Climate change: the new challenges for businesses in Italy and around the world

Interview with Professor Stefano Pareglio, professor of Economics at the Catholic University of the Sacred Heart and an expert on climate change. We talk to him about the green transition in the business world. Companies are beginning to integrate sustainable goods and services, he explains. But there is still some way to go to achieve full awareness.

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The concrete facts of the matter are prompting managers and companies to acknowledge the effects of climate change. Stefano Pareglio, professor of Economics at the Catholic University of the Sacred Heart, has been following the impact of climate change and the green transition on the business world and capital markets for years. “We are not at year zero, but,” he said, “we are also not in the condition where perhaps we should be, taking into account the material nature of this issue.”

Question: Where do we stand? What is the perception of companies on the risks of climate change?
Response: “Recent research by Deloitte conducted at the World Economic Forum investigates precisely the attitudes of CxOs (Chief Experience Officers) toward the issue of climate change. About 2,000 managers from 24 countries globally were interviewed in Davos. What emerges is that more than 42 percent of participants report that climate change is the main challenge they will face. In Italy, the situation is even more evident. Indeed, one in two managers in Italy report that climate change, and all that comes with it, both in terms of adaptation and mitigation, will be the main challenges to be faced in the coming years. More than 60 percent of them believe that climate change will have major effects on business operations and investments in the next three years.”

D: This is the perception. Has this been translated into any concrete action?
R: “We are not at year zero, but we are also not in the condition where perhaps we should be, taking into account the material nature of this issue. Rather, there has been a consolidated focus on the risk of transition, that is, the risk associated with changing policies, norms, markets and reputations. Companies are beginning to integrate–and at the same time trying to produce–sustainable goods and services. Obviously, the response differs somewhat, depending on the reference industry. Most actors still complain of difficulties on the cost front and in some cases of the absence of an incentive regulatory system. Put briefly, emissions reductions alone are not enough; equally incisive action is needed in the meantime to limit the worsening effects of the changing climate. The good news is that there are tools to act on both fronts, thanks to technological innovation and finance. However, we must act now, otherwise the challenge will become increasingly complex.”

D: Will reality bring innovation and adaptation?
R: "Reality, as I said, already compels us to tackle this challenge. We started a bit earlier on the mitigation front. Today we see that generation from renewable sources has grown tremendously in terms of installed capacity and cost reductions that continue, year by year, to exceed forecasts. There are similar expectations for adaptation-related technologies and tools. I am thinking, for example, of the effort still required in the water sector. The whole water cycle could be rethought: it is a precious resource that needs to be retained, channeled properly, used efficiently, reused wherever possible, and so on. At national level, it would be useful, for example, to take action to increase the capacity to retain rainwater, to make end uses more efficient (as is done for energy) especially in the agricultural sector, and to encourage reuse by removing certain regulatory hurdles. Focusing only on the issue of waterworks leakage diverts us from the real scope of the problem. Think, for example, of agriculture in northern Italy, historically rich in water, which still largely employs surface gravity irrigation and channels the water using furrows, methods that today are probably no longer suited given the evident shortage of this resource.”

D: Are there any Italian case studies that are pushing the boundaries?
R: “Our entrepreneurial system is based mainly on medium-sized and even more on small businesses. These businesses need to be helped and guided, and this task is increasingly being entrusted to larger companies. The participation of Italian SMEs in the supply chain of large companies, including multinationals, is therefore a very interesting topic, and we already have several examples in this direction. This is a great opportunity for policymakers to leverage these experiences and our large Italian companies to ensure that they communicate their commitment along the supply chain.”