• Zero Waste Shanghai

Small Businesses: Perspectives for a Carbon-free Economy


by Carola Caffarena.


At the recent Climate Ambition Summit on December 12, 2020, the President of the People’s Republic of China, Xi Jinping, announced that China has committed to lower its carbon dioxide emissions per unit of GDP by over 65 percent from the 2005 level by 2030 and achieve carbon neutrality before 2060 (1).


Chinese President Xi Jinping addresses the Climate Ambition Summit via video link on Saturday. Source: Xinhua

On the fifth anniversary of the Paris Agreement, the world is urgently calling on business for net-zero targets and a transition into the green.


Why become carbon neutral?

During the last years more and more companies realize that taking action on climate is not only beneficial for the environment but also critical to their success. The World Bank reported that China’s economic loss due to pollution and environmental degradation accounted for 10.51% of gross national income in 2008 (2).

In parallel, the COVID-19 crisis has accelerated the transition to a new business model by highlighting the fragility and fissures of the current system and revealing the need for sustainable economic structures and social habits. Starting the new decade “business-as-usual” is no longer optimal.


President Xi Jinping called on all countries to focus on a “green recovery of the world economy in the post-COVID era”. He added that COVID-19 is an opportunity for humanity to trigger a “green revolution” (3).


Businesses who want to survive to the new era must turn green, adopt sustainable strategies and become carbon neutral

In addition, consumption patterns are changing. Once industrialization and development are established and wealth grows, a new responsible consumer emerges, who cares more about his own well-being, appreciates the use of natural and organic products, and seeks environmental-friendly options and services while demanding more engagement and social responsibility to providers. This favors sustainable consumption which leads to protecting the environment as a promise of a safer future. Sustainable development is defined as that which meets the needs of the present without compromising the ability of future generations to meet their own needs (4).


A survey conducted by the China Chain Store and Franchise Association in 2017 reported that more than 70% of Chinese consumers are aware of sustainable consumption and agreed that personal consumption behaviors impact the environment (5).


The number of consumers choosing products from well-known sustainability-engaged companies grew significantly in the last years. In 2017, consumers purchased only 21.53% of products for that reason, while in 2018, it accounted for 43.2%. In 2019, the proportion reached 52.35% (6).


Source: China Sustainable Consumption Research Program, ‘Customers choose companies committed to sustainable production’, 2019

The US 2020 Sustainable Share Market Index™ reported that sustainability-marketed products delivered 54.7% of consumer packaged goods from 2015 to 2019, grew 7.1 times faster than products not marketed as sustainable, and that this growth continues despite the COVID-19 pandemic (7).


Driven by the increasing concerns and pressure of the society and (potential) customers, and legally bonded to government policies resulting from international climate summits, businesses who want to survive to the new era must turn green, adopt sustainable strategies, and become carbon neutral.


What is carbon neutrality?

Greenhouse gases due to anthropogenic activities are responsible for the accelerated global warming. By carbon footprint is the amount of greenhouse gas emissions associated, direct or indirectly, with all the activities related to a person, entity, event, or product, measured in terms of carbon dioxide (CO2) or carbon dioxide equivalent, in weight. The carbon footprint calculation is a useful tool to evaluate the impact of a company or product.


A product or company is carbon neutral when it removes the same amount of carbon dioxide it emits into the atmosphere, to achieve net-zero carbon emissions.

Carbon negative or climate positive is meant when it is removed more carbon from the atmosphere than it is released to it.


Decarbonization. Source: Istock

To maintain the climate protection actions adopted at the Kyoto Protocol, the Paris Agreement was adopted in 2015 with the target of limiting global warming to well below 2°C above the pre-industrial levels of 1750, while pursuing efforts to limit the increase to 1.5 degrees.


Green recovery plans after COVID-19 boost income, employment, and GDP better than return-to-normal stimulus measures (Cambridge Econometrics)

Perspectives for carbon-neutral small businesses

The “Assessment of Green Recovery Plans after COVID-19” conducted by Cambridge Econometrics analyzed several business scenarios and reported that green recovery plans boost income, employment, and GDP better than return-to-normal stimulus measures, with the added benefit of reducing emissions and major effectiveness (8).


GDP impacts at a global level. Source: We Mean Business Coalition (October 2020)
Employment impacts at the global level. Source: We Mean Business Coalition (October 2020)

Big corporations have already started their way to a carbon-free run. Google is pioneering it: the big digital company became carbon neutral in 2007 and is helping its partners and organizations reduce their carbon usage and remove carbon from the atmosphere (9). Another technological giant, Apple, commits to being 100 percent carbon neutral for its supply chain and products by 2030 (10). IKEA ambitions to become climate positive by 2030 (11). In the consumer goods sector, Unilever will become carbon positive in its operations by 2030 by directly supporting the generation of more renewable energy than they consume and making the surplus available to the markets and communities in which they operate (12).


However, the scenario for the Small and Medium-sized Enterprises (SMEs) looks different. According to several studies, only 12% of the enterprises reporting sustainability are smaller organizations (13) and only 1 out of 10 carbon-neutral companies are SMEs (14). The World Bank reports that SMEs represent 90% of all businesses (15).


Achieving carbon neutrality represents two-sided opportunities which include a social impact and room for internal improvements.

