioned several studies around sustainability. An important study conducted with the input of the VW workers’ council analyzed the effects of electric mobility and digitalization on employment and how these changes can be managed. Results showed the transition to e-mobility and digitalization would have a much more modest impact on jobs. The study also revealed that most VW employees were excited about the transformation.

Convincing VW’s CFO and other executives to take environmental, social, and governance (ESG) issues more seriously was another step in the company’s transformation. The Council invested in a better data infrastructure, extended ESG analysis into the supply chain, and integrated sustainability issues into investment analysis, corporate finance, and dialogue with investors. Two specific initiatives included a research project on the effects of fiscal policies for climate protection, and support for local efforts towards a sustainable cobalt supply chain.

Rebuilding the brand took time. But the efforts started to pay off in 2019 when VW was re-admitted to the UN Global Compact, a voluntary agreement from businesses to embrace sustainability issues. Later, VW’s climate leadership was acknowledged by the Science Based Target initiative, an international group that determines best practices in greenhouse gas emissions reductions.

Since 2018, VW has staked out a world leadership position in e-mobility. With “New Auto,” VW now has a compelling strategy in place to shape the future of sustainable mobility and its emerging value chain which includes cell production, energy and charging, new forms of mobility and digital integration into mobility. But one of the challenges in becoming a leader is that the market expects you to continue to lead. So, for all VW has accomplished, the world is catching up. More specifically, we believe the following needs to be done:

· Maintaining a consistency of purpose, with a sense of urgency: Keep the focus on delivering the bold e-mobility strategy that was developed under CEO Herbert Diess. As the industry matures and other legacy manufacturers catch up, VW must continue to move rapidly, while also adopting a more agile approach.

· Creating state of the art ESG policies, operations, and data infrastructure:Drive valuation prospects with capital markets while at the same time motivating structural changes necessary to accelerate the transformation across all brands and business activities.

· Doubling down on innovation and digitalization across all activities: Accelerate the technologically-driven change in the company in pursuit of aggressive sustainability targets. One example is new investment in battery cell production that incorporates circular material flow in the design phase to maximize recovery of valuable materials to improve resilience and environmental footprints. A recent Council report illustrates how digital solutions offer particularly excellent potential.

· Delivering on Commitments: Move systematically towards carbon neutrality by 2050, including the use of renewable energy, and low emission materials produced in ethical and sustainable ways, with interim performance milestones, and sharing of progress on an annual basis.

· Collaborating with Policymakers, NGOs, and other stakeholders: Continue the collaboration with policymakers in developing ambitious policies and standards to decarbonize cars and trucks, as well as expand and strengthen the collaboration with NGOs and other stakeholders.

· Building a World Class EV Infrastructure: Work together with EV charging companies, cities, and governments to build out the easiest to use, ubiquitous, and reliable charging infrastructure across VW’s markets.

The Sustainability Council’s operations will draw to a close at the end of 2022. It is, of course, difficult to ascertain the exact value we added to the transformation of the company, although Diess credited us as “a driver and a corrective for our strategy.” We hope that our participation has added value to the transformation of the company from diesel cheater to e-mobility leader with more ethical practices.

To successfully complete its massive transformation, VW will have to activate its full potential by reviving a spirit of innovation, motivation, and collaboration. Sustainability must be an important driver towards that end. The latest study initiated by the Council on workplace transformation confirms that VW employees are highly sensitized and ready and that they trust management on economic decisions.

VW is on the right track now and we hope the company under CEO Oliver Blume will accelerate the pace of change—especially given the increasingly horrific impacts of climate change-driven human and ecological suffering around the globe. As the world struggles to reduce greenhouse gas emissions quickly enough to stave off the worst impacts of climate change, VW’s strategies like New Auto can lead the way.

________________________

This article was written in cooperation with Margo Oge, a member of VW’s Sustainability Council and published on Forbes.com on 5 December 2022.

Deutschland und China: Ein Plädoyer für Zusammenarbeit

Der Kampf gegen den Klimawandel gelingt nur mit der Volksrepublik. Deutschland sollte deshalb das Narrativ ändern und mit China eine Zusammenarbeit auf Augenhöhe anstreben, fordert Georg Kell

Georg Kell Der Autor ist Chef des Fintech Arabesque, Sprecher des Nachhaltigkeitsbeirats von Volkswagen und Gründungsdirektor der UN-Initiative Global Compact für nachhaltig handelnde Konzerne. (Foto: Dominik Butzmann [M])

Georg Kell Der Autor ist Chef des Fintech Arabesque, Sprecher des Nachhaltigkeitsbeirats von Volkswagen und Gründungsdirektor der UN-Initiative Global Compact für nachhaltig handelnde Konzerne. (Foto: Dominik Butzmann [M])

Wie wir die Beziehungen zu China definieren wird weitreichende Auswirkungen auf die Zukunft Deutschlands und Europas haben. Die Rivalität der Großmächte nährt aktuell ein Narrativ, das China als Feind und Bedrohung darstellt. 

Das Narrativ könnte zur selbst erfüllenden Prophezeiung werden, sodass eine Konfrontation am Ende unvermeidlich ist. Aus Angst vor einem Kontroll- und Einflussverlust in der Welt wird unter dem Vorwand moralischer Überlegenheit und einer Systemrivalität für eine wirtschaftliche Entkopplung argumentiert. 

Natürlich muss auf der Einhaltung von Menschenrechten bestanden werden. Doch das vorherrschende Narrativ der Spaltung ist nicht nur falsch, es ist auch gefährlich.

