Australia’s extended and disastrous bushfire season has brought into sharp relief the high economic and personal cost of climate change.
That economic impact is increasingly recognised around the world as a major business risk. In California, for instance, it led to what is now referred to as the first climate change bankruptcy: the failure of Gas and Electric. The company was brought low by litigation after its equipment was blamed for the Californian wildfires.
It is not the only example. As Four Twenty Seven’s Emilie Mazzacurati and Natalie Ambrosio write in a paper for Which-50 this week, the insurance sector was likewise exposed. “Merced Property and Casualty local insurance company went bankrupt after California’s Paradise fire. The company had $US23 million ($A34 million) in assets and owed $US64 million ($A94 million) in liabilities after the fire, which the state of California took over after the company defaulted.”
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While the political debate in Australia remains fraught — with positions split between those who accept scientific evidence and those who prefer special magical thinking and foil hats — business is already recalibrating around the opportunity presented by one of the most disruptive and transformative trends in the world today.
Sustainability is emerging worldwide as one of the great drivers of corporate change, and with it innovation and wealth creation. But sustainability is about much more than climate or new sources of electricity. Many companies, for instance, have subscribed to the United Nations Sustainable Development Goals which include 17 measures encompassing issues such as climate change, diversity and approaches to dealing with poverty.
And sustainability is already a big driver at some of Australia’s biggest businesses.
According to NAB’s General Manager Social Impact, Dr Sasha Courville, “We have transformed the way we consider engagement with environmental, social and governance (ESG) issues across the bank. This is a move away from the concept of corporate responsibility as the basis for a sustainability strategy. At NAB, we aim for a more active approach, through a focus on the social impact that allows assessment of tangibles and concrete action.”
Courville told Which-50, “At the heart of our strategy lies a collective understanding of the action needed now to promote a sustainable economy in the future. We are serious about setting real-world goals and targets and taking action.”
NAB’s commitment is reflected in the data. The bank, one of Australia’s Big Four, was recently ranked 42nd in the Global 100 Most Sustainable Companies list. That also made it the top-rated business in Australia. “This reinforces NAB’s strong focus on making a positive and lasting impact on customers, communities and the environment,” said Courville.
While banks and other financial institutions are often on the receiving end of criticism for the funding decisions they make, within the bank there is a growing awareness of the power of sustainable finance.
“There is global momentum around sustainable finance at the moment. We are seeing this through new initiatives and guidance from global central regulatory bodies.
“Our project finance portfolio plays a big role in supporting Australia and New Zealand’s growth. Our in-house expertise and passion for this space has enabled us to become Australia’s leading arranger of project finance for Australian renewable energy, helping our customers and community make the low-carbon transition,” Courville said.
The fact that businesses like NAB are adopting the broadest definition of sustainability is what gives it its transformative and disruptive potential as it impacts almost all aspects of the modern enterprise.
Fiona Walmsley, Head of Sustainability Governance at retail giant Woolworths, told Which-50, “At Woolworths, we think about sustainability in its most holistic sense. This clearly includes our environmental programs such as energy efficiency and waste reduction. But it also includes many other important topics such as our diversity and inclusion agenda, safety, community programs and the protection of human rights in our extended supply chain.”
Companies like Woolworths are making significant investments in staff capabilities to ensure they are capturing the opportunities of sustainable business.
“We have a team of sustainability experts in the business, who do a great job partnering with the business on a range of programs.”
However, like all transformation projects, success is really driven by cultural change that embeds the philosophy of sustainability into the organisational DNA.
“Success depends on every single one of our 200,000 team members understanding the role they play in realising our sustainability ambitions. As our approach to sustainability has evolved, it has become a part of our culture and the way we operate.”
This is not just an issue for companies at the top of the ASX. Pioneering internet businesses like retailer The Iconic put sustainability at the heart of their approach to business, recognising the importance of the issue to consumers and employees alike.
Jaana Quaintance-James, Chief Sustainability Officer at The Iconic, says sustainability touches every element of the business. “Our commitment to social responsibility is core to our business practice. At the end of 2019, we released our inaugural Annual Progress Report, which details our sustainability journey to date — achievements and shortfalls — as well as our targets for 2022.”
Importantly, the retailer’s approach to sustainability is all-encompassing. “At The Iconic, we are aware that many opportunities exist for us to create positive change. For us, the way to transform the landscape of Australian and New Zealand retail is by championing inclusion, diversity and body- positivity, as well as recognising our social and environmental responsibility for the better of all communities involved.”
Its strategy is built on four key pillars:
- Ethical sourcing — social and environmental impacts of its supply chain and those of its key partner brands;
- Environment — environmental impacts of its operations;
- Community — its contribution to the social fabric of the world in which it operates;
- Diversity, inclusion and body positivity — a celebration of its people and its customers across every touchpoint.
In mid-2019, the US Business Round Table Chairman Jamie Dimon announced that the influential group of almost 200 leading US companies changed the definition of the purpose of a corporation from beyond profitability to include the recognition of the wider social good. That’s the kind of high profile pricing signal that catches the attention of innovators and entrepreneurs.
Interestingly, however, in some sectors, such as information technology, vendors have already moved aggressively to respond to the demands of their clients for more sustainable solutions.
Take a company like VMware, the global technology business with more than 24,000 staff worldwide. It may lack the profile of more consumer-oriented technology businesses like Google or Microsoft, yet it is a critical partner when it comes to delivering genuine sustainability improvements in the corporate data centre.
According to Olga Specjalska, Director, Marketing, Australia & New Zealand, “Our commitment in this space is consistent with the brand promise and what we’ve been standing for since our inception: commitment to driving innovation that contributes to a net positive future and sustainable growth.”