Whereas theoretically, it should be easier for small businesses to accomplish carbon neutrality than for bigger corporations, putting it into practice might still sound a bit challenging and, no wonder, it represents an investment in terms of financial means and technical efforts. However, the mid-and long-term advantages and benefits from becoming carbon neutral should convince the entrepreneurs to go a step forward. Additionally, starting to plan a green strategy in a timely manner would allow businesses to accommodate the new emerging regulations as well as market requirements, and reinforce themselves.


Achieving carbon neutrality represents two-sided opportunities which include a social impact and room for internal improvements.

A carbon-neutral company impacts society in a positive way by raising awareness into more sustainable consumption habits, creating a commitment for the customers by being an example to follow, and supporting a circular economy and other green initiatives. It becomes more transparent about its footprint and engages in environmental and social responsibility.


Companies that reset themselves to reach carbon neutrality and even climate positive are rewarded in the mid-and long-term with improved performances both at the technical and administrative level, including attractive benefits (yet not limited to these listed here):


  • More efficiency by optimizing resources, and reduced total costs,

  • Revenue growth,

  • Delivery of quality and credibility through transparent processes,

  • Consolidation of customers and opportunity to attract new ones,

  • Competitive products,

  • Stronger position in the market,

  • Stakeholders engagement,

  • Better communication and internal organization,

  • “Greenwashing” or image cleaning,

  • Taxes reduction by avoiding future regulations that punish carbon release,

  • Satisfaction and pride in contributing to a healthier world.


With a worldwide destabilized economy, more and more engaged and demanding consumers, and stricter regulations, 2021 opens the door to an emerging business structure with a more positive impact on the environment and society. Pioneers will lead the long-term run towards a carbon-free economy. Take action before the cost gets higher.


The first step into decarbonization is understanding your carbon footprint. Zero Waste Shanghai supports carbon neutrality through its Consulting Services by applying principles of the Circular Economy to make corporations more resilient and profitable to face potential legal and environmental changes.



References

1.Ministry of Foreign Affairs of the People´s Republic of China.

https://www.fmprc.gov.cn/mfa_eng/zxxx_662805/t1840220.shtml. Visited on 10.02.2021.

2.Delivering Environmentally Sustainable Economic Growth: The Case of China. Dr. Junjie Zhang. September 2012.

http://www.lapres.net/asiasociety.pdf. Visited on 20.02.2021.

3.Will COVID-19 boost or block carbon reduction ambitions? WSP. September 25, 2020.

https://www.wsp.com/en-GL/insights/will-covid-19-boost-or-block-carbon-reduction-ambitions. Visited on 18.01.2021.

4.Report of the World Commission on Environment and Development: Our Common Future. Oslo (1987)

https://sustainabledevelopment.un.org/content/documents/5987our-common-future.pdf

5.China Sustainable Consumption Research Program. Report on Consumer Awareness and Behavior Change in Sustainable Consumption. 2017.

https://www.oneplanetnetwork.org/sites/default/files/en_report_on_consumer_awareness_and_behavior_change_in_sustainable_consumption_in_china-final.pdf. Visited on 19.01.2021.

6.Green Products in China: Growing out of `Niche´ but needs more investment. Daxue Consulting. March 23, 2020.

https://daxueconsulting.com/green-products-china/. Visited on 11.01.2021.

7.Sustainable Market Share Index™. Research on 2015-2020. Randi Kronthal-Sacco, Tensie Whelan. NYU Stern Center for Sustainable Business. July 16, 2020.

https://www.stern.nyu.edu/sites/default/files/assets/documents/NYU%20Stern%20CSB%20Sustainable%20Market%20Share%20Index%202020.pdf

8.Assessment of Green Recovery Plans after COVID-19. Cambridge Econometrics, We Mean Business Coalition. October 2020.

https://www.wemeanbusinesscoalition.org/wp-content/uploads/2020/10/Green-Recovery-Assessment-v2.pdf

9.Our third decade of climate action: Realizing a carbon-free future. Sundar Pichai, CEO of Google and Alphabet. September 14, 2020.

https://blog.google/outreach-initiatives/sustainability/our-third-decade-climate-action-realizing-carbon-free-future/

10.Apple commits to be 100 percent carbon neutral for its supply chain and products by 2030. Apple. July 21, 2020.

https://www.apple.com/newsroom/2020/07/apple-commits-to-be-100-percent-carbon-neutral-for-its-supply-chain-and-products-by-2030/

11.What does being climate positive mean for IKEA? IKEA, Sustainability.

https://about.ikea.com/en/sustainability/becoming-climate-positive/what-is-climate-positive

12.Unilever to become ‘carbon positive’ by 2030. November 27, 2015.

https://www.unilever.com/news/news-and-features/Feature-article/2015/Unilever-to-become-carbon-positive-by-2030.html

13.Net Zero: Are SMEs The Missing Link In The Chain? WSP. November 12, 2020.

https://www.wsp.com/en-GL/insights/net-zero-are-smes-the-missing-link-in-the-chain. Visited on 11.01.2021.

14.Programa de carbono neutralidad apunta a pymes para ampliar su impacto. Sebastián Rodríguez. Ojo al Clima. April 3, 2017.

https://ojoalclima.com/programa-carbono-neutralidad-apunta-pymes-ampliar-impacto/

15.Small and Medium Enterprises (SMEs) Finance. Improving SMEs’ access to finance and finding innovative solutions to unlock sources of capital. World Bank.

https://www.worldbank.org/en/topic/smefinance. Visited on 11.01.2021.


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