DISCUSSION ON CONTEMPORARY MARKETING CHALLENGES
(A) The Challenge
Greenhouse gas (GHG) emissions (e.g., carbon dioxide, methane, and nitrous oxide) disrupt weather patterns and the usual balance of nature thereby causing climate change and global warming. Burning of wood, charcoal, and coal increases the level of pollutants in the atmosphere. Technological inventions such as power generators, vehicles, ships, and airplanes that run on fossil fuels (e.g., gasoline/diesel and natural gas) also have direct impact on humans, aquatic life, agriculture, and businesses. The automotive, mining, transport and logistics, and tourism and travel industries contribute higher percentages of carbon emissions when compared to other industries (Malik et al, 2018; Ozili, 2021).
Figure 1: Fossil fuel sources have varying amounts of energy per unit of weight.
Source: EPECTEC (2023)
*Note: MJ/kg+Megajoules per kilogram
Air pollutants from cars cause lung cancer and other health problems (e.g., heart diseases, asthma, birth defects, and eye irritation. Carbon (CO2) emissions also have negative impact on the environment and economy. However, widespread awareness about eco-friendly products and responsible corporate behaviours has increased pressure on the global automotive industry to reassess their decarbonization strategies and take a proactive approach towards mitigating air pollution risks. Data on Figure 1 shows that sustainable energy such as Lithium-ion battery produces insignificant GHG emissions than other sources of fossil fuel combined, but the biggest challenge is how and when individuals, households, and businesses—not only the technology sector and automotive industry—can take bold steps towards stabilizing global temperature rise to or above pre-industrial level (a maximum of 1.5°C) (Ozili, 2020).
Other challenges to reducing global carbon emission index is that small- and medium-scale enterprises (SMEs) do not have adequate research and development (R&D) investments in the areas of technological innovation, facility/equipment upgrade, and employee training.
Additionally, there are discrepancies in the interpretation of climate change analytics, and the quantification of carbon emissions impact across the world. For example, the U.S. Environmental Protection Agency (EPA) calculates carbon emissions for larger vehicles using weight and wheelbase measurements thereby providing disproportionate figures in comparison to small- and medium-size vehicles (Fisher et al, 2018).
(B) The Consequences of Air Pollution & Impact on Society
Climate change is the biggest health threat facing humanity. It affects determinants of life (e.g., safe drinking water, clean air, secure shelter, and sufficient food). A recent World Health Organization (WHO) data indicates that premature deaths induced by pollutants (e.g., malnutrition, heat stress, diarrhoea, and malaria) can increase by an additional 250,000 per year between 2030 and 2050. Although everyone is at risk from air pollution, the most vulnerable climate change stakeholders comprise of people (low-income earners and disadvantaged communities in developing countries) who contribute least to GHG emissions and are least able to protect themselves and their families. Global CO2 emissions from fossil fuels reached its highest point in 2021 (Antonopoulou, 2022; Ben-Amar et al, 2022).
Figure 2: Global Index of CO2 Emissions between 1750 and 2021
Source: Global Carbon Project (2022)
Figure 3: Carbon emissions growth between 1750 and 2021
Source: Global Carbon Project (2022)
Figure 3 shows that CO2 emissions was relatively slow until 1945. In 1950, global emissions reached 6 billion tonnes and nearly quadrupled in 1990 (22.76 billion), with a rapid growth of more than 37 billion tonnes in 2021. The climate crisis is not only a threat to global health; if stakeholders fail to address the issue, there is a possibility that humanity can lose the last fifty years of progress in development in addition to an unprecedented level of hunger, poverty, and healthcare burden. These setbacks are currently exacerbating existing barriers to healthcare delivery and limiting access to primary care thereby impeding the actualization of United Nations (UN) universal health coverage (UHC) and sustainable development goals (SDGs) in various ways. Over twelve percent of the world’s population (about 930 million people) spend at least ten percent of their income on health care. As highlighted in Figure 2, countries with a weak health infrastructure and low CO2 exposure require enormous financial and technical support to prepare and cope with health crisis such as the COVID-19 pandemic (Vu, 2023).
