Purposeful profit: 5 strategies for a sustainable business on World Environment Day

In the face of escalating physical and transitional climate risks, adopting sustainability practices has become not just a choice but also a business imperative.

Companies navigating the net-zero economy face transition challenges, yet early movers can accelerate value creation and outpace competitors.

Estimates suggest the surging demand for low-carbon offerings could be $9 to $12tn by 2030, creating new green economies and business opportunities.

The UAE leads by example

At COP28, the UAE delivered a historic consensus in Dubai to accelerate climate action laying out an ambitious response to the Global Stocktake, including mobilising over $85bn for climate action and taking bold steps to deliver beyond the “Action Agenda” for the non-state actors, including the private sector.

For the first time, the private sector was at the core of the COP process, stemming from the strong belief of the UAE and COP28 presidency in the private sector’s pivotal role in accelerating action towards a green, inclusive, and resilient economy.

The UAE is spearheading the transition to a net-zero economy — the first country in the region to sign the Paris Agreement and proactively announce a third update to the NDC through emissions reductions of 40 per cent by 2030 (23.5 per cent-31 per cent-40 per cent). COP28 delivered the UAE consensus that remains the new point of reference to guide implementation going forward.

 The sustainability leaders

Following the 2007–08 financial crisis, outperforming companies took various courses of action to create an earnings advantage, including proactively cutting costs and identifying areas of growth, as well as embarking on a journey that is sustainable and future-ready.

When navigating the current uncertainty—with an eye toward net zero— here are some strong recommendations that combine areas of focus for sustainability business leaders.

While limitations and challenges vary by country, sector, and firm size, these actions can be applied widely across industries and geographies, which have proven successful for several organisations globally.

1. Value creation with vision and ambition

The advantage of early movers in low carbon offerings and the building out of production capacity before latecomers enter the market.

2. Lowering COGS through integrating cost and carbon reductions. There is no trade-off nowadays between lowering cost and carbon.

It has dual benefits by improving energy efficiency and shifting to lower-carbon raw materials and feedstocks. Everyone is experiencing high energy prices; energy efficiency and margin improvements are nothing new, but with the increasing energy prices and geopolitical tensions impacting energy security agendas, it’s more crucial than ever to consider them.

3. Regulations change 

Increasing market share in competitive markets with strong consumer preferences towards low and zero-carbon product offerings.

If we look at the Carbon Border Adjustment Mechanism (CBAM) in Europe that entered the transitional phase last October, which dictates a cap on the GHG emissions generated in a single imported product, this creates an opportunity of increasing market share to a compliant exporter and a risk of losing it to a non-compliant exporter.

In addition, the European Commission announced in January 2024 the phasing down of fluorinated gases and using environmentally friendly products instead.

4. New green businesses

Our research concluded that there will be a demand for sustainable businesses and climate tech solutions of around $12tn per annum by 2030. Investors can turn to the existing and currently available techs such as batteries for electrical vehicles, agri-tech, energy efficiency solutions, renewables, and waste recycling.

5. Access to capital finance 

The financing system is integrating net-zero with new financing commitments and innovative financing solutions. It’s the financiers who lead the decarbonisation pathway and not the engineers.

Funding gap

At COP28, we witnessed over $85bn of new climate finance commitments from governments, multilateral development banks (MDB), the private sector and philanthropies.

There is a still $200tn of a funding gap by 2050 to keep the temperature well below 2 degrees C. Meanwhile, Carbon credits, insurance products, blended finance, debt swaps, and ESG bonds are on the rise. All efforts are towards crowding in private sector investments into climate-related opportunities.

The financing gap in the MENA region to achieve the UN SDGs is $230bn annually. Financial institutions are increasing their sustainable finance commitments by the day and it’s a great opportunity for organisations to start their transition journey and access these pools.

As we strive toward a future where sustainability is at the forefront of economic development, we must recognise the importance of collaboration and partnership among all sectors of society.

This includes government, the public and private sectors, academia, NGOs, international organisations, and individuals. Only by working together can we create a sustainable ecosystem that benefits everyone.

By aligning our efforts and resources towards a common goal, we can ensure that future generations have a planet that is not only habitable but thriving. It is only through collaboration and partnership that we can truly hit the nail on the head and pave the way for a sustainable future for all. Let us work together towards this shared vision of a better, more sustainable world.

The author, Hanan Sakr, is managing director and partner, EMIR.