Pandemic, war, food shortages, inflation, droughts, floods and fires. Alerts come from all sides, putting companies’ sustainability strategies under pressure and facing often conflicting objectives, despite keeping the messages. And when more money was needed to address environmental, social and governance challenges, investor availability appears to be dwindling.
Limiting the rise in the planet’s temperature to 1.5 degrees Celsius, reducing hunger and inequality or not investing in fossil energy and war industries are today more difficult and challenging goals than before February 2022, when Russia invaded. to Ukraine. Saving capitalism from itself, investing for good, currently involves a higher bill, a greater sacrifice of profits.
Not to do so is to challenge the future, but also the present through social judgment. And countries like the United States of America are beginning to be caught up in the conflicts between radicals.
The latest UN document is especially dramatic. “The world is experiencing a confluence of crises that threatens the survival of humanity”, reads the report on the Sustainable Development Goals (SDGs) 2022.
Almost all environmental, social and economic objectives have been degraded, without a final picture of the effects of the war in Europe.
The degradation of the general framework of sustainability is especially important in the environment and in the economic and social conditions of citizens. And it is also visible, in the mirror, by investment movements, with the demands of war mobilizing resources, both for the defense industry and for fossil energy, the sectors that have been cursed by sustainability until now.
Portuguese entrepreneurs and managers, especially those of large companies, have generally maintained their investments and objectives. Sustainability concerns are also beginning to be identified in smaller companies, with special emphasis on those that have commercial relations with more demanding countries, such as those in Northern Europe. In public policies, and for the time being, the Government seems to be more focused on energy and on mitigating the effects of inflation than on mobility.
In the environmental domain, it is in the production of electricity, heating of houses and transport that Portugal has the origin of the overwhelming majority of greenhouse gas emissions. The figures, which can be consulted in Our World in Data, reveal some progress in reducing emissions in energy production, but practically none in transport. In addition, Portugal already has an average of 30% of its energy produced from renewable sources.
The results on this environmental front end up being a portrait of the structure of the energy sector – two large companies such as EDP and Galp can, with their policies, significantly change emissions. But they also reflect the priorities of the Government, which has been more focused on production and less on mobility, namely electric. The closure of coal plants and the continued commitment to renewable energies put Portugal in a good position among European countries.
Still in the environmental field, Portugal is especially behind in the circular economy and waste management, areas that deserve an alert in the last analysis to the country within the scope of the European Semester. Circular use of material recorded the worst results in the EU as a whole (25th position), remaining stable since 2015, at around 2.1% and 2.2%. And Portugal was one of the countries that failed in the European goal of recycling half of its waste in 2020, reaching 28.9% in 2019 – latest final data.
It is in the social pillar that Portugal, like the world today, has the greatest short-term challenges. After the pandemic, inflation and rising interest rates are the conditions to exacerbate inequalities even further. Food and energy take up at least half of the budgets of the lowest-income households, and that’s where the biggest price rises are. In addition, contrary to what happened in the pandemic, public policies have to be more prudent so as not to exacerbate inflation and, in the Portuguese case, not to put the country at risk of financial problems, given its high indebtedness.
Low wages and the low representation of women in top positions are other aspects where Portugal needs to make progress. A recent study by the Calouste Gulbenkian Foundation reveals that “the almost stagnation of the average salary in Portugal has contributed to our country’s decline in the OECD average annual salary ranking since 2015 and, in 2019, Portugal occupied the 3rd worst position among the countries of the European Union that integrated this ranking”. And, as for gender equality, only about 16% of women were in executive roles, for an average of 20% in the EU.
Save ESG strategies
In global terms, business and investment strategies focused on the environment, social and governance have been under strong controversy, leading to the fact that recently the magazine “The Economist” defended that the focus should be limited to environmental objectives, for the greater ease that exists in being measured and, therefore, with less room for manipulation (“greenwashing”). The ECB and the European Union in general have made an effort to harmonize measurement methodologies, but this has not stopped some companies and investment funds from saying they do more than they actually do.
But the biggest challenge is to be able to limit the Earth’s temperature rise to 1.5 degrees Celsius, relative to the pre-industrial era, in line with the goals of the Paris Agreement, avoiding the point of no return of global warming. The conflict with Russia, although it has added to the environmental arguments the security ones, to reinforce investments in renewable energy, is determining in the short term solutions that will inevitably provoke a setback. It can be a step back, to take two steps forward, a trend that we can also witness on the social front. Or have we reached, as the French President said, the “end of an era of plenty”?
Source: Jornal de Negócios by www.jornaldenegocios.pt.
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