How to avoid the green swan

Conversation with Edo Ronchi, President of the Sustainable Development Fundation

Though just 10 years ago economic and financial risks were the greatest concern for the global economy, both in terms of probability of occurrence and potential, today we find environmental risks at the top of the ranking. Particularly concerning are those related to climate change such as extreme meteorological events, the failure of climate policies and natural disasters. It has now been ascertained that these risks transversally pose further economic, social and geopolitical risks with global and sometimes unforeseeable consequences including migration, damage to the energy sector, scarcity of food and resources, and health risks. From fear of the Black Swan - an unexpected catastrophic event, ready to upset our financial markets - to fear of the Green Swan: this one determined by the consequences of Climate Change.

Professor, parliamentary and former Italian minister of the environment from 1996 to 2000, Edo Ronchi has been president of the Sustainable Development Foundation for the last ten years, an organization that works alongside companies, helping them in the transition process towards the green economy. A few weeks ago, NextChem, a Maire Tecnimont group company active in the field of green chemistry and the technologies that support the energy transition, became one of the founding members of Susdef. “The green economy is changing the way we do business” Ronchi explains, “and it is obligating companies to rethink their business models. Our approach to environmental issues can no longer be bureaucratic and defensive, but must rather be proactive and competitive, in regards to the environmental quality of both the production processes and the final products. For this reason, companies need innovative tools and approaches, new reporting tools and strategies dedicated to a business that must already be thought of as “green” at the outset. Entrepreneurs and managers have come to understand that developing what is known as eco-innovation is what will make the difference.”

The interview with the Foundation president began with an account of the general situation, the worsening climate emergency and the politics in play that will guide the energy transition onto economically sustainable ground. “The epic challenge of climate change is starting to become the heart and soul of a great project that is giving new meaning and valor to Europe. With the Green Deal, in fact, the European Commission has put an investment plan of approximately one trillion euro within the next decade in place, a program that will require a necessary adjustment of institutional process. However, in this stage of history the rate of innovation is very fast and should not be slowed down, or a country like Italy will be made less competitive. Without a reworking of this kind, some territorial and sectorial markets may not be ready to manage the financial resources for technological innovation, investment development and new employment.

There is some positive data that brings hope. In February, the International Energy Agency (IEA) announced that after 2 years of growth, global emissions of CO2 from energy sources has held steady at about 33 billion tons in 2019, the same as in 2018. The halt in the increase in emissions has been caused by the ongoing positive evolution of electricity generation. “The reduction in the use of coal to produce electricity” explains Ronchi, “has resulted in a decrease in emissions of around 200 Mt of CO2 compared to 2018. The most advanced economies (USA, Europe and Japan), despite GDP growth, have reduced their emissions by over 370 Mt of CO2 : a cut of 3.2%.”

The other great matter of debate for businesses today is the circular economy. At the most recent National Conference organized by the Circular Economy Network, the decisive role of the circular economy was discussed in concurrence with the launch of the Green Deal program. In addition to the reduction of environmental and climatic impacts and the consequent economic and employment advantages, the theme of Regenerative Bioeconomy emerged. It is considered to be a field capable of consolidating the future of successful sectors, such as agribusiness, simultaneously initiating new development in marginal territories and relaunching abandoned industrial sites and activities. The former minister stated: “Circularity in the use of natural resources is now a necessary provision for the well-being of populations and the development of businesses. Italy registers a higher overall circularity performance compared to the other main European economies, despite showing some delay.”

In fact, our country holds the role of leader in production (resource productivity and eco-innovation) and waste management. It does, however, present more marked delays in regard to the market of secondary raw material (including the reutilization of recycled material within production systems). “Public policy has the role of helping the market make strides towards decarbonization, facilitating necessary technological innovation. Politics and bureaucracy must move at a speed that is appropriate to the transition, not become an obstacle slowing down progress.” Ronchi explains. “Let’s take the case of the End of Waste act, which regulates when waste ceases to be waste. The process, which allows refuse and differentiated waste to become legitimate products that can be reintroduced to the market, must be accompanied by regulations that facilitate those who would like to invest in the green economy. Putting sustainable choices in practice must become easier and more convenient. A demand for a broader range of exchange, rental and sharing services must be initiated. If bureaucratic controls (with the exception of environmental protection and product quality) become too slow, in the end it will no longer be worth it for a company to recycle its waste. Therefore, it will be necessary to have corrective measures such as carbon pricing in place to gradually lessen the dependency on energy derived from fossil fuel: the only way to avoid regulatory delays and constraints on the circular economy and decarbonization is through an extensive plan of public intervention.” A significant example is the conversion of industrial areas. “A relevant topic in Italy is the green conversion of brownfield industrial sites” responds the Foundation’s president, “a fundamental step towards cleaning up the territory and avoiding further land use. The energy transition must bring with it a change in economic and production activity: this is the reason why the use of abandoned industrial sites is an important road to take. Germany sets a good example with their plan to convert all carbon power plants by 2038. Government, businesses and the main mining Länder have reached an agreement which provides for an allocation of around € 40 billion for the progressive closure of the plants, their economic conversion and subsequent support for the loss of jobs. The collaboration has overcome bureaucratic delays and mapped out a fast and dynamic path on both a national and local scale.”

We asked Ronchi in closing: What do managers and entrepreneurs need in order to successfully navigate a change as important and articulated as the green transition? “First of all, Vision. A vision in the medium-long term that will allow businesses to keep up with innovation and the scenarios around them. Second of all, I would say the ability to continually be up to date, making alliances with Universities and Institutes of Technology of premiere importance. Today, technology and solutions are evolving with remarkable speed, faster than ever before. And last, but certainly not least, is the ethical side of the business. The responsibility towards stakeholders and the idea of social enterprise that gives back to the territory and the community in question should be pillars upon which companies of the third millennium are built. I feel that an essential characteristic and objective of the green economy is an all around well-being of a better quality than was in the past. Only in this way will we be able to prevent the outcomes of the climate crisis, improve our health as citizens and protect those landscapes and territories that make our lives enjoyable.”

You can find the full interview in our last issue of EVOLVE, the Maire Tecnimont's Magazine:  Read it