Leading Off: An inconvenient briefing: the leader's guide to climate change

ESSENTIALS FOR LEADERS AND THOSE THEY LEAD

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The earth spins and revolves around the sun, and twice each year, on one day in December and one in June (perhaps today is that day where you are), a solstice arrives and ushers in a season of extremes. Whether in winter, summer, or in between, climate change is a topic that is subject to extremes because it touches everyone and everything. Because the processes driving it are built into the foundations of the world economy, efforts to decarbonize a warming planet can be neither piecemeal nor ignored. Whatever perspective on environmental change you hold, it is important for leaders of all levels to have a nuanced understanding of climate issues and risks—and the remedies for them. This week, let’s brief you on the central issue of stewardship of the global commons.

AN IDEA

Time is running out for businesses without a net-zero strategy

Warnings of climate risk seem to break daily, and climate action is on the rise from all sectors of the economy. More than half of global GDP is now generated in countries that have net-zero mandates for carbon emissions, and investors are asking whether their portfolio companies are getting ahead of climate-change forces. The net-zero push will have far-reaching and underappreciated implications. Costs will be distributed unevenly, leading to a shift in the competitive landscape and the largest reallocation of capital in history. In an article in Fortune, McKinsey experts explore the actions executives can take: starting a crash course in climate awareness, developing offensive and defensive strategies, and boning up on business-model innovations that can help.

A BIG NUMBER

That’s 40 percent of survey respondents who say they expect their companies’ sustainability programs to generate modest or significant value in the next five years. That percentage is nearly double the proportion saying such programs have already created value. Respondents in a few industries that play pivotal roles in climate change (automotive, electric power, and natural gas) see future value creation. Also notable: companies that generate value from sustainability programs follow a distinctive set of management practices.

A QUOTE

“As fast as we might go, it won’t be anywhere near fast enough.”

That’s Sumant Sinha, founder, chairman, and managing director of ReNew Power, India’s largest renewable-energy company, on the big bets India is placing on renewable power. Renewables could make up nearly half of global total electricity capacity by 2035 and be critical in preventing the worst effects of climate change. In India, two-thirds of electricity is currently generated using coal, so achieving what Sinha calls a “total inversion in how electricity is generated” will require privatization of energy-distribution assets, as well as radical changes to energy procurement and mobility.

A SPOTLIGHT INTERVIEW

What does it mean to steer global sustainability? Vanessa Rothschild leads that charge for H&M, the world’s second-largest clothing retailer. For her, it means defining and achieving the company’s sustainability goals, which include using only sustainable materials by 2030 and having a “climate positive” value chain—one that reduces more greenhouse gases than it emits—by 2040. Welcome to the future of “circular fashion,” in which resources and products stay in use for as long as possible before being recycled or regenerated into new products again and again. In fashion, “we have had the power to create desire,” Rothschild says in this interview. “I think we also have the power to create meaning and well-being.”

THE OTHER GLOBAL CRISIS

Will the fight against COVID-19 distract attention from climate change? Further warming may be unavoidable, but limiting it to 1.5°C above preindustrial levels would reduce its most dangerous and irreversible effects. Tap this interactive presentation for critical data and scenario projections of various ways to approach the 1.5°C challenge. And don’t miss the story of the burping cows and the ways to remedy the problems they create.

Lead informedly.

— Edited by Bill Javetski, an executive editor in McKinsey’s New Jersey office

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