How profit and sustainability can go hand in hand
The central theme of a panel discussion at the recent Nordea Sustainability Summit was not what you might expect from a conference hosted by a bank for business clients. World-class speakers with resumes containing Fortune 500 companies, the UN Global Compact and even the British military were invited to discuss the role of courage in making the transition to a new, sustainable economy.
Moderator Alasdair Ross from The Economist kicked off the discussion by noting that, from an investor perspective, the transition would seem to require a combination of commercial pragmatism and visionary thinking.
“How do you draw the balance between the commercial imperative of making money and the more visionary side of what you’re trying to turn the world into,” he asked panellist Harald Mix, chairman of Vargas Holding and founder of Altor Equity Partners, who has been involved in sustainability-related ventures including Northvolt and H2 Green Steel.
“I actually think there’s no contradiction between the two. You don’t have to sacrifice one for the other,” Mix responded.
A tremendous market opportunity
Mix noted that frameworks such as the Science-based Targets initiative have helped provide a clear roadmap, spurring many large companies to make commitments and set climate-related targets.
“That creates a tremendous market opportunity,” he said. He referenced the steel industry as an example, drawing from his role as chairman of H2 Green Steel. He noted that 70% of steel today is produced through blast furnaces, releasing significant amounts of CO2. Around 1.4 billion tons of virgin steel will have to be decarbonised over the coming decades.
“If you take that market opportunity and engage with key customers, from the automotive industry, the white goods industry, the construction industry, and look at it from a purely commercial point of view, there’s actually a tremendous opportunity,” he said.
He described such investing not as “impact investing,” which implies subsidised returns, but rather “industrial scale-ups.” While the previous era has been all about tech, software and data, this one is “going to be about real capex spending, building renewable energy infrastructure and transforming industries,” he said.
A need to be bold
When pressed by Ross on why relatively few people are pursuing such ventures if the business case is so strong, Mix noted that it takes courage and a tremendous amount of work.
“You need to be bold and driven by the ambition,” he said, describing the experience of founding Northvolt, Swedish battery developer specializing in lithium-ion technology for electric vehicles. Starting with a blank slate, no plant, and needing to raise 3 billion EUR, that endeavour was originally met with scepticism. However, it was lucky to catch a tailwind with the rise of Tesla and electrification.
“People started to realise we were going to need a trillion dollars’ worth of batteries in 10 years. That’s a big opportunity,” he said.
‘Greed isn’t good’
Faced with the same question of how to balance the commercial imperative with the vision of global development and the green transition, panellist Lise Kingo also saw no contradiction. Kingo serves as an independent board director of Sanofi, Danone, Covestro and Aker Horizons and was previously CEO of the UN Global Compact as well as EVP in Novo Nordisk.
She noted that we’re moving away from the idea of shareholder capitalism defined by Milton Friedman towards a new economic model called stakeholder capitalism or regenerative capital.
“Greed isn’t good. You need to account for all different types of capital in the world – the ecological, the human. It’s a much broader capital model,” she said.
The UN’s 17 Sustainable Development Goals (SDGs) have been a major catalyst in speeding up that shift, especially when the financial sector picked up the goals, she added: “I always felt that was the silver bullet to really making stakeholder capitalism or sustainable business the new way of doing business in the world.”
Progress is happening, but it needs to rapidly accelerate, she added. She cited a recent study by BCG and INSEAD, which found that 91% of board directors feel more time should be spent on the strategic aspects of ESG and not only reporting and monitoring operations.
Setting the tone from the top
Panellist Sir Graeme Lamb, former lieutenant general of the UK land army, brought the discussion back to courage.
“What really matters is courage. Moral courage to make the right decision,” he said. He also highlighted the importance of strong leadership, not only in making the difficult decisions but getting others to rally around those decisions.
“To make people come with you requires an authenticity at the top, a genuine belief in what you’re saying. Straightforwardness, being empathetic, transparent, humble,” he said.
Ross closed the session by asking about the “left-field challenges” the world has faced in recent years, from the pandemic to Russia’s invasion of Ukraine. “Have we gone backwards?” he asked.
Mix noted that, while there may be setbacks in the short term, with some coal plants being fired back up amid energy shortages, he did see a silver lining:
“This could be a moment where the world comes together, where we realise that we can’t rely on fossil fuel energy for the future, and where we actually have a chance to accelerate the transition.”
For more from the Nordea Sustainability Summit, including a panel with Nordea CEO Frank Vang-Jensen, Ørsted CEO Mads Nipper and Neste SVP Milla Aila, see "Balancing the dilemmas of ESG."