(C) Impact of Climate Change Issues on the Technology/Automobile Industry
Reduction of GHG emissions through green transport models, food choices, and energy-use habits can improve quality and span of life. This underscores the importance of stakeholder collaboration. However, climate change stakeholders operating in the carbon-intensive car manufacturing industry are facing a complex task of analysing, understanding, and mitigating air pollution risks with robust and reliable environmental, social, and governance (ESG) metrics (Malik et al, 2018; Antonopoulou, 2022).
Figure 4: CO2 Emissions from the Global Automotive Industry
Source: BP Statistical Review of World Energy (2019)
Pictorial data on Figure 4 indicates that fossil fuel-powered vehicles emit the highest percentage of CO2, thus, there are multiple impacts of climate change on the global automotive industry. For example, global consumers are showing concern for the ESG performance of companies, and the metrics have direct impact on sales and revenues. Also, extreme weather conditions causing water scarcity or floods expose companies to business risks such as supply shortages (Ozili, 2022).
Global sustainability strategies in the automotive industry requires changes in business model and technology infrastructure, a capital-intensive project that creates transition risks from government regulations to operational costs, low viability of existing products/services, and equity risks. Additionally, the potential liability for high GHG emissions includes lawsuits against fossil fuel companies and utilities who have been held accountable for the harsh consequences of climate change. According to the “Stakeholder Theory,” people (such as climate change stakeholders) whose lives are touched by a corporation have the right and obligation to participate in directing it. Thus, businesses should embrace ethical activities (CSR) that prioritize societal wellbeing, not profits. (Fisher et al, 2018; Ozili, 2021).
(D) Does the challenge provide a barrier or a new opportunity to do things differently?
The Linear Model of Innovation identifies scientific research as the key driver of innovation and diffusion that eventually leads to economic prosperity. The theory was designed in the 1950s to highlight the linear progression of businesses from scientific discovery to technology-driven development, and to the market, where goods/services are sold for profits. However, there are arguments about the process of innovation (technology push and market pull models) and its varying effects. For example, the “technology push” model outlines “basic science, design and engineering, manufacturing, marketing, and sales” as the innovation process whereas the “market pull” model starts with “market need, development, manufacturing, and sales.” The Linear Model of Innovation was designed to link basic science and technology, but its practical implementation was widely criticized because the innovation models ignored the role of consumer feedbacks and loops that occur between different steps of the innovation processes. Such errors and failures at various stages, according to Godin Benoit (2006), may require business leaders to reconsider earlier steps that could in an innovation. Both models of the innovation process emphasize the current technology push for green energy and market demand for eco-friendly vehicles that are not only safe but attractive, and affordable.
Climate risk creates opportunities for innovative companies like Tesla, BMW, and Volkswagen to change their business models and adapt with global sustainability demands (Ben-Amar et al, 2022).
First, companies can start by improving their resource productivity (that is, increasing energy efficiency) to reduce operational costs (Roberts, 2022).
Second, climate crisis highlights the importance of innovation, strategic management, customer-oriented policies, employee engagement, and Corporate Social Responsibility (CSR). So, companies are leveraging science and innovation to design and manufacture highly differentiated and inimitable eco-friendly products that strengthen customer trust, loyalty, and brand equity. These climate change objectives align with Archie Carroll’s “Pyramid of CSR” which suggests that organizations can achieve competitiveness through four key approaches to business: (a) focus on profitability (economic); (b) focus on compliance with the law (legal); (c) focus on doing ‘what is right’ (ethical), and (d) focus on doing ‘what is desired’ (philanthropic) (Silva Junior et al, 2023).
Third, companies can enhance supply chain resilience by transiting to renewable energy sources. Reducing reliance on price-volatile fossil fuels will not only increase long-term Return on Investment (ROI) but spur business leaders, governments, and investors to increase R&D investments and unlock new market opportunities (Ozili, 2022; Valentini & Kruckeberg, 2018; Ghosh et al, 2022).
(E) Why is it important for marketers to address the challenge for their company?
The ambition to sustain profitability and competitive advantage has been a primary driver of businesses. However, in in the context of CO2 emissions, the “Triple Bottom Line Theory” suggests that leaders should calculate bottom-line impact of their business models not only in economic terms but with respect to the society and environment. Thus, the corporate culture of companies and their technological choices certainly make a huge difference in this climate change era (Lange & Bundy, 2018).