Falsch ist das Narrativ, weil die uralte Machtbesessenheit als Selbstzweck die Tatsache ignoriert, dass es in unserer modernen und von gegenseitigen Abhängigkeiten geprägten Welt keine Alternative zur Zusammenarbeit gibt, wenn wir Frieden und Wohlstand sichern möchten.

Wir haben einen neuen gemeinsamen Feind: Der Klimawandel ist die größte Herausforderung, mit der sich die Menschheit je konfrontiert gesehen hat. Er bedroht ganz unabhängig von Glauben oder Sprache die Existenzgrundlage der Weltbevölkerung.

Wir verdanken einen Großteil unseres Wohlstands dem Handel mit China

Gegen den Klimawandel haben wir nur gemeinsam mit China eine Chance. Noch ist das Land sehr abhängig von Kohlestrom. Es ist gut, wenn der Kampf der Wirtschaft gegen den Klimawandel global geführt wird.

So lassen sich auch im Chinageschäft der nötige Druck zur Dekarbonisierung aufbauen und internationale Benchmarks austauschen. Die Dekarbonisierung von Wertschöpfungsketten und Prozessen kann nur durch unternehmerisches Handeln – insbesondere im technologischen Bereich – und durch Zusammenarbeit erfolgen.

Der Klimawandel muss zur außenpolitischen Toppriorität werden und Politiker müssen sich von althergebrachten Machtgedanken verabschieden, die auf geografischen Einflussbereichen und der Kontrolle über Völker basieren.

Gefährlich ist die Idee eines Rückzugs aus China aber deshalb, weil er den wirtschaftlichen Niedergang und soziale Unruhen zur Folge haben kann. Unser Wohlstand ist nicht vom Himmel gefallen. Vielmehr ist er in großen Teilen auf den Handel mit, und Investitionen in China zurückzuführen.

In China sind dadurch Hunderte Millionen von Menschen der extremen Armut entkommen. China ist und bleibt ein wichtiger Markt und entwickelt sich zu einer immer stärkeren Innovationsquelle.

Und der Markt sichert Arbeitsplätze in Deutschland. Bei Volkswagen in Deutschland sind viele Arbeitsplätze direkt und indirekt mit dem Chinageschäft verbunden. Die drei Milliarden Euro des anteiligen operativen Gewinns aus dem Markt stützen auch Investitionen in Europa sowie die Transformation zur Elektromobilität.

Gleichzeitig baut Volkswagen das Geschäft in den USA weiter aus und ist in Europa und Südamerika stark. Aber China ist Deutschlands wichtigster Handelspartner und wird es auf lange Sicht bleiben.

Rund 40 Prozent seiner Fahrzeuge hat der Volkswagen-Konzern im vergangenen Jahr in China verkauft. Verwehrt man westlichen Unternehmen den Zugang zu China, schnürt das Umsatz- und Innovationsströme ab, was wiederum mit weitreichenden Folgen für den Arbeitsmarkt und die Konjunktur einherginge, gerade auch in Deutschland und Europa. Deutsche Unternehmen wären nicht mehr in der Lage, ihre ambitionierten Dekarbonisierungsziele zu finanzieren.

Unternehmen können und sollten die Staatsmacht nicht ersetzen. Der Instrumentalisierung von Wertesystemen, insbesondere von Menschenrechten zur Ausübung von Machtpolitik, muss Einhalt geboten und die zugrunde liegende Problematik offengelegt werden.

Menschenrechte sind nicht verhandelbar. Daher müssen globale Unternehmen, um erfolgreich zu sein, die höchsten Standards einhalten, ganz unabhängig vom Umfeld, in dem sie agieren.

Menschenrechte dienen dem Schutz von Menschen und ein Rückzug aus bestimmten Regionen ist nur dann gerechtfertigt, wenn die Mitarbeitenden vor Ort von der Einstellung des Betriebs profitieren würden.

Westliche Unternehmen sind in der Xinjiang-Region aktiv und können erst so ihre Werte und Standards vor Ort leben. Präsenz bringt dort mehr als Rückzug. Auch die Auswirkungen auf Mitarbeitende vor Ort sind zu berücksichtigen.

Moralische Überlegenheit ist ein Ausdruck von Arroganz

Außerdem ist die Vorstellung, der Westen habe so etwas wie ein Monopol auf moralische Überlegenheit, schlicht und ergreifend falsch. Die europäischen Politiker von heute sind in der Regel nicht in extremer Armut aufgewachsen und haben nie einen Krieg erlebt.

Wir alle sind in der glücklichen Lage, Teil dieser Generation zu sein. Die Annahme, unsere Erfahrungen auf andere projizieren zu können, ist arrogant und töricht. Jedes Land, jede Kultur hat eine eigene Geschichte und eigene Herausforderungen.

Wir müssen uns nur fragen, warum so viele asiatische, afrikanische und lateinamerikanische Länder sich nicht gegen das Putin-Regime stellen, um zu verstehen, dass unsere unterschiedlichen Vergangenheiten zu unterschiedlichen Interpretationen führen.

Moralische Überlegenheit ist der Ausdruck der Arroganz unserer Interpretation und zeigt, wie wenig wir von der Geschichte anderer Länder wissen. Wenn wir unserem Führungsanspruch gerecht werden möchten, müssen wir Bescheidenheit und Respekt an den Tag legen.

