There is a good reason why US business professor Rita McGrath advises companies to set an end date when they develop business models and products in order to establish an internal culture of constant change.
Transformation involves a lot of uncertainties. It is difficult to project how quickly the marginal costs of new technologies will fall, how much governments will change their subsidy policy or how many customers innovations will find in the future. There is no doubt the transformation will occur, and there are already a couple of pillars of this: Green energy and sustainable products will initially be monopoly factors and result in advantages. However, they will then penetrate the global mass market – and previous solutions will disappear.
There is a good reason why US business professor Rita McGrath advises companies to set an end date when they develop business models and products in order to establish an internal culture of constant change. She says we must “slaughter” our cash cows at their high point and invest the money in new products, services and business models.
The law of the few and the stickiness factor: Why the climate transformation is suddenly taking hold
There are many reasons why the climate transformation is taking place with such vehemence now. In his best-seller “The Tipping Point”, US author Malcolm Gladwell describes three factors that must occur in order for something to have a broader impact.
- The “law of the few” describes the need for people with a high level of social charisma to be part of the debate. One of the most prominent examples is Swedish student Greta Thunberg.
- The “stickiness factor” requires information to be simple and memorable in order for it to remain in people’s minds. More than ever, the complex scenarios of climate researchers are be translated into easy-to-understand models: everyone is now familiar with the 2-degree goal.
- Gladwell uses the “power of context” to refer to the need adapt key messages to the circumstances and experiences of the listener. This is growing now because more and more people are experiencing how theoretical debates are transforming into perceptible weather changes and disasters near them.
Davos was a turning point for the economy, society and the financial world
One turning point in the debate was the World Economic Forum in Davos in 2020. Unlike before, the challenges of the climate crisis were recognized as challenges for the economy, society and financial institutions. It could no longer be ignored that in 2019 more Fortune 500 companies published climate commitments than had done so from 2005 to 2015 combined. From mid-2019, the number of Google searches on the topic rose exponentially as well, and global climate demonstrations have been among the largest protests in history. Something new was also happening in relation to money – the only decisive source of change, according to cynics: The number of sustainable funds exploded and some of the largest institutions announced that in the future they no longer wanted to invest without a strict view of sustainability figures.
EYCarbon
The course is set and there’s no turning back: Europe will be climate-neutral by 2050. After digitalization, decarbonization will be the driving force behind the next big transformation. Markets and companies will change fundamentally. We see great opportunities for our customers, for Europe, and for our children. In order to make the most of these opportunities, we have established EYCarbon.
Consulting has changed more than ever before as well
The climate transformation represents a turning point for consulting companies like EY, too. That is why we are seeking new paths consulting with EYCarbon. Instead of maximizing profits, clients now want to maximize their impact: What activity promises the greatest success in the battle against climate catastrophe? We do not want to maximize our own sales, but rather the influence of our work on the environment and society. Among the Big Four, we were the first to commit to being carbon net zero by 2025. Net zero refers to when an organization aims to achieve emissions reductions in line with 1.5° C global warming and removes all other remaining emissions from the atmosphere. Thus, we have set an ambitious climate protection target that we want to achieve over the long term. We also act in accordance with concrete rules for EYCarbon:
- We only provide advice if it will result in a true transformation.
- We only provide advice if it will actually be implemented and not simply involve concepts and strategy papers.
- We share key findings with our clients in order to help advance the transformation at other companies.
We know this stance may be irritating. But we believe we’re talking about the most important topic for our planet and our future. We believe that now is precisely the right time for irritation.
Fazit
It must be possible in the future to achieve more prosperity without increasing CO2 emissions – a massive undertaking for politicians, companies and society. The climate crisis will sharply alter every aspect of life, just as computers and the internet once did. Companies should face up to the challenges and confront the transformation with new approaches.
In our work related to EYCarbon, we no longer want to focus on increasing profits, but rather on the impact of our work.
