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Economic Sustainability: Building Blocks for a Green Future
What do we actually mean when we talk about sustainability? For companies, this has long since become a crucial question that is getting increasingly difficult to answer. Growing demands and expectations from stakeholders make it clear that sustainability is no longer just an ethical obligation, but a strategic necessity. Companies are therefore faced with the challenge of anchoring sustainability as an integral part of their strategy. Preferably as part of a holistic approach that takes equal account of economic, ecological and social aspects.
As experts in the field of sustainability, we not only offer strategic support in the implementation of your sustainability strategy. We also provide comprehensive training opportunities. Our aim is to raise awareness of the importance and potential of a sustainable economy. Our focus lies on knowledge exchange, innovative processes and inspiring initiatives to create a sustainable basis for life. Through in-depth analyses, current research findings and practical examples, we want to encourage companies and society to consolidate sustainable action.
What Does Sustainability Mean in an Economic Context?
Economic sustainability means promoting a way of doing business that is viable for the long run and does not focus on short-term profits. It should rather ensure the preservation of natural resources while taking environmental and social aspects into account. This includes promoting fair trade, supporting local communities and taking environmental and social costs into consideration when making economic decisions. Weighing up ecological and economic relevance is essential for this.
We firmly believe that following the principle of sustainability is both an ethical obligation and an economic necessity. By using our resources responsibly, we can both protect our environment and contribute to a fair society and preserve it for future generations. With our part-time study programs such as the Executive MBA Energy Management, the Master Sustainability, Entrepreneurship & Technology and the ESG & Sustainability program, the WU Executive Academy actively contributes to bringing about a positive change towards a sustainable society.
Resources for Your Business and Personal Development
On our website you will find a variety of articles, interviews and practical tips to help you align your personal and corporate goals with a sustainable strategy. Take a look at our latest news articles on sustainability right here, or scroll down, where we explain the key terms related to economic sustainability and offer support for your journey towards sustainability. From reducing your ecological footprint to implementing environmentally friendly business practices.
The ABC of the Energy Transition: Part 2
May 06, 2024
Thing you didn't know you didn't know
The energy transition is perhaps among the most difficult and, at the same time, most important tasks humanity has ever had to face. Experts unanimously agree that we are running out of time and that this extremely challenging task can only be tackled in a joint global effort. In these ABCs of the energy transition, Jonas Puck, Academic Director of the Executive MBA Energy Management at the WU Executive Academy, debunks the most common myths about the energy transition and expounds on background facts about little known correlations in a field that will shape our planet’s future more than anything else.
ABC of the Energy Transition: Maritime Momentum
Energy harnessed from the oceans and seas could make a considerable contribution to enabling the energy transition. Considering the enormous energetic momentum of water, it’s clear that wave or ocean thermal energy converters and tidal power plants harbor a potential for the sustainable generation of electricity. Having said that, the respective technologies are still in their infancy, and numerous environmental protection issues are yet to be solved. This concerns, for instance, the effects of such plants on the flora and fauna as much as on the local population and regional tourism.
Another unsolved issue is the fact that energy is produced where it is not needed. So how to transport it from the seas to the end user without losing too much of it on the way? And still: we should definitely keep an eye out for future uses of energy generated by the oceans and seas.
ABC of the Energy Transition: Net-Zero Navigations
To curb global warming, the global economy must reach net zero emissions fast. This is a monumental task requiring drastic measures across all industries. The former goal of containing global warming to a plus of 1.5°C compared to pre-industrial levels has effectively become unrealistic as almost every country lags behind in reaching its climate goals.
The specter of rising energy prices drastically affecting prosperity and competitiveness – something particularly companies fear – does not help either. But not all manufacturing enterprises need to worry. With the exception of players in the energy-intensive steel and cement industries, the energy costs of an average producing company amount to only one to three percent of its overall expenses.
ABC of the Energy Transition: Oil Oxymoron
You would think that soaring oil prices would prompt consumers to switch to renewable energy sources. That’s partly true because when prices are high, people look for alternative and cheaper energy sources to save money.
But that’s only one side of the story. Oil and gas corporations are major investors in renewables as they too are forced to develop new business models in the long run. As long as they make enough money from oil and gas sales though, they tend to hold back on investments or scale them down. So even if the current prices seem like a strong incentive to move away from fossil fuels, the pace of the transition to renewable energy sources is much slower than one would expect.
ABC of the Energy Transition: Plastic Pollution
The production and disposal of plastics both considerably contribute to driving climate change. Plastic causes greenhouse gas pollution across its entire life cycle. in the production of the raw material oil it is derived from, its actual production and transport, and when it is not properly recycled and ends up on landfills (methane) or is burned (CO2 and other harmful substances). Reusing and recycling plastics could, reduce pollution, but the effects are still quite limited.