Das soll nicht heißen, dass der politische Diskurs zu Menschenrechten und deren Schutz durch Staaten gescheitert ist oder nicht fortgeführt werden sollte. Aber Sachverhalte, die die Politik nicht zu lösen vermag, auf Unternehmen abzuwälzen ist nicht zielführend und wird einen noch größeren Schaden anrichten.

Wir müssen uns nur fragen, warum so viele asiatische, afrikanische und lateinamerikanische Länder sich nicht gegen das Putin-Regime stellen, um zu verstehen, dass unsere unterschiedlichen Vergangenheiten zu unterschiedlichen Interpretationen führen.

Moralische Überlegenheit ist der Ausdruck der Arroganz unserer Interpretation und zeigt, wie wenig wir von der Geschichte anderer Länder wissen. Wenn wir unserem Führungsanspruch gerecht werden möchten, müssen wir Bescheidenheit und Respekt an den Tag legen.

Das soll nicht heißen, dass der politische Diskurs zu Menschenrechten und deren Schutz durch Staaten gescheitert ist oder nicht fortgeführt werden sollte. Aber Sachverhalte, die die Politik nicht zu lösen vermag, auf Unternehmen abzuwälzen ist nicht zielführend und wird einen noch größeren Schaden anrichten.

Die deutsche Regierung muss mit China eine Zusammenarbeit auf Augenhöhe suchen

Zum umsichtigen Walten gehören die Vermeidung von extremen Abhängigkeiten, eine gewisse Risikovorsorge und die Durchsetzung robuster Regularien. Eine selbsterklärte moralische Überlegenheit und das Ignorieren der durch den Klimawandel hervorgerufenen Bedrohungen zeugen von einer Wiederholung von Fehlern aus der Vergangenheit.

Klar geregelter Wettbewerb bei gleichzeitiger Förderung der Zusammenarbeit gegen den Klimawandel ist der einzige Weg in eine sichere Zukunft.

Deutschland und Europa müssen sich am Riemen reißen und mit Innovation und sozialer Integration führen. Nur so lassen sich andere inspirieren.

Die deutsche Regierung hat eine historische Chance, mit der künftigen Chinastrategie das Narrativ zu verändern und auf eine Zusammenarbeit auf Augenhöhe zu drängen. Eine Zusammenarbeit, die von dem Wissen um die gegenseitige Abhängigkeit und von gegenseitigem Respekt geprägt ist.

Wir haben zweifelsohne eine historische Verantwortung, beim wichtigen Kampf gegen den Klimawandel die Führungsrolle zu übernehmen und aufzuzeigen, dass die Dekarbonisierung der Wirtschaft bei Erhaltung des gesellschaftlichen Friedens nicht nur möglich, sondern auch erstrebenswert ist.

Germany and China: The Case for Engagement

How we frame the relationship with China will have far-reaching implications for the future of Germany and the rest of Europe. Big-power rivalry on both sides of the Atlantic is currently feeding a narrative that casts China as an enemy and a threat that might eventually lead to confrontation. Motivated by the fear of losing control and influence in the world, the case for economic decoupling is made by invoking moral superiority and system rivalry. This narrative is both flawed and dangerous.

It is flawed because the ancient obsession with power for the sake of power ignores the fact that in our modern and interdependent world, we have no choice but to collaborate if we want to secure peace and prosperity. We have a new common enemy – climate change. It is the biggest challenge humanity has ever faced and threatens the very foundations of humanity, irrespective of creed or language. We only stand a chance to turn the tide on climate change if China is on board. Decarbonization of value chains and processes can only happen through corporate – especially technological - engagement and collaboration. Climate change must become the top foreign policy priority and policy makers must retire the ancient power myths that are based on notions of geographical spheres of influence and control over people.

The narrative of disengagement with China is also dangerous because it has the potential to lead to economic decline and social unrest. Our wealth did not fall from heaven. Much of it was earned through trade and investment with China, where it has helped hundreds of millions of people to escape extreme poverty. China remains an important market and increasingly also a source of innovation. Denying Western companies an engagement with China would cut them off from revenues and innovation with far-reaching consequences for employment and economic wellbeing. German companies would no longer be able to finance their ambitious transformation agendas towards a carbon-neutral economy. In short, Germany would not be able to lead the big transformation that is so urgently required.

The weaponization of value systems, in particular making human rights the handmaiden of power politics, needs to be rejected and its fundamental flaws need to be laid open. First, for companies to have a positive footprint, they need (and always needed) high standards for treating their employees and managing their supplies, irrespective of the broader environment in which they operate. Human rights are about people, and divestment is only justified if local employees are better off if the operations are discontinued. Companies cannot and should not substitute for state power.

Second, the idea that the West has a monopoly of moral superiority is simply wrong. Today’s policy makers in Europe have never experienced extreme poverty or war. We are the lucky generations. Assuming that our experience can be projected onto others is arrogant and foolish. Every country and culture has its unique history and struggles. We just need to ask the question why so many countries from Asia, Africa and Latin America do not rally against the Putin regime to understand that our own history and their history have different interpretations. Moral superiority is the arrogance of our interpretation and a measure of how little we understand about the history of others. Modesty and respect are called for if we are to give real meaning to the claim of leadership. This should not mean that the political discourse on human rights and the duty of states to protect them has failed or should not be continued. But offloading on companies what politics cannot solve does not help and will only inflict more damage. 

