According to NASA, 2015 was the hottest year since man started measuring the temperature of the planet. This was by no means an isolated case, but a constant trend from the year 2000 to today; the biggest culprit is the global warming associated with human activity, along with emissions of greenhouse gases (GHGs) as a by-product of fossil fuel combustion.
Climate change is an issue that has been discussed to no end: actor Leonardo DiCaprio has spoken very frankly about the need to act at the UN General Assembly, U.S. President Barack Obama added climate change to his mandate, and in Paris 195 countries reached a historic agreement during the COP21 conference.
Despite all these efforts, the consensus is that the solution is still a long way away, and that big companies just don’t do enough. Why?
The traditional approach to climate change: progress vs environment
The debate on climate change is usually tackled starting with three fundamental assumptions. The first concerns a moral duty: it’s our responsibility to safeguard the planet for future generations, as we only have one Earth.
The second assumption is ecological: the climate mutation for which we are responsible is also to blame for unpredictable natural disasters, of which the victims are many.
The third assumption stems from the juxtaposition of progress and environment: progress means economic growth, and economic growth of an individual or a nation implies increased pollution: progress demands energy, and access to energy is ever more at the cost of the environment. Asking individuals, or whole nations to limit their own carbon footprint means placing limits on their demand for energy, and as such, their demand for growth. Asking individuals and states to compensate for their own carbon footprint leads to their growth being more expensive; which in turn accounts for the differences between most Latin America and developed countries’ plans to combat climate change.
These three assumptions don’t actually help to find a solution, because the truth is that facing up to climate change is considered by big companies and governments to be important, but not convenient. It’s a case of having to bear the brunt of immediate costs in the present, in order to reap the rewards in the distant future.
If we think, for example, of a traditional car: all of us know that in using one (a benefit of the present) we are impacting negatively on the climatic conditions of the planet (tomorrow’s cost). However, the sacrifice of having to walk (today) often means that we put off dealing with the problem (until tomorrow). What happens, however, if someone were to propose a car with the same functionality and characteristics as the one we use, at a similar price to the one we paid, but that doesn’t pollute? Well now the picture changes: we’re suddenly motivated to act against the issue at hand (pollution), because we finally have a solution (the electric car) from which we can reap immediate benefits .
It’s certainly not by chance that I have just described what is happening to the automobile market, thanks to Elon Musk: energy is set to dominate the debate on tomorrow’s world. From self-driving cars to wearable devices, the problem will be how to enable this progress without having to resort to finite resources that only serve to worsen the climate change issue.
Renewable energy is not just a reaction to climate change
Since the industrial revolution, progress has continued to be achieved at the cost of the planet we live on; in 2040 demand for solar electricity is expected to have grown by 70%. With these statistics, we cannot afford to continue to think of Earth as a disposable resource, ripe for consumption.
Renewable sources solve this problem, because they radically transform energy availability: from a zero-sum game, in which it is a race to see who can claim the most fossil fuels, using them at the expense of the environment, to a positive-sum game whereby the access by one party to energy does not affect the other party’s access, resources are neither limited or localized, and the environmental impact is minimal.
We need to build convenient, tangible alternatives until a new direction is adopted and replicated. Nevertheless, there are still many that believe that resorting to renewable sources is still impractical from an economic point of view, when compared to the use of fossil fuels.
But what happens if we begin to look at it from the perspective of long-term value?
We ought to factor in both the costs and benefits of whichever choice we make.
For Enel, Latin America is an enormous technological laboratory when it comes to renewable energy. The solutions that we have adopted were not, however, motivated by reacting to the climate change issue; they are derived from a precise strategy centered on Porter and Kramer’s shared value theory: only in aligning the shareholders’ interests with those of the customer and territory, is it possible to successfully grow a business over time.
Renewable resources needn’t just be a reaction to climate change. They are motors of progress. The benefits are many, tangible and immediate:
● Technology makes renewable resources all the more competitive from a financial point of view, but they also have an extremely fast time-to-market. Renewable energy can be competitive with traditional energy production, even in geographic areas where its development is still in the early stages, as we’re proving in Peru, profitably managing three different renewable technologies in the country: wind, solar, and hydroelectricity (totaling 326 MW).Renewable resources provide diversification of a country's energy mix, making the energy system more resilient and better focused on addressing the challenges posed by climate change.
● Renewable resources generate energy security in the country that develops them, because their production does not depend on the volatility of commodity prices. Less developed countries which are often rich in fossil fuels could set their sights on more stable growth. In Venezuela, fossil fuels seem to be more of a curse, rather than an advantage. Since 2005, Uruguay has invested over 3% of their own GDP in altering their energy mix to favour renewable energy, now generating 95% of the country’s electricity from renewable energy.
● Renewable resources also help in solving the issue of bringing energy to isolated communities, as demonstrated by the Ollague case, where renewable energy allows us to provide energy (24 hours a day, 7 days a week) to an off-grid village at 3700 meters above sea level, in a deserted area of Chile, ensuring that the village has access to energy, even at night.
● Renewable resources create local jobs and above all else promote a direct, inclusive dialogue with communities that are based in the territory, as demonstrated by the Cerro Pabellon case in Chile, where we’re constructing the first geothermic plant in Latin America (48MW). The involvement of 6 indigenous Quechua and Atacamegne communities has made it so that some of the investments and benefits reaped remain in-situ, thanks also to the integration of those same communities into the chain of service providers for the construction phase of the project; this has facilitated the birth of new entrepreneurs, of whom the majority are women.
What we can learn from our efforts in Latin America
What is clear to us now, having faced so many issues in Latin America, is this: thinking of the world as a battleground between those who love the planet and those who are interested in delivering shareholder value is both superficial and outdated. The real distinction lies in those who are committed to creating long term value for all, and those who are not.
A commitment to long-term shareholder value means that over 50% of the Enel Group’s growth capex over the next four years is dedicated to renewable energy, the generation technologies of the future. That same commitment means that we will not to open any more coal-fired power plants either – because this is a generation technology of the past. In the long run, companies need to produce value in order to generate profit; and in an interconnected world that is best achieved by adhering to the principle of shared value, which moves us beyond the perspective of trade-offs.
It was because of this that in March 2015 Enel and Greenpeace took a stand together: the challenge of those who strive to protect this planet is the same as that of a company that wishes to generate long-term shareholder value: ensure that today’s progress does not need to happen at the expense of tomorrow’s opportunities.
The World Economic Forum on Latin America is taking place in Medellin, Colombia from 16 to 17 June.