And the fact that standards of and approaches to handling used plastics vary greatly across the world only exacerbates the situation. While EU countries recycle, on average, just over 42% of their plastics waste, this number is as low as 9% in the US. Countries in Africa and Asia fare even worse as they have little to no infrastructure to manage their waste.
ABC of the Energy Transition: Quota Quandaries
It’s basic math: a quota and the absolute sum can differ significantly, and one can often not be interpreted without the other. And the same goes for depicting the share of fossil fuels in an overall portfolio. If a country proudly states that the quota of fossil energy sources in its energy portfolio has dropped by 15%, this does not necessarily mean that the total sum of energy from fossil sources used has decreased. In fact, the reduced share of fossil energy is often associated with significantly increased total energy consumption, particularly in growth regions.
So what sounds like good news at first, alas, sometimes simply means that the CO2 pollution has decreased in an insignificant way, or maybe not at all.
ABC of the Energy Transition: Rebound Reaction
It’s a phenomenon as old as Thomas Edison’s invention of the light bulb. Already back then, people turned it on more often than necessary. Efficiency increases usually make things cheaper for consumers. This leads to what has been termed the “rebound effect”. When a cheaper energy source that enables people to save energy and money becomes available, people often end up using more, effectively offsetting their savings. A simple example: you buy a car with outstanding mileage and use it for every short trip, such as the 5-minute drive to the supermarket. This phenomenon can also be observed on the macroeconomic level. If the energy-conscious behavior of one group of consumers results in a drop in energy prices, this can lead to increased consumption by another group of consumers.
There are also indirect rebound effects, such as when money saved by increased energy efficiency is spent on energy-intensive fields. The rebound reaction also comes into play in the development of products. Flat-screen televisions are more energy-efficient than CRT televisions. However, as people are buying ever larger screens, energy consumption through TV use is still increasing every year.
ABC of the Energy Transition: Storage Struggles
For gas and nuclear power plants, the energy output can be controlled. When it comes to wind, water, and solar energy this becomes difficult. When the weather is stormy but sunny, power plants feed massive amounts of electricity into grids, causing electricity prices to become negative and threatening the entire system. What’s paradoxical about this is that the grid operator is then forced to pay the consumers to get rid of excess electricity.
When it’s very windy in Germany for example, windmills produce additional electricity that Germany has to pay, e.g., Austria to accept the surplus that would overburden the stability of their grid. Austria feeds this electricity into pumped-storage power plants, which pump water into mountain water reservoirs to store energy. When more electricity is needed in Austria, this water is released again. In the future, it will be a challenge to develop ways to efficiently store energy.
ABC of the Energy Transition: Tipping Point Tragedy
The climate system’s tipping points are no longer the hobbyhorse of climate experts. They have also entered public discourse. And for a good reason! Even though the Intergovernmental Panel on Climate Change (IPCC) emphasizes that, contrary to common belief, tipping points are not actually points at which the climate would “tip” irreversibly, they are still something to worry about. When they are reached, the (climate) system changes its nature entirely. They are abrupt climate effects that rapidly change for the worse and are sometimes, but not always, irreversible.
And they often trigger a chain reaction. One tipping point sets off the next one. If one sub-system is destroyed, this affects further sub-systems. The weakening of the Atlantic meridional overturning circulation (AMOC), melting polar ice caps, and thawing permafrost are only some examples of such tipping points.
ABC of the Energy Transition: Urbanization Utopia
Urbanization is both an opportunity and a threat for climate protection. Cities cause the most emissions, but they can also pioneer the changes needed for the energy transition. Just think of green buildings and efficient infrastructure and sustainable mobility offers such as bike or car sharing. Usually, however, green lungs and recreational parks are located at the outskirts of cities.
The notion of keeping things regional, which will be an important requirement for the energy transition to succeed, plays a particular role in cities. Sustainable farming to produce the food needed for a big city like Vienna takes place outside the city’s borders. This means that urbanization will only be a stepping stone to a zero-emissions future if we find ways to ensure regional (food) provision in urbanized areas. And it is also why innovative approaches with the potential of becoming real game changers will be so important.
ABC of the Energy Transition: Vivid Visions of Birdkill
In many regions of the world, renewable energy portfolios rely heavily on the contribution of wind farms. At the same time, there are ecological and social aspects about them that have gotten animal lovers all riled up. In Germany, the threat these power plants supposedly pose to birds constantly makes headlines. Apparently, a shocking number of songbirds find their death through a collision with wind turbines.
Many people feel strongly about this topic, but actual research paints a different picture. Even if a wind turbine would be built in every suitable spot across Germany (which would increase the number of the country’s windmills by about 90%), the number of birds killed in collisions with rotor blades would only come to 1% of the birds falling prey to pet cats every year. While all beings are precious and deserve protection, the extent of birdkill is often exaggerated.