Prudent stewardship involves avoiding extreme dependencies, preparing for disruptions, and insisting on robust rules of engagement. Self-declared moral superiority and ignoring the threat of climate change while falling back to a “Kaiser Wilhelm Kanonenpolitik” is a recipe for repeating past mistakes. Competition based on clear rules while nurturing collaboration to fight climate change is the only way to secure a safe future. Germany and Europe need to get their act together and lead with innovation and social inclusion, which is the only way to inspire others. And no doubt, we have a historic responsibility to lead the most important struggle of all – showing that decarbonizing economies and maintaining social peace is both doable and desirable.

Corporate Sustainability in Crisis?

Gray-brown donkey with white nose standing on stony and bushy grass field, some trees and dark hills in the background,

Published in Forbes.com on June 13th, 2022

“The world is on a downhill path towards more disruption, poverty and danger.” This is how Martin Wolf of the Financial Times recently assessed the global state of affairs after analyzing how the war in Europe has been multiplying fragilities. The uncertain outlook ranges from more state rivalry, financial instability, stagflation, further supply shocks to an increase in hunger and poverty, especially in developing countries. Sadly, the list is not complete. The level of heat-trapping gases in the atmosphere has reached a new record – 420 ppm, essentially showing that efforts to deal with the climate crisis have so far not bent the curve. Climate- and nature-related disruptions will compound uncertainties ahead of us.

What does this mean for the modern corporate sustainability movement and its financial equivalent, the ESG movement, which started to emerge about two decades ago? Voices claiming that these movements are doomed to become a footnote in history are already starting to be heard. Some of those who are making the case for the backlash against corporate sustainability and ESG are clearly motivated by the desire to protect established interests. They now see an opportunity to cast the movement as ideologically motivated, thereby relegating it to political divisiveness. Others are willing agents of the backlash for personal gain. But all share a surprisingly superficial way of reasoning, failing to take into account the broader context of the sustainability movement. And much of the popular press and media is happily playing along with the noise without probing relevant questions.

The modern corporate sustainability movement was premised on conditions that no longer hold in today’s world. A rules-based system and multilateral cooperation provided a predictable framework, including access to markets and natural resources. Low transportation costs and scale-and-efficiency effects led to the development of vast supply chains and ultimately helped hundreds of millions of people to escape poverty while creating enormous wealth for shareholders and skilled professionals. Universal values backed by UN conventions in areas such as human rights, labor rights, environmental stewardship and anti-corruption were respected everywhere, at least in principle. In a globally integrated marketplace, corporations all over the world were part of a race to the top, willing to improve environmental and social standards in order to be able to compete anywhere. As the influence of corporations grew, civil society rightly argued that power and responsibility cannot be separated and put pressure on corporations to improve their ESG performance.

Today, we face an entirely different world. Market supremacy and multilateralism are retreating while protectionism is back. Security issues and the ancient game of state power are reshaping framework conditions for markets in profound ways. Corporations have already started to react to the new emerging order, seeking new tradeoffs between efficiency and resilience by reconfiguring supply chains and making investment decisions that mitigate political risks. Will compliance with political regimes become the new north star for corporate survival and growth, at the expense of the corporate sustainability and ESG movement that dominated over the past two decades?

History is not necessarily a reliable guide for the future, but it is noteworthy that similar questions were asked in the aftermath of the financial crisis of 2007-2009. The argument then was that corporate sustainability would fall victim to cost cutting and to the need to focus on core business functions. The opposite turned out to be true. Corporations maintained or increased their sustainability efforts as part of their survival strategy, realizing that it was essential to rebuild trust. Shortly afterwards the financial industry discovered what many business executives had long known: good ESG performance is a necessary precondition for long-term success. Today, corporate sustainability and ESG analysis are robustly embedded in corporate boardrooms and in the valuation strategies of investors and regulators, while consumers continue to exert incentives and pressure that drive the movement.

Moreover, three megatrends driving sustainability issues show no sign of slowing down: first, the irreversible trend to price climate change-related externalities and the degradation of the natural environment are bound to intensify over time; second, technological change - in particular AI and digitalization - continue to disrupt business, improve transparency and the measurement of sustainability issues, and thereby facilitate their inclusion in decision making; third, people everywhere, especially among younger generations, are increasingly demanding faster change in order to balance profit, the planet and humanity.

How will these trends interact with the uncertainties associated with political and macroeconomic changes? And how will this influence the future of corporate sustainability and ESG?

1) Environmental Issues – a Strategic Imperative

Irrespective of political power games and economic cycles, the continued buildup of heat-trapping gases in the atmosphere and the destruction of eco systems will increasingly force our hands. Eventually, emissions will have to be priced high enough to motivate systemic change. This is bound to become a central theme for societies and markets. Business has started to anticipate these changes as is evident in the growing number of corporations that are aligning with the Science Based Targets initiative. Corporations are well advised to double down on decarbonization and environmental stewardship. For investors seeking to thrive in the long run, it is becoming ever more important to fully account for climate and natural risks and for corresponding opportunities.

The current supply chain disruptions and the rising raw material prices are also opening up new opportunities for closed-loop material flows and new business models. “Cradle to grave” concepts have been around for decades. But they have had little impact, as it has been more cost-effective to “extract, process, use and throw away”. A mixture of market-induced price increases and new regulation in areas such as plastics may now prepare the ground for new process designs that will ultimately lead to closed-loop material flows.

2) Bridging the Divisiveness of Social Issues

As governments take on a greater role, one might expect that social issues will become less important for corporations and investors. However, rising inequality, political divisiveness within countries and social movements that challenge established norms will continue to require corporations and investors to continue to adapt. So do changing workplace practices and the race to attract and retain talents. Cultural changes are not slowing down. No doubt, the social agenda will play an ever-greater role.

