Danish companies want to save the planet hand-in-hand with government

In September 2018, iconic Danish toy conglomerate Lego announced that it would replace the plastic in its trademark brightly coloured blocks with a more sustainable material while committing to carbon-neutrality by 2030. Later that year, Maersk, the world’s largest container shipping company and Denmark’s most profitable company, followed suit by declaring that it would become carbon neutral by 2050.

As the disastrous effects of climate change threaten global supply chains and businesses’ bottom lines, and as public opinion shifts in favour of environmental action, CEOs are becoming more climate-conscious.

Carbon neutrality has received push back from some private sector companies out of fear they may lose their competitive edge. But Danish industries are staying ahead of regulation by collaborating with the government to hit national targets.

Businesses green growth ambitions

Shortly after the centre-left Social Democrats won the 2019 elections, the new Danish Prime Minister Mette Fredriksen announced that Denmark would aim to reduce the country’s carbon emissions by 70% before 2030 — well above the EU’s commitment of 40%.

Although Danish climate goals continue to be ambitious, the technical details of how businesses can help achieve them have been less explicit. To resolve this, The Confederation of Danish Industry (DI), which represents 11,000 private companies in the country, released a 2030 plan in September focused on sustainability.

As the global business community vows to reshape their business models to align with government mandates under the 2016 Paris Agreement, many question if business ambitions and economic growth can be intertwined with combating climate change.

Morten Granzau Nielsen vice director and head of the economic policy department at DI, said it can be – and that focusing on sustainable practices to tackle climate change can certainly lead to economic as well as environmental benefits. But in order to achieve these dual aims, businesses need to be able to remain competitive.

To align with the Danish government’s goals, he said DI devised the plan as a “way forward and the next steps” for Danish businesses to remain competitive and grow the economy while cutting emissions by 70 percent.

Deemed a “fully financed political playbook” by DI’s CEO Lars Sandahl Sørensen, the 2030 plan has 150 proposals for the government, including increased public funding for research and development to support the creation of new technologies for climate change mitigation.

DI has concluded that if politicians implement its proposals Denmark will increase its wealth by over $16 billion by 2030.

The plan calls for companies to use resources and energy more efficiently while making the transition to renewable energy sources. They advocate for a lower corporate tax rate to ensure competitiveness, but are open to a small increase in the carbon tax to incentivise a transition to renewables.

“We don’t want to pursue carbon reductions by lowering growth or pushing private companies out of Denmark with taxes or other demands competitors don’t have,” said Nielsen.

Although economic competitiveness has been a concern for the private sector, a study conducted by researchers from the London School of Economics concluded that there is little evidence to say that strict environmental protections lead to large, adverse effects on competitiveness. The cost burden environmental policies have on trade, industry location, employment, productivity, and innovation also proved to be low.

Similarly, a carbon tax is viewed by economists as one of the most powerful strategies to lower greenhouse gas emissions but has limited effect on competitiveness depending on the policy’s design. For instance, removing subsidies for high-carbon activities can shift the economic landscape without limiting competitiveness.

DI is hoping the government provides tax incentives for companies to invest in research and development, but if there are plans to increase taxes on carbon or manufacturing he said DI “would not be pleased”.

Although the private sector may agree with government’s overall sustainability priorities, the approach to achieve the objectives won’t always align. Creating a dialogue between the public and private sectors lets both sides engage in a meaningful debate about the terms, allowing them to partner on setting the conditions.

The government and business sector as co-players

Ida Auken the former Danish Minister for the environment and member of Parliament from the Danish Social Liberal Party, said that an industry that is willing to work with the government is in a better position to receive support and political backing.

She hailed DI’s plan as a breakthrough, adding that it’s preferable if the business sector and the government act as “co-players” because working together to achieve target reductions can lead to greater innovation and cost savings.

The government plans to open sectoral discussions with a panel where an industry group, citizens and municipalities are invited to introduce a range of perspectives and work together to establish a common climate goal.

The Prime Minister has also agreed to meet with DI in the fall of 2019 to build a partnership with the private sector and detail the specific initiatives that will help businesses reach carbon emission reduction targets, according to Nielsen.

Her plan is to evaluate each sector and create detailed, technical targets for each. But Nielsen said the preferred way forward for DI is a combination of the proposals in the 2030 plan and meeting the government’s overall goals.

If industries aren’t willing to comply with government targets, Auken said the next step should be regulation so they “feel the heat”.

Collaborative approaches can lead to more sustainable industries

If there is pushback on adopting sustainably-focused business practices, regulatory oversight can drive the private sector to meet climate legislation quicker and with more ambition.

But instituting regulations should be done on a sector by sector basis, said Auken. She added that regulatory deadlines should be set within reasonable timelines so that they are achievable and not burdensome on the private sector.

Although DI signalled a willingness to cooperate with government, not all sectors have escaped regulatory oversight. Auken said during the first government climate framework, the agriculture sector was unwilling to work with the government, so Denmark ended up regulating the industry.

The agriculture industry is one-fifth of Denmark’s overall carbon footprint. But the sector also generates a significant amount of revenue for the Danish economy — the food sector rakes in 25 million dollars a year in exports, for example.

In March of 2019, The Danish Agriculture and Food Council (Landbrug & Fødevarer, DAFC) – an industry group that represents the Danish food sector – pledged to go carbon neutral by 2050, reversing course to work with the government.

Niels Peter Nørring, climate director of DAFC, said there was concern among DAFC and its members that lowering CO2 emissions meant lower production rates, which would hinder growth and development of the agricultural sector.

Reluctant at first, Nørring said it is now important for the sector to become a global leader in sustainable practices, and with the help from the government to meet the targets in their 2050 strategy, that can be achieved.

Sustainable companies can increase profitability by tapping into new markets and developing new technologies, and by limiting resources, can further reduce costs.

Cooperative approaches make it easier for sectors to achieve their targets and get additional financing to meet their goals.

DAFC is currently in talks with the government and is requesting investments for research, new technologies and agriculturally sustainable products such as peat soils and climate-friendly stables.

“We’ve had a government which has been looking at the agricultural sector in a positive way and has been proactive, creating constructive proposals and want to find solutions together instead of saying we’re a burden and won’t be able to fulfil the targets,” said Nørring. “It is of the utmost importance to have a dialogue with the ministry and ministers and as well as NGOs and other stakeholders.” - Amelia Axelsen