Businesses are increasingly looking to solve climate problems through their core product offerings. Whether it’s due to economic incentives, advances in technology, or the desire to solve environmental challenges, in the last few years we have seen a big rise in ‘climate friendly’ companies, such as in clean tech.
The number of renewable energy firms has soared. The Solar Energy Industries Association (SEIA) reports that US solar is ‘booming’. Annual growth rates averaged 68% over the last decade and now as many as 9,000 companies are operating. In fact, solar energy generation employed more people in the US in 2016 than coal, gas and oil combined. Wind came in second.
In the EU, wind now has almost triple the number of jobs than the US and generates EUR 72 billion in annual turnover, According to Wind Europe.
African countries, including South Africa, Morocco, Algeria, Ghana and Egypt are also making progressive commitments and efforts to increase energy generation from solar. And just recently, Saudi Arabia has announced plans to supply 10% of its power demand from renewable sources by 2023.
A second example of a core ‘good’ product might be electric cars. The International Energy Agency reports in its Global EV Outlook 2017 that the global electric car stock grew 60% in 2016 (see graph below from International Energy Agency).
This is exciting, but it comes with an alarming reality check. Even climate-friendly businesses have serious social, economic and environmental impacts – both directly and indirectly. The energy used to power all those electric cars rarely comes from renewable sources, for example. So assuming you’re inherently good and closing your eyes to understanding your other impacts is a huge mistake. But it is the mistake it seems many have, indeed, been making.
Take human rights. In late 2016, Business & Human Rights Resource Centre revealed that it had received 94 human rights abuse allegations for renewable energy companies since 2010. Through their outreach to the renewable energy sector, they found ‘an alarming lack of transparency, awareness and implementation of human rights responsibilities’ within the companies. Their analysis of corporate human rights commitments includes companies like Dong Energy, GE, Siemens Wind Power, and Engie.
Renewable energy companies such as hydro and solar, although climate-friendly, are not necessarily community-friendly. These companies require the building of infrastructure on sizeable stretches of land, pinning community interests against those of the company. This is especially risky in countries with weak governance and land rights, where the prospect of business investment may physically or financially displace a community without any real opportunity at recourse or compensation. Navigating the deep waters of government’s economic interests, community rights and views – as well as cultural and environmental heritage – can be very tricky, especially for newcomers to the industry. Corporate players in new industries may not yet have a history of interacting with stakeholders, learning from peers, or engaging in industry dialogue. As such, many find themselves with fewer resources and guidance to draw on to ensure they are being a responsible corporate citizen.
And the issue isn’t isolated to a company’s direct operations. Supply chains of new markets, like electric car manufacturers, force us to consider whether some parts of the world are unfairly paying the price for our transition to renewable energy.
Lithium-ion batteries, currently required in electric cars, cannot be made without using cobalt. The price of this has more than doubled last year due to demand. Some 63% of the world’s cobalt comes from the Democratic Republic of Congo, a country famous for its ‘conflict minerals’ and where 20% of this cobalt is mined by hand, prevalently using child labour, and other inhumane conditions uncovered in this report. Just before Christmas, Amnesty International published a new report analysing the policies and practices of 26 companies with respect to managing human rights risks within their cobalt supply chains. The report finds that ‘all 26 companies had failed to conduct human rights due diligence in line with international standards…alarmingly, the majority were unable to answer basic questions about where the cobalt in their products came from and whether there were any risks…’
The bottom line is this: companies must not assume that their noble product eliminates their responsibility to understand and mitigate social, economic and environmental harm elsewhere. The transition to renewable energy is an exciting opportunity, but we should all work hard to ensure that it is also an equitable and fair one.