In addition, system rivalry between big powers is instrumentalizing human rights. Corporations and investors are easily caught between a rock and a hard place. For businesses to retain a license to operate, they need to navigate conflicting signals while ensuring that their human rights policies and practices are state of the art and that their own operations do not infringe on human rights. In a more divisive world with competing agendas and less willingness to collaborate, business may explore opportunities to rediscover the importance of universal principles as advocated by the UN Global Compact. Searching for a new balance between efficiency and scale on the one hand and less exposure to political risks on the other will require corporations to better adapt to local conditions. But going more local can only succeed if the same high standards and values are upheld everywhere.

3) Leveraging Technology to Drive Sustainability

Uncertainty about the future is not slowing down technological change. On the contrary, crises and disruptions lower barriers against change and increased the willingness to experiment with new approaches. We are entering a new era where a range of technological breakthroughs are redefining the capabilities of human ingenuity. The nexus between technology and sustainability is becoming the new sweet spot for forward-looking corporations. New forms of collaboration in a number of sectors of the economy can already be observed, including energy, transport, and material processing, where sustainability imperatives, such as decarbonization, are met with innovative business concepts that leverage technology.

The advance of artificial intelligence and data-driven business models will also disrupt finance and help to firmly embed sustainability goals in analysis and decision making. Digital platforms and smart analytics as advanced by ESG Book will greatly facilitate the utility of ESG data and thus overcome the current shortcomings of ESG ratings, improve dialogue with investors and ensure that ESG data is publicly accessible and comparable. Advances in ESG data will also help to overcome the current backlash. ESG-related information will grow in relevance for corporations and investors alike. In times of uncertainty, the availability of ESG information is even more important to better assess risks and opportunities which are not (yet) part of the market price. The prospect of regulatory requirements to disclose relevant information and recent efforts to establish a global base line as spearheaded by the International Sustainability Standards Board (ISSB) will add further momentum.

4) Rediscovering Corporate Citizenship

Sadly, the world is utterly off target to meet the UN Sustainable Development Goals. As political and environmental risks and disruptions are bound to lead to more humanitarian emergency situations, corporations and investors with a global footprint will be challenged to adapt their “corporate citizenship” activities. Philanthropy and community engagement are only a tiny fraction of the corporate economic footprint but can make a huge difference in the lives of people in need and can greatly nurture a purpose-driven corporate culture. Supporting trusted humanitarian global organizations which are not tools of power politics or an extended arm of narrow national interests can not only save the lives of innocent children but also help to rebuild a sense of humanity that connects and nurtures.

The world is moving in the wrong direction. Corporations and investors have no choice but to adapt to changing framework conditions, comply with sanctions and hedge political risks. The prospect of inflation, further supply chain disruptions and slowing growth will all require adjustments to ensure survival. At the same time, the irreversible forces of technological change and destruction of the natural environment not only pose new threats but also new opportunities. Corporate sustainability and ESG will not only survive, but increasingly become integral to strategy and decision making powered by technological advances and driven by the imperative to cope with a messy world.

The movement will evolve and adapt, but it is in search of an updated narrative. The nexus between technology and sustainability offers a solid basis on which strategies and operations can be built. And in the broader context of human co-existence beyond the narrow confines of historical coincidences, such as where we are born or what kind of culture we are exposed to, there is now an opportunity to revive the universal values of respect, decency, and good stewardship, as advocated by the UN Global Compact. Moreover, the climate agenda offers opportunities to collaborate beyond political divides which hopefully will inspire governments to rediscover that the enemy is not “them” but us.

Can Management Be Beautiful?

Bertrand Russell, the Nobel laureate, logician, philosopher, and humanitarian, insisted that “mathematics, rightly viewed, possesses not only truth, but supreme beauty — a beauty cold and austere, like that of sculpture, without appeal to any part of our weaker nature…” and this is the view that propelled his life.¹ So passionate was his pursuit of beauty that he described a six-month prison sentence for conscientious objection as “agreeable,” as it allowed him to work undisturbed, writing the entirety of Introduction to Mathematical Philosophy from his cell.²

Many of us have fleetingly felt the inspiration that drove Russell — watching our children thrive or being fully absorbed in a passion project. But most are rarely motivated this way in their work. Instead, we are more likely driven by obligation or financial rewards. Whether we do it knowingly, we rely on the business philosophy called scientific management. Formulated in the early 1900s by Frederick Winslow Taylor, scientific management is about the maximizing efficiency and measurability of work. He believed that managers ought to specify “not only what is to be done but how it is to be done and the exact time allowed for doing it.” ³

Taylor believed that agency and control should remain with managers as much as possible. To do this, work would be sub-divided, standardized, and measured. Each task was codified, and workers were trained to execute them as specified. Finally, managers were to ensure that every step could be observed and measured for further optimization.

Scientific management is a product of its time, conceived when a significant amount of work took place in factories. It is a powerful approach for optimizing physical production, at least in part because it minimizes the quirky and unpredictable human aspects of work. Scientific management loses its power when applied to work where it is precisely these human elements that are critical. Specifically, scientific management is less effective in the following contexts.

  • Problems of cooperation. Effective cooperation between humans cannot be readily compelled or mandated. Likewise, no KPI can completely measure its success, or properly incentivize its implementation. To cooperate effectively we need to share common aspirations and values with others and no amount of automation or standardization can ensure this.