ABC of the Energy Transition:Willing to Win Elections
One of the biggest challenges for the energy transition can be traced back to the political election mechanisms that prevail in most (democratic) countries. Politicians do not always make decisions based on what’s best for everything and everyone involved (people, the environment, etc.) but act with upcoming elections and garnering votes for themselves in mind. This also explains why so many measures are implemented that are clearly the worst of all possible options in the long term.
Add to that the fact that, especially with issues such as the energy transition, the impact of decisions can only be felt many years later. Populist systems, where people often have little to no information or are prevented from checking whether claims made are actually correct, are a particular hazard. And this is why education and independent media will have to play a vital role as we transition to a zero-carbon future.
ABC of the Energy Transition: X-treme X Factor
The X factor represents everything we cannot anticipate and plan for on our way toward a transformation of the energy sector. It stands for all the unpredictable events, developments, and technologies that can have an impact on how things pan out. Often, these things are negative in nature (particularly at first sight). Just think of the catastrophe in Fukushima, which changed public sentiment about the use of nuclear power, especially in Europe. Or the war in Ukraine, which has ruined all the progress made in terms of a nuke-free future and even incited a kind of renaissance of nuclear power plants.
But also, happy events can be disruptive in a positive sense. Think of ground-breaking (r)evolutions such as energy storage solutions requiring far less resources than in the past, which have the potential to change framework conditions from the ground up in a very short amount of time.
ABC of the Energy Transition: Yes, to Youth Empowerment
Fridays for Future has impressively shown how empowering the youth can make a real difference in the fight against climate change. Many of us are not (yet) too worried about rising temperatures because for now, we do not (yet) or only rarely feel the immediate consequences. For future generations, however, this will be a whole different story.
This is why it’s important to raise special awareness of this topic particularly among young people. They are not only the leaders of the future but if they join forces, they have the power to convince decision-makers that there is no topic more urgent than the energy transition already today. And again, education will play a crucial role in building awareness, both among younger and older people.
ABC of the Energy Transition: Zero-Emissions Science Zigzag
Science and research will have to play a major role in discovering and developing solutions to combat climate change and realize the energy transition. This includes technological innovations as much as probing social, economic, and political aspects. Many experts agree that science has been instrumental in improving the efficiency of renewable energy sources and storing energy. Others, however, keep repeating that research must do so much more. Particularly where the development and marketing of further alternative energy solutions are concerned, there is still a lot of room for improvement. But it would be unfair to put all the responsibility entirely on researchers’ shoulders. Also, politics and companies can make important contributions to the energy transition, for instance by earmarking additional investments in their annual R&D budgets to be used for innovations related to the energy transition.
MYou can read more about the energy transition and paths to renewable energy in the first part of our big energy transition ABC.
Table of Contents
Strategic Sustainability Management in Your Company
Strategic sustainability management is a systematic approach that ensures that sustainability goals are firmly anchored in the corporate strategy. Based on an analysis, the sustainability aspects relevant to the company are determined and measures are developed to minimize environmental, economic, and social impacts. This enables companies not only to meet regulatory requirements, but also to assume responsibility in terms of social sustainability. It also ensures long-term competitiveness.
Strategic sustainability management is of central importance for companies for several reasons. It lays the foundation for environmentally friendly business practices by helping them to use resources more efficiently in the long term.
Acting in an economically sustainable manner means making forward-looking decisions. This helps to keep expenditure in check and make the most of the available budget. Acting in an environmentally conscious manner means avoiding, reducing or offsetting measures that have a harmful impact on the environment.
At the same time, implementing effective sustainability management enables companies to meet rising expectations of customers, investors and other stakeholders.
Responsible Corporate Governance: What is CSR?
Corporate Social Responsibility (CSR) is fundamentally based on the awareness that companies have a social responsibility and must act accordingly in the interests of a sustainable economy. In 2011, a strategy on social responsibility was published by the European Commission for the first time. It is based on the intention of creating good conditions for sustainable growth and responsible business. Therefore it identifies areas for action and provides guidance on how CSR can be implemented in existing concepts and corporate strategies.
In this respect, CSR pursues a principle of action. According to this, companies - over and above political objectives - voluntarily integrate ecological and social measures into their business activities and in cooperation with stakeholders. This includes, for example, the implementation of or participation in projects to protect our ecosystem. Philanthropic activities such as donations to charitable organizations and youth development or support for local community projects also fall under the term CSR. Furthermore, companies can fulfill their social responsibility by creating fairly paid jobs, safeguarding employee rights and promoting diversity and inclusion in the workplace.
CSR has become particularly important as companies are increasingly judged on what they do for society including the environment - and what commitment they make. Even if the implementation of CSR measures is voluntary, these measures are now taken for granted in the context of social responsibility and have a significant impact on a company's reputation.
