What impact is the terrible war in Ukraine going to have on the whole ESG / sustainability/ business purpose movement? A wider question is what impact these terrible events will have on business generally, but let’s focus on the issues around the purpose agenda more specifically.
We’re seeing some commentators saying that this will mean “the end of green”. The thinking is that the economic effects if the war drags on will be so serious, and issues of energy security so critical, that government and citizens will worry less about decarbonisation and net zero. Other nice-to-have initiatives (social value, equality and diversity in the supply chain etc) might also fade away if countries sink into recession and the global geo-political landscape becomes complex and dangerous.
On the other hand, Ukraine has brought the issue of national energy security right to the top of the priority list. The problems for countries such as Germany which has been reliant on Russian energy are now clear. No-one wants to be reliant on oil and gas from other countries that are potentially “enemies” now or at some point in the future. So in the short term, we may see coal mines, fracking, and new oil and gas fields all coming back into favour, both from an energy security point of view and also because of the economics if the price of oil and gas stays high.
But for many countries without natural reserves, energy security can only come from nuclear and renewables such as wind, solar, tidal, geo-thermic… in fact, all the energy sources that are more sustainable than digging carbon out of the ground. So my prediction is that the war will lead to a short term negative in terms of emissions, which is bad news given the urgency of the current climate situation. But in the medium term, perhaps 5-10 years, then the current crisis should drive much more rapid de-carbonisation than we have seen already. Similarly, organisations may need to be pragmatic over the next couple of years in terms of energy procurement and how they push suppliers along a decarbonisation path. But that is no reason to put net zero plans on ice for too long.
We mustn’t forget either the huge cost of the physical destruction in Ukraine in terms of emissions. All that rebuilding will have an environmental impact as well as an economic cost.
But will the war make us more sensitive to environmental issues generally? I think there are some troubling issues ahead. More nationalism may mean less international cooperation, for instance. If the world splits into two camps, particularly if China and Russia become the “leaders” of one group and the US/Europe another, then this could be very bad news in many ways, including for the environment. And global economic problems would make solving problems such as rainforest devastation in poorer countries even harder to solve.
What about the social issues that sit under the “purpose” banner? Well, it is clear that the Ukrainian refugee situation will bring a number of challenges to the fore. We are already seeing the risks of this leading to exploitation, human trafficking of refugees and even modern slavery issues. So looking for some silver lining amongst this tragedy, we may see more pressure on firms to make sure they are not facilitating such problems in any way. Indeed, I suspect there will be more focus generally on the “who are you doing business with” issue, which is a positive.
The challenge in the next few years (assuming peace of some sort in Ukraine does come before too long) will be keeping economies afloat, and managing a really dangerous geo-political landscape, whilst not precipitating a total environmental and climate disaster. I don’t know if we are up to it, to be honest, but all we can do is try to make our own small contribution to the challenge. And do take a look at the Procure4peace initiative which aims to use procurement skills and resource to help that country.
A final note - we talked about this and other “procurement with purpose” topics last week when I had a webinar conversation with Sarah Clarke of Vizibl. You can catch up with that on demand if you are interested here. Vizibl Webinars | Peter Smith & Procurement with Purpose