  • Creative or empathic work. Work that can be easily standardized is becoming less important for humans to execute. Over time, routine work, from bus-driving to copyediting, will be automated using artificial intelligence. As routine work disappears, we will be left with work which depends upon more uniquely human traits and abilities like empathy, creativity, and ethics. These are not the skills scientific management was designed to support.

  • Inspiring the next generation of employees. Young people today want their jobs to be personally and socially meaningful. According to a recent Gartner Research poll, more than half of respondents reported that the COVID-19 pandemic had “made [them] question the purpose of [their] day-to-day job”. It is not enough for companies to have a purpose statement. Employees increasingly want to believe in the companies and work which absorb the major portion of their waking hours. The tools of scientific management — goals, quotas, evaluations, monetary incentives and the threat of being fired — are insufficient to motivate today’s knowledge workers.

  • Continuous transformation. The pace of business change is accelerating to keep pace with technology and shifting societal expectations, such as decarbonization. As the pace increases, scientific change management approaches, which tell us what to change but not why, leave employees exhausted. Classical approaches rely on top down prescription, overwhelming employees with a sense that any change is an alien event happening to them, rather than a forward-looking opportunity they are a part of and have ownership over.

In short, there is a limit to how far we can stretch the paradigm, and we are reaching it. Leaders implicitly know that we need to better inspire and use human talent, hence our collective obsession with purpose. These attempts often fall short however, as author Ranjay Gulati implies in his need to distinguish “deep purpose” from mere “purpose”.

Instead, we need a new paradigm to stand beside scientific management. We need a paradigm which holds our humanity as the central ingredient in solving human problems. We need a more humanistic approach to management.

Frank Knight, a leading economic and business thinker of the 20th century, balked at the notion of managing human tasks with ‘scientific management’ alone. In his words:

“A large part of economic activity, of the task of making a living for society, consists of converting material things into forms which can be scribed and standardized. The process of such transformation can be reduced to rule and specification, that is, they can be treated “scientifically.” But the larger and more difficult part of the work of the world consists either of working things into forms which we can only characterize by such vague terms as beauty …or else in working with human beings themselves and bringing them into relations which are agreeable and effective. Just what it is that makes human relations agreeable and effective baffles scientific statement just as obstinately as that which makes an esthetic object beautiful.” ⁴

What could “beautiful” management, better able to inspire the full potential of human creativity and cooperation, look like? We must look further back for inspiration. Since antiquity, philosophers, artists, and clergymen alike have studied beauty for its ability to inspire, and for the almost gravitational pull it hason us.

The ancient Greeks believed that beauty, truth, and goodness were closely related. In fact, the word for beauty common in Plato’s time was kalos, meaning noble or fine. In addition to beauty, it designated something moral beyond duty or obligation. Importantly, it was understood that neither beauty nor this elevated morality can be compelled — both must come from an intrinsic motivation. To do something beautiful, in that Greek sense, is to do something good, out of motivation simply to do that good thing, rather than because of an ulterior motive.

The Greeks also believed that beauty was a path to understanding something beyond the finite — giving us the ability to see beyond ourselves and beyond the moment toward some greater common purpose. This was echoed by many medieval thinkers, who described all beauty, whether natural (say, that of a flower), manufactured (say a painting), or intellectual (a well-ordered mathematical proof) as an emulation of God’s perfect beauty. Later philosophers severed the connection between beauty and the divine but continued to insist that beauty gave access to a greater truth. Good aesthetic taste was seen as a path to empathy and improved judgment, and as such as a conduit for the moral betterment of humanity.

The power that beauty has isn’t a dusty relic or a philosophical whimsy. Bertrand Russell felt it. And no doubt many of us have felt it fleetingly too in those moments when our work seemed noble and infinite, more of a privilege than a duty. Then we sense that beauty is a miraculous motivator. When we have distilled some of this power, inside or more likely outside of work, we know that it is non-instrumental, that it helps us see beyond ourselves, often to a common higher purpose.

The future of work has become a fashionable topic, with discussion largely focused on how to reorganize existing activities temporally and spatially in the current management paradigm. But we are also free to imagine more substantially new ways of working and managing. What would it take to inspire people’s best efforts without compulsion, to engage their curiosity and imagination, to awaken higher aspirations and to illuminate common purpose, engaging the full potential of human talent? We don’t have all of the answers, but our investigations provide some clues on how to materialize “beautiful management”.

Pursue infinite goals

Tactical goals are undoubtedly useful in many contexts. But where appropriate, dare to treat such goals as an orthogonal result of pursuing excellence. Imposing finite goals provides collective consistency and protection for near-term priorities, but sometimes at the expense of autonomy, aspiration, or personal meaning.

Allow people to work on whole problems

Encourage curiosity and ownership of whole problems, from inception to completion. It may be more efficient to subdivide and parcel out tasks, but less likely to inspire. For those that must naturally be subdivided, develop narratives that show how all activities are essential parts of the whole, encouraging ownership and cohesion across the firm.

Pursue prosocial effects

Beauty is not just seen or heard; it is also felt. It reaches for the heart, so to speak. Because it is so personal, beauty can also be a powerful interpersonal agent. To consider beauty together, or better, to create beauty together, is to build a lasting understanding and a common purpose. Through beauty, we learn to embrace causes larger than ourselves. We learn also to take joy in others’ success — the hallmark of lasting social collaboration. And so caring for others in and through one’s work turns from a duty to a voluntary commitment.

Inspire, don’t compel

When is the last time you put your all into something you were told to do, or incentivized to do, as opposed to something chosen as meaningful to you? It rarely happens, and though to compel is simpler as a manager than to inspire, efforts towards the latter are undoubtedly more effective.

