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#20 - Stakeholder capitalism to fix the climate crisis

#20 - Stakeholder capitalism to fix the climate crisis

πŸ’‘ One idea: Stakeholder capitalism to fix the climate crisis

πŸ“ˆ One data figure: Bolsonaro's 59.5% boom in deforestation

✨ One success: Synhelion produces solar fuels

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πŸ’‘ Stakeholder capitalism to fix the climate crisis

Theorised by Milton Friedman in the 1950s, shareholder capitalism seems to have reigned for too long. The theory that puts shareholders above everyone and everything else is now seriously challenged by the emerging concept of stakeholder capitalism, notably in the wake of the climate crisis. Let's understand this idea better and see which hurdles it needs to overcome.

In fact, companies that focus on maximising shareholder value before anything else usually pursue short-term profit and disregard climate action, at the cost of other stakeholder groups and the environment. On the contrary, when serving the interests of multiple stakeholders such as employees, customers, suppliers, shareholders, communities and more generally the whole cultural and natural environment, companies shift their vision on how to create value and embrace longer-term financial and non-financial goals.

When the company's interests overlap with those of society and the environment (by Embedding Project)

What a beautiful story! Sadly, it is filled with good intentions and lacks robust data. While it is widely admitted that modern capitalism is responsible for reducing human poverty but damaging nature and the climate at the same pace, the big challenge of the decade is to incentivise private actors to internalise climate costs into their decision-making processes. Even Larry Fink, CEO of BlackRock, is an advocate for a modernised approach.

β€œIt is through effective stakeholder capitalism that capital is efficiently allocated, companies achieve durable profitability, and value is created and sustained over the long term,” said Larry Fink in his 2022 open letter to CEOs, after which he was accused of going woke.

Because ESG ratings reward companies that maximise the interest of various stakeholders, not just shareholders, they are a promising step towards largely accepted (maybe less largely expected) stakeholder capitalism metrics. But ESG is not enough, and we need new measures of performance to motivate corporate climate action. A robust data-driven approach is key!

The World Economic Forum, in collaboration with Deloitte, EY, KPMG and PwC, released in 2020 a report titled Measuring Stakeholder Capitalism. The consortium recommended a set of 55 metrics paving the road towards a global reporting system.

Transparent, verifiable and harmonised metrics will allow managing directors and board members to:

  • communicate more clearly using a common language
  • enhance alignment among all stakeholders
  • raise awareness among shareholders about stakeholder capitalism and long-term value creation
  • change their relationship with regulations (companies actually lobby for more regulation when looking at the big picture)

Changing the narrative from shareholder to stakeholder will not happen overnight, and even then, not every stakeholder has the same opinion about climate action. The most important is to get the conversation going, and for this, we need common metrics. Ultimately we and the planet depend on it.

πŸ“ˆ Bolsonaro's 59.5% boom in deforestation

Jair Bolsonaro came into power in 2019 and immediately implemented the programme he was elected for, largely supported by the agribusiness industry. His government weakened forest protection laws, reduced the budget of environmental agencies, mocked climate scientists and weakened indigenous land rights.

According to independent environmentalists of the Brazilian Climate Observatory, the government of Jair Bolsonaro accounts for the highest Amazon deforestation acceleration rate in the last 34 years. To be noted, the absolute annual rate of deforestation was actually higher before and at the beginning of President Lula's first term in the early 2000s.

Deforestation in the Brazilian Amazon since 2022, according to INPE

Bolsonaro’s four years in power (2019-2022) ended last week with a 59.5% boom in Amazon deforestation rates, a level that had never been seen in a presidential term since satellite monitoring began in 1988.

With Trump out of power and Lula back in, expectations for ambitious international climate policies are high. The Amazon forest should be one of the very first beneficiaries.

✨ Synhelion produces solar fuels

When organic materials are burnt in the presence of oxygen, the process releases heat, CO2, and water vapour into the atmosphere. The model of Synhelion is to reverse this chemical reaction. Powered by extreme solar heat, the team was able to recombine water vapour and CO2 into hydrocarbon fuels. We call solar fuels the synthetic fuels produced from solar energy.

A field of mirrors called heliostats concentrates the sun's radiations onto a solar receiver (no solar electricity is produced). The temperature in the thermochemical reactor can then reach 1,500Β°C. This solar heat is used to produce synthesis gas, a mix of hydrogen and carbon monoxide, from CO2 and water, and eventually hydrocarbon chains. The cutting-edge technology can produce kerosene, gasoline, diesel, methanol, hydrogen, synthetic crude oil, and many more.

Carbon-neutral solar fuels could become a serious sustainable alternative to fossil fuels as they are immediately compatible with the global fuel infrastructure and can be used in existing planes, cars, trucks, and ships. This said, solar fuels are not available on the market, and economical production at scale has not been achieved yet.

Synhelion's industrial demonstration plant in Germany

Philipp Furler, CEO and co-founder of Synhelion, recently announced having raised CHF 22 million ($23.6m) from existing investors and new strategic investors including Swiss International Air Lines (SWISS) who will become one of the main early users of the solar fuels.

The start-up has already built the world’s first demonstration plant for the production of solar fuel in JΓΌlich, Germany, where industrial production will start in 2023. Commercial production should begin by 2025 in a future industrial facility to be built in Spain. Synhelion targets a production cost below €1 per litre by 2030. I can't wait to replenish my car with this cheap and climate-friendly petrol.

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