Aliging Profit with Purpose - Global Goals Yearbook 2019

FINANCING COMMON PROSPERITY
lenges. Environmental risks were at the
top of the World Economic Forum’s
annual Global Risks Perception Survey
this year. Businesses are also getting the
message that sustainability is a critical
way to mitigate these risks. According to
another study by United Nations Global
Compact and Accenture, 76 percent of
CEOs surveyed believe embedding sustainability
into core business will drive
revenue growth and new opportunities,
and 93 percent regard sustainability as
“critical to future success.”
Sustainability is increasingly seen as core
to the business, but it has yet to become
fully embedded by companies across the
board. The uptick in action to address
climate change from business has been
very welcome. Now we need to ramp up
our climate goals and address other key
ecological challenges such as deforestation
and water stewardship. Finally, the
market needs to better recognize these
issues as being material to business, and
businesses need to commit to greater
accountability and transparency. The
long-term cost of inaction would be
staggering. Those companies that lead
the way to a sustainable future will be
the first to reap its rewards.
2. Climate as material to business
The average global temperature has
already reached 1°C above preindustrial
times, with dire consequences for
economies around the world. From South
Africa to Guatemala, nations face the
prospect of shrinking freshwater supplies
and dropping agricultural yields.
According to the National Oceanic and
Atmospheric Administration, extreme
weather events are becoming more frequent.
Since 1980, 241 weather disasters
have saddled the United States with a bill
exceeding $1.6 trillion. Disruptions from
climate change are expected to continue.
According to the Fourth National Climate
Assessment produced by the US Global
Change Research Program, losses in some
sectors are expected to be hundreds of
billions of dollars annually by 2100.
To avoid the worst impacts of climate
change, we need to limit planetary
warming to no more than 1.5°C above
preindustrial levels. To do that, we must
completely decouple the global economy
from carbon emissions and reach netzero
emissions globally by 2050. That
means zeroing out emissions from the
energy we produce, the buildings in
which we live and work, the vehicles
in which we travel, the products we
manufacture, and the food we eat. Companies
are a critical element for reaching
this goal.
Increasingly, companies see climate
change as material to their business.
Focusing on environmental issues that
are material to business is what makes
the difference between sustainability
and charity. Mozaffar Khan, George
Serafeim, and Aaron Yoon’s research
shows that companies that are strong
actors on material sustainability issues
significantly outperform those with poor
performance on these issues. This suggests
that investing in sustainability issues
increases the value of the company
for shareholders. This research has been
corroborated by a Deutsche Bank and
University of Hamburg survey of 200
empirical studies that found a positive
relationship between financial performance
and environmental, social, and
governance (ESG) standards.
Business leaders are sitting up and taking
notice: According to Ceres, 32 percent
of companies now conduct materiality
assessments, up from 7 percent in >>
Global Goals Yearbook 2019
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