It is important for companies to address their carbon footprint because the world has reached a breaking point. According to the World Health Organization, direct damage costs to health care and health systems per year, excluding the financial impact on health-determining sectors such as agriculture, water, and sanitation, is above $2 billion and could reach $4 billion by 2030. To remain competitive in this era of global sustainability campaigns, automobile companies must overlook financial, market, and transition risks when making policy decisions (Ghosh et al, 2022; Ben-Amar et al, 2022). So, companies in the global automotive industry must understand the impact of GHG emissions (especially carbon dioxide) on the world and support transition to sustainable energy. There are four reasons for this.
First, business outcomes differ, and governments are enacting and implementing mandatory CO2 emissions reporting which legally holds businesses accountable for their carbon output (Valentini & Kruckeberg, 2018).
Second, a high percentage of the global workforce, especially millennials, are rejecting employment offers from companies with a history of weak corporate culture that allows corruption, tax evasion, environmental degradation, and unethical business.
Third, competitors are recognizing the importance of reducing their carbon footprint, not only as a business strategy for making more profits but a moral act to save the world (Roberts, 2022).
Lastly, resources are limited so every company needs an innovative, engaged workforce, an innovative leadership, and a robust supply chain with understanding of the risks and implications of global sustainability, ethics, CSR, customer satisfaction, and a strong corporate culture.
Automakers should therefore increase efforts to acquire quality carbon credits as their companies transition from fossil fuels to renewable energy while simultaneously using CSR projects to make the world a better place. Under the European Union’s Climate Monitoring Mechanism, for example, large corporations are mandated to disclose their carbon emissions. In the United States, California senate in early 2022 approved the Climate Corporate Accountability Act, which requires companies generating up to $1 billion in gross annual revenue to disclose GHG emissions data from all technologies/activities (that is, direct emissions from company-owned technologies, electricity usage, and indirect emissions from their supply chain). The U.S. government expects to implement mandatory reporting for companies that meet the CO2 emissions standard by 2025 or 2026 (Buallay, 2022; Silva Junior et al, 2023).
Conclusion
To achieve net zero target by 2025, climate change stakeholders must reduce carbon emissions to a pre-industrial level (1.5°C). This requires steady reduction of the current GHG by limiting burning of fossil fuels and, at the same time, increasing production and use of eco-friendly products. Companies in the automotive industry should not wait for governments to force them to act. Leaders should analyse the business environment, plan, and voluntarily start implementing policies to reduce their carbon footprint and protect our environment. Notwithstanding the financial and transition risks of supporting global sustainability campaigns, automakers and stakeholders in the global technology sector should collaborate—independent of what is required by law—to design safe, affordable, and durable products that will increase consumer trust, reduce workforce shortage, and show the world a peek of corporate visions that prioritize ESG impact.
References
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Ben-Amar, W., Comyns, B. and Martinez, I. (2022), “The COVID-19 pandemic: opportunity or challenge for climate change risk disclosure?”, Accounting, Auditing & Accountability Journal, Vol. ahead-of-print No. ahead-of-print.
Buallay, A.M. (2022), “Relevant Theories to Sustainability Reporting”, International Perspectives on Sustainability Reporting, Emerald Publishing Limited, Bingley, pp. 61-76.
Fisher, D.R., Galli Robertson, A.M., Waggle, J.M., Dewey, A.M., Dubin, A.H. and Yagatich, W. (2018), “Polarizing Climate Politics in America”, Environment, Politics, and Society (Research in Political Sociology, Vol. 25), Emerald Publishing Limited, Bingley, pp. 1-23.
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Lange, D. and Bundy, J. (2018), “The Association between Ethics and Stakeholder Theory”, Sustainability, Stakeholder Governance, and Corporate Social Responsibility (Advances in Strategic Management, Vol. 38), Emerald Publishing Limited, Bingley, pp. 365-387.
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Ozili, P.K. (2020), “Effect of Climate Change on Financial Institutions and the Financial System”, Özen, E. and Grima, S. (Ed.) Uncertainty and Challenges in Contemporary Economic Behaviour (Emerald Studies in Finance, Insurance, and Risk Management), Emerald Publishing Limited, Bingley, pp. 139-144.
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