Addressing climate change the Nordic way: Motives of Swedish companies for taking action

It is Sweden’s goal to become one of the world’s first fossil fuel free welfare states, and many Swedish companies are voluntarily working to reduce their climate impact. The reasons for this are manifold; they primarily involve risk management, a sense of responsibility, management of reputation, and addressing the demands of various stakeholders, many of which are increasingly expressing concerns. Even though taking action often involves significant costs, some businesses have suggested that action is taken because of the high environmental awareness amongst the Swedish public, favorable conditions for taking climate action (such as high availability of renewable energy), and good cooperation between the state and non-state actors—factors which are arguably present in the other Nordic countries. While effective climate action still requires both states and non-state actors to show leadership and focus on speeding up implementation, Nordic companies have the potential to also be a driver for change abroad.

The use of renewable energy have been rising in recent years, especially wind and water power is common. The picture shows windmills in Lapland Sweden. — Even companies that are dependent on fossil fuels are beginning to consider alternative ways of working. While national and international regulation helps, some are doing it voluntarily. Photo: Windmills, Lapland, Sweden. NN-norden.org, Johannes Jansson. CC BY-SA 4.0.

23 June 2020 by Cornelia Fast, Julia Grimm, Naghmeh Nasiritousi,

The Paris Agreement has opened up a new chapter in political efforts to tackle climate change. It provides a flexible framework for moving the world towards decarbonization, leaving goal setting and implementation up to nation states. At the same time, the Paris Agreement recognizes the importance of non-state and sub-national actors in taking climate action. This rapprochement of the realms of state and non-state climate action has potentially significant effects on the role of the state in climate policymaking. While the traditional role of the state was that of rule-maker and regulator, states have increasingly become networkers, coordinators and facilitators by promoting voluntary climate action by industries, businesses and municipalities.

A fossil free Sweden? Voluntary climate targets to tackle climate change

Sweden, like the other Nordic countries, has adopted a carbon-neutrality target, and one of the government’s main initiatives for achieving this target has been to set up a multi-stakeholder platform based on the voluntary participation of non-state and sub-state actors. The platform, which is called Fossil Free Sweden, has to date drawn up 21 roadmaps for how different sectors should decarbonize to meet targets set out in Sweden’s climate policy framework that was adopted by its parliament in 2017. The sectors are diverse and include for example cement, mining, steel and agriculture. Implementation of these roadmaps will of course not only depend on incentives provided by the government, but also on voluntary climate action taken by industries and businesses.

Many Swedish companies are relatively progressive in their voluntary climate targets. For example, 31 companies with headquarters in Sweden, in sectors such as real estate, retailing and construction, have adopted science based targets towards reducing their climate impact. Even more companies, such as pulp and paper manufacturers, home appliance manufacturers and telecommunications companies have registered voluntary climate targets in UN’s Global Climate Action database. Many of these companies have also joined Fossil Free Sweden, which currently has over 450 non-state and sub-national actors as members. This seems to suggest that many Swedish companies not only support the international and national climate targets, but have also set up their own targets to work toward decarbonization.

But, there also appears to be significant differences in how companies interpret and commit themselves to voluntary rules. In a research project conducted at Stockholm University, Linköping University and the Vrije Universiteit Amsterdam, we have mapped how and why non-state actors were willing to engage in climate action, using Swedish businesses as a case study.

The data includes 19 interviews with representatives of large and middle-sized Swedish companies in managerial and executive positions, such as CEOs and sustainability managers. This has highlighted some of the reasons why Swedish companies have decided to take (or not take) action on climate change in line with Sweden’s political goal to become one of the world’s first fossil fuel free welfare states, and differences within and between certain industry sectors, highlighting variation that exists among companies.

The logo of Fossil Free Sweden.

The logo of Fossil Free Sweden. Source: Fossil Free Sweden.

