Several commentators have remarked that current conditions in the world and in business are characterised by VUCA: Volatility, Uncertainty, Complexity and Ambiguity. From where I am sitting, it certainly feels that way.
In business, we face relentless pressure and change from within our industry, from new technology, changing customer demographics and preferences and increasing regulation, and from the broader operating environment. One only needs to glance at news headlines to appreciate the VUCA reality: on-going economic challenges in Europe; oil price volatility; violent instability in the Middle East with spill-overs to other regions; and growing concerns around inequality, poverty and global under-employment everywhere. These domains are increasingly interconnected, which means that any large business is materially impacted by macro challenges that transcend traditional boundaries.
Over and above all of this, the world faces another challenge that is quite unique. Climate change is distinctive temporally, because the consequences span generations. It is distinctive spatially, because impacts have no respect for borders. And it is distinctive in its irreversibility, because once certain thresholds are breached there is no going back. Possibly the most difficult aspect of climate change is that it is caused not by evil intentions or deliberate selfishness, but mostly by our well-meaning efforts to provide affordable energy, food, and higher living standards. What is needed is a collective resolve to deal with the reality of climate change that has no historical precedent.
Understanding the causes, impacts, and possible responses to climate change has already been an unparalleled scientific endeavour. Although the basic principles of climate science were firmly established a century ago, and underscored by a US National Academy of Science study in 1979, the last two and a half decades has seen the topic subject to further scientific examination, scrutiny and peer-review unlike almost anything else. No process is perfect, but the work overseen by the Intergovernmental Panel on Climate Change (IPCC) is surely the best effort the world could have mounted to understand the complexity of the challenge. And the message from the IPCC is emphatic: the world needs to take rapid and decisive action in order to avoid dangerous interference with the climate system. This means we need to drastically reduce the emissions of greenhouse gases (GHG) while continuing to meet the developmental needs of society.
Thus far, the rest of the world, as represented by our leaders and policy makers, has been unable to translate the scientific recommendations into actions that are commensurate with the challenge. December this year, at COP 21 in Paris, presents another chance to agree upon a pathway to a low carbon economy. We cannot be sure that the negotiators will succeed where twenty previous attempts fell short, but we really need them to because time is not on our side. For this reason, we must lend our support. Some form of globally-binding agreement will imply sacrifices from all of us and changes in the way we pursue certain objectives. Longer term gains nearly always require shorter term pain. But, we really do not have any alternative.
Responding to climate change is not just the ‘right thing to do’. It is also the most economically rational thing to do. Fortunately, continued advances in renewable energy, energy efficiency and energy storage technology are also making it increasingly achievable and cost-effective. South Africa, like the rest of the world, can now see a credible pathway for the continued expansion of energy services while greatly curtailing GHG emissions. At Nedbank, we are committed to play a leading role in enabling the transition to a low carbon economy through our core business and have been a market leader in the recent renewable energy tenders. We do this because we want to be around for a long time, to create long-term value for all our stakeholders, and to be admired for helping to shape a thriving environment and society through being a great business.
In our own climate change journey, we have found it useful to apply the lens of a carbon budget. Budgets are something that we are all very familiar with, and we firmly believe in the discipline that budgeting instils. We also believe, as the marketing adage goes, in the ‘freedom of a tight brief’. This means that applying a carbon budget can unlock a great deal of innovation and far-sighted decision-making, as we are compelled to consider the use of every resource prudently with the future direction in mind.
We want our lending portfolio, as well as our operational footprint, to correspond with a GHG emission trajectory that is compatible with an equitable carbon budget for South Africa, informed by the globally-accepted 2°C threshold. National legislative frameworks, international political commitments and the latest scientific knowledge provide useful guidance as to what such a budget should be. We will make decisions that are internally consistent and replicable, while speaking to what is required. The challenge we face is too serious to allow for complacency, inconsistency, or mere grand gestures.
Climate change is a formidable challenge in a world already buffeted by volatility, uncertainty, complexity and ambiguity. Unlike anything else, it requires courageous leadership and our ability to consider the whole rather than narrow pursuit of self-interest. We can all take a step in the right direction by supporting our negotiators and legislators to carry a South African commitment to Paris that will enhance the likelihood of a successful agreement. And we can all look ahead to the exciting and beneficial opportunities inherent in the transition to a low-carbon economy. We are certainly doing just that. Please remember – there simply is no Planet B.
*Mike Brown is Nedbank’s CEO