Encourage alignment with excellence, not hierarchy

Goals may be best identified from the mountain top, tasks not so much. The more creative, adaptive, and fast-paced the work, the greater the need for individual autonomy. Even so, employees need an orientation that integrates diverse approaches into a harmonious whole. Aesthetic excellence provides that self-steering orientation toward the larger cause. It is also, in many ways, less arbitrary and more convincing than a principle of because-I-said-so.

Take inspiration from great craftsmen and women, such as carpenters, architects, and ceramicists, who, without prescriptive direction, conceive work that brings joy to many. Apple’s key industrial designer, Jony Ive, watched his father work as a silversmith during his childhood, and reports that the hands-on process of making was an important influence.

Cultivate pride in your workplace

Recall the first home you had that you were proud of. How did your experience of that space differ from your experience in a college dorm, or childhood home? You likely made sure you actually liked the art you hung, and took much more care cleaning. Similarly, when we take pride in something, especially something we believe to be beautiful, we take more care in preventing corrupting forces. In your first home, the corrupting forces were likely dust bunnies and dirty dishes; in the workplace, corrupting forces are apathy, corporate decline, harassment, and corruption itself.

Facilitate individual journeys

Scientific management tries to distill individuality out of the workplace. But for some jobs, especially those that are more creative in nature (including, as Frank Knight insisted, management), to standardize is to obstruct excellence.

From manager to creative designer to data scientist, moments of excellence and inspiration can only come when an employee applies the best of her specific abilities, whether that means following the handbook or not.

This list is not comprehensive — it can’t be, since unlike scientific management, inspiration and beauty have no simple universal formulae. But hopefully, it can help us to peep beyond the constraints of scientific management and help us to tap into a neglected part of human potential. Neither is the implied approach a panacea. We don’t suggest that anyone practice only ‘beautiful management’, but that the scientific and the beautiful serve managers as complements. If we are optimizing a production line, scientific management will likely provide the best approach. But it will serve us well to give the engineers doing that optimization the space, agency, and inspiration to do work that is truly their best.

[1] https://users.drew.edu/~jlenz/br-ml-ch4.html

[2] https://www.openculture.com/2020/02/bertrand-russells-prison-letters-are-now-digitized-put-online-1918-1961.html

[3] Taylor, Frederick Winslow. The Principles of Scientific Management. Harper & Brothers, 1911, archive.orghttps://archive.org/details/principlesofscie00taylrich/mode/2up, Accessed 27 Apr. 2022.

[4] Frank H. Knight in Iowa City, 1919–1928. (2011). United Kingdom: Emerald Group Publishing Limited. https://www.google.com/books/edition/_/FQ0zqzbhbMgC?hl=en&gbpv=0

About the authors

Madeleine Michael is an associate in the New York office of BCG and a BCG Henderson Institute Ambassador. You may contact her by email at Michael.Madeleine@bcg.com

Martin Reeves is a managing director and senior partner in the San Francisco office of Boston Consulting Group and the Chairman of the BCG Henderson Institute. You may follow him on Twitter @MartinKReeves and contact him by email at Reeves.Martin@bcg.com.

Claus Dierksmeier is Professor of Globalization Ethics at the University of Tübingen.

Georg Kell is Chairman of Arabesque, a sustainability-based asset manager, and also the founding director of the UN Global Compact.

About the BCG Henderson Institute

The BCG Henderson Institute is the Boston Consulting Group’s think tank, dedicated to exploring and developing valuable new insights from business, technology, economics, and science by embracing the powerful technology of ideas. The Institute engages leaders in provocative discussion and experimentation to expand the boundaries of business theory and practice and to translate innovative ideas from within and beyond business. For more ideas and inspiration, sign up to receive BHI INSIGHTS, our monthly newsletter, and follow us on LinkedIn and Twitter.

War In Europe and Corporate Responsibility

Forbes.com, Leadership Strategy, March 8th 2022

Dead pigeon lying on gray cobblestones

Born in 1954 in Germany, I always wished to live at least until the year 2045, so I could say, “100 years of peace in Europe – lucky me, it has been accomplished!” This dream was shattered on Feb. 24, 2022. The oldest story in the world, the narcissistic will to power, which runs most rampant in those who are the most powerful, is still alive and kicking. Alas, homo sapiens has yet to arrive in the halls of state power.

The arrogance of state power and the horrors of war are at full display once again - this time in Europe. Vladimir Putin’s brutal war against the people of Ukraine has ushered in a new era on the continent. Its outcome is unpredictable, but even if the war can be contained and its worst outcomes avoided, it is already clear that it will have a lasting and deep impact around the world. Intensified regime rivalry, economic stagflation, humanitarian crises situations and further environmental degradation are all in the cards. 

For businesses, the war in Ukraine adds a colossal additional layer of uncertainty to an already uncertain outlook due to accelerating technological disruptions, environmental degradation, the Covid pandemic and shifting macroeconomic conditions. For the corporate sustainability agenda, the following points are illustrative:

First, the war is driving home the point that state power trumps markets, especially in times of turbulence. The comprehensive sanctions against Putin’s Russia have already induced massive divestments or suspensions of business activities by foreign companies operating in Russia. Compliance with sanctions raises legal, social and human rights issues. While sanctions, including so-called “smart sanctions,” are intended to harm the political elite, they mostly fall on the shoulders of innocent citizens and local employees. Those issuing sanctions mostly ignore this collateral damage, but for businesses, retreating or suspending their activities is a serious moral issue. Sadly, many companies seem to just rush to the exit, cutting their losses. But a few, such as the Volkswagen Group, have put in place explicit activities to care for their employees. This is not only morally the right thing to do but also an investment in peace. 