More Sustainability Through ESG? The Key to a Holistic Corporate Strategy
In this context, the question arises as to how social responsibility and sustainable business practices can be implemented. An effective sustainability strategy could, for example, be based on the principles of ESG. But what exactly is behind the buzzword "ESG"?
ESG stands for Environmental, Social and Governance. These three key aspects (also known as the "three dimensions" of sustainability) enable a holistic assessment of companies. They are ensuring that economic success is not achieved at the expense of environmental protection, social justice and ethical standards. Taking ESG criteria into account is therefore crucial to ensure long-term growth and resilience. It also helps to meet the expectations of various stakeholders.
Below are some examples of how sustainable companies specifically integrate ESG principles into their organizational strategy:
Environmental: Responsible use of raw materials, use of renewable energy, reduction of emissions, economic and sustainable travel, protection of natural habitats
Social: promotion of healthy working conditions, diversity and inclusion, social commitment, product responsibility
Governance: transparency in decision-making processes, compliance with ethical principles, integrity, protection of human rights, avoidance of exploitation, appointment of a money laundering and compliance officer, risk management, supplier selection
Outlook for 2030: The Importance of the Sustainable Development Goals (SDGs)
In 2015 and as part of the 2030 Agenda for Sustainable Development, the United Nations agreed on the Sustainable Development Goals (SDGs). These can be seen as a universal call to end poverty, protect the planet and ensure prosperity at an international level.
The SDGs provide a comprehensive framework for promoting economic sustainability by setting indicators for sustainable development with a total of 17 development goals and 169 targets. Companies can contribute to achieving the SDGs by aligning their business processes with these targets, e.g. by investing in clean energy technologies and sustainable infrastructure to combat the climate crisis (SDG 13 - Climate action).
Green Finance: Financial Paths to a Sustainable Future
Protecting the environment and climate is a task not only for companies, but also for the world of finance. The term "green finance" established in this context refers to investments in environmentally friendly projects and companies that help to reduce environmental pollution and promote a sustainable future. Green financial instruments such as green bonds and sustainable investment funds enable investors to invest in climate-friendly and sustainable projects while generating financial returns.
Companies, on the other hand, can raise capital for green investments by issuing green bonds. And thereby demonstrating their commitment to environmental sustainability. Governments, meanwhile, have the opportunity to use green financing through policy measures (e.g. tax incentives, subsidy programs). They can encourage investments in environmentally friendly projects and accelerate the transition to a low-carbon economy.
Responsible Leadership: Sustainability as a Guiding Principle
In order for companies to implement a successful sustainability strategy, they need managers who cultivate a responsible management style and act in a value- and sustainability-oriented manner. Responsible leadership should therefore also be understood in particular as providing impetus for communication and interaction. It is questioning company processes and examining and, if necessary, modifying their ethical, economic and sustainable principles. Decisions should be made in the interests of a sustainable future, away from short-term financial success and towards corporate social responsibility.
The term responsible leadership therefore primarily refers to the ethical and long-term oriented actions of managers and decision-makers in companies that aim to achieve economic success without jeopardizing resources. This means that companies not only strive for short-term profit maximization, but also include social and environmental impacts in their decisions. Responsible managers strive for a balance between financial goals, environmental protection, and social responsibility. This approach is important to develop long-term stable and sustainable business models that serve the interests of both the company and society as a whole. It helps to strengthen stakeholder trust, improve the company's reputation, and create long-term value.
Energy Transition: Ecological Transformation for a Sustainable Energy Supply
In the context of "sustainability", there is no getting around the energy transition. The term "energy transition" refers to the transition from fossil fuels to renewable energy sources in order to ensure stability in the energy supply in the future. This transition aims to reduce dependence on limited and environmentally harmful resources while creating new opportunities for growth and employment. By promoting renewable energy, companies can benefit from stable and affordable energy prices while reducing environmental impacts and dependence on volatile energy markets. The energy transition is therefore a decisive step towards a sustainable and future-oriented economy and society that combines ecological, social and economic aspects.
The Need for Sustainable Development
The need for sustainable development is indispensable. It has to satisfy the needs of society without jeopardizing the needs of future generations ("justice for grandchildren") and it has to focus on the protection of natural resources. The first measures, plans and regulations have already been launched. Companies are addressing the issue of sustainability voluntarily or by decree, as well as realigning corporate goals and strategic processes.
The future of an environmental economy is characterized by a profound change in the way companies operate and create value. It encompasses a range of innovative approaches aimed at placing the concept of sustainability at the heart of economic decision-making. This includes the increased use of renewable resources, the promotion of circular production and the integration of environmentally friendly technologies and practices along the entire value chain. An ecological economy of the future not only strives for short-term profits, but also takes into account long-term environmental goals and the well-being of future generations. The urgency of this transformation lies in the need to meet the challenges of climate change and ecological degradation and to ensure a sustainable future.