A new way to be sustainable

Prices are surging across all the markets, and this trend has not spared the sphere of sustainability. In fact, companies are seeing higher price tags on several worthwhile solutions that would enable them to shrink their carbon footprint. For example, recycled PET obtained from plastic bottles has doubled in price in the last twelve months, outpacing even virgin PET, the cost of which is soaring in turn in the wake of crude oil. What’s more, carbon offsets via reforestation or other nature-based initiatives cost three times more than one year ago. This type of contribution, which is currently the most credible option for counteracting carbon emissions, is used by companies to hit net zero, a vital objective for stopping climate change.

Why is sustainability getting more expensive? On one hand - and this is the good news - the demand from companies for sustainable solutions is on the rise. All the world’s leading food and beverage producers want to boost the percentage of recycled PET in their packaging, in response to consumer pressure and relevant regulations. Case in point: a European Union mandate requires producers to use at least 25% of recycled PET in plastic bottles by 2025. But these companies are competing with the fashion industry, which is expanding consumption of polyesters made from recycled PET. As far as carbon emissions, over 25% of the biggest listed companies in the world aim to hit the net-zero target no later than 2050. Across every industry, more and more enterprises are joining the race to sustainability every day, given the growing public concern over global warming.

On the other hand, supply can’t keep up with this surge in demand. Raw materials for PET production are hard to find, given that most plastic bottles are still ending up in landfills or in our seas and oceans due to a lack of recycling systems. What’s more, nature-based climate contributions need land, which means making less land available for farming, grazing, and other activities. According to Oxfam research, to offset all the emissions from the energy sector with nature-based solutions, we would need to reforest an area as big as the Amazon. The spike in sustainability costs is dangerous if it means higher prices for consumers and leads to the mistaken perception that sustainability is a luxury that we can’t afford. But the truth is, what we really can’t afford is a lack of commitment to sustainability. If we fail in this endeavor, the impact of human activity on the environment and on society as a whole will cost us far more dearly. From a different perspective, an increase in the cost of sustainability can also be healthy, because it dispels the illusion that we can be sustainable by buying materials and solutions on the market.

The path to sustainability instead leads companies to be creative in leveraging technology, business models and relationships with external partners.

An example of this is the recently-signed agreement between Italgas and Buzzi Unicem (the leading distributor of natural gas in Italy and one of the biggest producers of cement in Europe) for the development of a new decarbonization technology. Italgas will produce hydrogen obtained from renewable sources, which will be combined with the CO2 generated by the cement production process and collected by Buzzi Unicem with a carbon capture system. The output of this process is synthetic methane, used to heat the raw materials of the cement to the required temperature, potentially obtaining a closed production cycle fueled by renewable energy, and releasing no CO2 into the environment. This technology could lead to total decarbonization of cement production, which represents approximately 8% of global emissions.

Ironically, the investment being made by Italgas and Buzzi Unicem is even more lucrative in light of the rising cost of climate contributions and carbon emissions rights (which have also doubled in the price in the last twelve months), allowing Buzzi Unicem to sell their reduced emissions on the market for a higher profit.

For companies, higher costs mean transitioning from “buying” sustainability to “doing” sustainability. A sustainable company may try to find a way to efficiently cut down on the amount of plastic it uses, rather than buying a recycled version that mitigates - but does not eliminate - the damage. The fact is, until we have better systems for collecting packaging, recycled PET will still end up polluting the environment, like all other plastics. Or a sustainable company might try to cut carbon emissions throughout the various stages of the product life cycle by making intelligent choices as far as materials, industrial design, and production methods, in energy provision and in consumer relationships. So climate contributions are the last resort, when decarbonization is impossible, not a quick shortcut to a low-cost net zero that transfers the problem to some other place in the world. Being sustainable means understanding that your business has certain impacts, and resolving these issues is one of the ways that companies can create value for their consumers, their shareholders, and their communities.