Second, humanitarian assistance and support for civilians who are suffering from war must be a priority. The business community can now play its role as good corporate citizen by providing financial, logistical, volunteering and other support. Established international organizations, such as the UN Global Compact, have issued concrete guidance that helps to ensure that such support is effective and reaches the people in need. Many corporations have already stepped forward, and as the crisis deepens, such contributions will be urgently needed.

Third, the war accelerates the rise of the bossy state in many economies. Already prior to the war, we saw a steady rise of economic nationalism and industrial policy making. The balance between the private and the public spheres will shift further in favor of state power. Navigating sanctions, coping with diverging national and regional regulations and being seen as a national rather than an international player will put an extra premium on legal and compliance functions and will challenge the agility of corporate cultures, even if such activities do not support productivity and innovation. Businesses have no choice but to go local and to play along.

Fourth, the cries for more arms for Ukraine and the massive increase in military expenditures – leading to a paradigm shift in Germany, for example – give new credibility to defense industries which until recently were considered “not sustainable” and were excluded from sustainable investing on ethical grounds. ESG (environmental, social and governance) investing, already accounting for more than one third of professionally managed assets worldwide, will have to come to grips with this growing industry. New definitions will be required to distinguish between defensive and offensive weapons, and efforts will have to be made to define the ethical boundaries of killing machines, including autonomous weapons and their uses.

Fifth, major events have major consequences. The law of unintended consequences set in motion by the military invasion of Ukraine is still gaining momentum. But already the invasion has led to a revival of liberal values which had long been declared on life support and close to extinction by many observers. For businesses, this means that social norms, in particular human rights, will move up on the agenda. Beefing up due-diligence processes, improving supply chain performance and putting in place remedy procedures, such as outlined in the UN Guiding Principles on Business and Human Rights and the Principles of the UN Global Compact, is fast becoming an essential prerequisite for a license to operate. The risk that social norms will be instrumental for political power purposes is rising as policy makers will be tempted to outsource state duties to the private sector. To avoid such a dilemma, business executives may soon be required to familiarize themselves with the writings of Amartya Sen, in particular his book The Idea of Justice.

Sixth, the war will have a huge impact on the fight against climate change. The immediate impact is massive environmental destruction and additional pollution in the wake of military fighting, as well as the revival of coal production in the name of energy security. The heightened focus on security and military defense will also sadly take away much needed resources and divert political attention from humanity’s greatest challenge. The buildup of military industries around the world and the new arms race is a further serious impediment towards achieving the Paris goals. It is estimated that the US military alone, if it were counted as a nation state, would be the 47th largest emitter of greenhouse gases. This estimate is based on fuel consumption alone, not counting the burning of ammunition and other toxic material associated with military activities. Surprisingly, environmental activists have so far paid little attention to this challenge. But there is also a potential upside. The war has revealed vulnerabilities associated with fossil fuels and the dependency on a few major exporters. The buildup of renewable energies, energy storage technologies and the decentralized and localized energy systems may now get a new boost in the name of energy security. Many businesses have already set in motion major decarbonization strategies. They have good reason to drive the energy transformation with even greater urgency.

Seventh, the war is disrupting essential supply chains beyond the energy sector. The ripple effect of these disruptions is already showing up in industrial activities, especially in the European automotive sector. Ukraine is the world’s fifth largest exporter of wheat. A spike in prices for agricultural commodities will not only further fuel inflation, but also lead to a global food crisis and to social upheavals in countries far away from the war zone. Businesses have already started to reassess supply chain vulnerabilities in the light of rising economic nationalism and the Covid pandemic. The war will further push them to search for safer supply chains, reassess political risks and relocate activities closer to home, and in some instances, give fresh impetus to circular material flows. 

What else can businesses do in the face of deep uncertainty about the future? For one thing, we all have a choice to either nurture peace or to thrive on division. We can choose whether or not to believe that what connects us is stronger than what divides us. We can blindly follow the siren call of power myths, or we can be builders of humanity and stewards of the natural environment. We have made enormous leaps in science and technology but our minds have not evolved, and those in charge of state power have particularly failed. The idea that big powers have to go to war for the sake of supremacy is still very much alive, while we fail to comprehend that manmade challenges are threatening our common future, irrespective of spheres of influence or military doctrines. 

Businesses understand that they cannot succeed in failing societies. Peace is the highest public good of all and a precondition for flourishing markets. The United Nations was created on the ashes of the worst war the world has ever seen. While the UN’s failings and lack to modernize can rightly be criticized, its foundational spirit still rings strong around the world and creates hope everywhere. Its business platform, the UN Global Compact, now has over 15,000 participating corporations from over 160 countries. The UN Global Compact’s Ten Principles, covering the areas of human and labor rights, environmental protection and good governance, are derived from international conventions that in principle enjoy universal legitimacy. It now makes sense for businesses to more fully engage in the UN Global Compact and its various activities, especially through its many country networks. By giving new life to the Ten Principles of the Global Compact, businesses are helping to revive and strengthen the good spirits of humanity and to build bridges and mutual respect while demonstrating that collaboration and tackling common challenges is the only way to go. Commerce and shared economic interests may not always deter military conflict, but they certainly help to contain abuses of state power politics and, if grounded in shared values of humanity, they certainly are a force for good.