Specjalska says there is a wide range of policies and practices CIOs can lead, which will help their organisations be more sustainable, as well as have a bigger impact in the broader community where social responsibility is concerned.
She offered two concrete examples: reducing carbon dioxide by replacing hardware with software; and inspiring a culture of sustainability innovation — using new technologies to address global challenges.
“Data centres account for two per cent of the world’s greenhouse gas emissions. Virtualisation technologies such as those pioneered by VMware make IT infrastructure dramatically more efficient.”
She said that VMware’s impact on hardware efficiency has helped its customers avoid putting 664 million metric tonnes of carbon dioxide into the atmosphere since 2003 — the equivalent of the annual power consumption of Spain, Germany, and France.
“We are [also] channeling our collective VMware ingenuity for global impact by integrating sustainability into innovation programs. Our developers explore ways to use technology in areas like data analysis, Internet of Things (IoT), blockchain, machine learning, and artificial intelligence (AI) to help enable our customers to develop solutions to global sustainability challenges, such as climate change.”
A recent Forbes Insights research report, The CIO of 2025, which VMware sponsored, revealed that nearly 70 per cent of CIOs feel a responsibility to use technology for the greater social good, she said.
“Respondents said they can use technology to help fight climate change, promote equality and fight poverty — and they can do it at scale in a way that’s never before been possible due to the ability to touch a bigger portion of the population. Many CIOs see their use of technology for good as vital to their own success.”
Simon Cooper, chief operating officer at NextDC reinforced the idea that data centres are very heavy users of electricity with enormous growth potential.
“And knowing that NextDC has focussed on sustainability since it’s early days. Our journey started in 2011 by actively participating in the development of the NABERS standard for Data Centres, and the 2012 deployment of a 400kWpk solar array on our M1 data centre – at the time it was the largest privately funded array in Australia.”
The company was also an anchor member of the City of Melbourne’s Renewable Energy Project, which culminated in an 80MW wind farm being funded and built, he said.
“Since then we have achieved NABERS 5 Star ratings for both our S1 (Sydney) and M1 (Melbourne) data centres, the only two data centres in Australian to achieve this significant level of efficiency. Efficiency is the key here, as this reduces the demand from the grid assisting the complex transition to an increasing mix of renewable energy generation, and at the same time saving our customers money.”
Hardware powerhouse Lenovo is also pushing a strong sustainability message. According to Nathan Knight, Managing Director of Lenovo Data Centre Group ANZ, “With digital transformation so firmly anchored in the availability of more data and the speed at which it can be processed, the consumption of energy by IT infrastructure is only set to increase.”
He says that by 2025 it is anticipated that the ICT industry could use 20 per cent of all electricity and emit up to 5.5 per cent of the world’s carbon emissions, forcing companies like Lenovo to reassess its approach to design and ownership.
“As heat dissipation is a major driver of energy consumption in data centres, Lenovo DCG has developed Lenovo Neptune, a technology already deployed and in use by major Australian customers that utilises warm water for cooling (instead of air) to conduct heat more efficiently. By removing the need to utilise low-efficiency chillers, the cooling technology majorly reduces energy consumption.
“Beyond innovative cooling methods, I anticipate renewable energy solutions, recycled materials and ‘pay-for-what-you-use’ business models will be increasingly adopted in the data centre space as the industry addresses the growing issue of energy consumption.”
CIOs and CTOs aren’t the only executives around the leadership table who understand the transformative power of sustainability.
For chief marketing officers, determining and describing the explicit link between sustainability and brand purpose is becoming increasingly core to their role.
In some cases that link is easy to describe. Take dating site OKCupid, for instance, where the link between the product purpose and consumer attitudes is as direct as you can imagine.
Melissa Hobley, Global Chief Marketing Officer at OKCupid, told Which-50, “As more and more people began talking about climate change on their dating profiles, we began adding questions on this topic to help our users find people with compatible views.
“In fact, there’s already been millions and millions of responses to our questions about climate change and the environment on OKCupid, so we know this is a topic people are really interested in matching on. Since we know dating looks different all around the world, we’ve also added in localised questions in more than 25 markets globally.”
For Sherilyn Shackell, the CEO and founder of The Marketing Academy, the increased focus on sustainability comes as no surprise — although she acknowledges the uptake has been slower in Australia than the US or the UK.
Shackell’s courses attract the star marketing performers from some of the world’s biggest brands, who need to be nominated by their employers to attend the highly sought-after international course. “It is so exciting to watch how this is emerging in Australia. It wasn’t really a big issue when we first started in Australia (five years ago), which surprised me. I think all of the tragedies that Australia’s been going through over the last three months have probably made it much more public. But the bottom line is we have always believed purpose is central to our program for marketers, and our craft.
“Marketing, media, and advertising can change the minds, the behaviours and the decisions of every single person on the planet. It’s the only function that has a direct influence on how people behave in the world. Marketers need to own the responsibility of that power. And they really need to think about what they’re doing and how they’re doing it when their brand is engaging out in the world.”
Shackell believes that the word ‘purpose’ became quite hackneyed for some time.
“Some brands were adopting it because they felt that they had to, but not necessarily in a way that then changed the behaviour of the organisation.”
But not anymore, she said. “It’s changing massively. Consumers are demanding that companies have a community responsibility, that they are really careful about how they do business, in what way they do business, what their supply chain looks like.
“Marketers have the emotion of the customer in their hand. They’re the ones that really feed back what consumers are thinking and feeling into a company, and then influence the changes that companies need to make to behave in the right way,” she said.
“Marketers can be the conscience of the business — utilising their knowledge of their customers.”