The business case for taking climate action

Taking climate action has for a long time been viewed as costly and leading to a loss in international competitiveness for companies, so it is important to better understand why many Swedish companies are taking voluntary climate action. The most prominent line of argument for taking climate action among the Swedish companies involved in the research was self-interest, including notions of profit-maximization and self-preservation. To specify, such arguments were based around minimizing risks and anticipating future market advantages.

First, company representatives explain that they have performed risk assessments of the future and concluded that business as usual would have a negative impact on the company’s existence, given the risks of direct climate impacts and/or anticipated regulatory changes as governments increasingly seek to address climate change, as well as changing investor demands. This is true for different types of companies, ranging from some of Sweden’s largest and listed companies to family-owned and middle-sized businesses.

Further, this approach is adopted both by companies that have integrated environmental concerns as a core value ever since their establishment, as well as companies that admit to only recently having adopted climate measures (e.g. fossil fuel dependent companies). Consequently, this has made companies re-adjust and transition into climate mitigating and climate adaptation practices. With the aim of self-preservation comes the goal of obtaining and maintaining competitiveness in the market generally, as well as with respect to direct competitors in the same industry sector. Climate action is seen as one way of achieving this.

Motives for voluntary engagement beyond the business case?

Along with the business case for taking climate action, multiple companies expressed that they take measures for the environment based on notions of responsibility. On the one hand, companies argued that climate measures and a re-organization of their practices is a consequence of growing sustainability demands from their customers and employees. For example, some climate action is driven by staff who push the issue onto a company’s agenda because of their personal commitment to the environment that is transferred into the realm of their profession. Environmental concern is coupled with considerations about people and society at large, including future generations.

However, some also highlight that climate action attracts new employees and has reputational benefits for their brand. One company even stated that they lowered their climate efforts when investors and partners did not set any demands, which indicates that the business case is prominent and that there is a tendency to minimize efforts when they are not required. On the other hand, companies infuse the idea of creating a society that they want to live in themselves in their operations and internal management processes. They explain that this is a product of feeling a sense of responsibility that stretches outside of the company’s own operations.

Lastly, an explanation that reoccurred multiple times, and often in conjunction with the other motives, was that action is taken as a consequence of existing policies and legislation. Interestingly, interviewees mention national policy and legislation as well as international environmental agreements such as the Paris Agreement. The alignment of climate targets is described as an obvious and necessary act rather than a result of coercion.

The five Nordic ministers for climate and environment at COP21, 2015.

The importance of non-state actors in fighting climate change is recognized in the Paris Agreement, which was adopted at the twenty-first session of the Conference of the Parties (COP21) to the United Nations Framework Convention on Climate Change. Photo: the Nordic climate and environmental ministers at COP21, 2015. (Vito Thomsen, NN-norden.org. CC BY-SA 4.0).

Motivations for taking climate action somewhat diverge based on whether companies view themselves as already part of the solution, or as potential key actors in transforming their industries that are currently dependent on fossil fuels. The former consists of companies in sectors that generate goods and services that can enable a smooth transition towards a fossil-fuel free society (e.g. via digitalization). These companies seek to position themselves as enablers in the process of decarbonizing societies and simultaneously sustaining the success of their own and other businesses. The latter group argues that they view transformation of their industry as inevitable and therefore they seek to shape this transformation. Some strive to take on the role of leader in society’s sustainability transition, since they are a key actor in their industry sector and able to inspire and help others both within and outside of their own sector.

Climate action in Sweden: Limitations and tradeoffs

Despite these motives for stronger climate action, interviewees also highlighted why they do not always take climate action—despite the external pressure coming from the Swedish government, investors, consumers and employees. Businesses explain that the extent to which they engage in climate action is influenced by limitations and tradeoffs.

To begin with, companies do not have unlimited resources, which affects their capacity to adopt new measures. Resources include time and money, as well as the presence of knowledge about climate measures and climate initiatives. Thus, companies are required to make tradeoffs between where to allocate their resources, which may completely hinder initiation of, or stagnate continuation of, climate action. Climate action on a regional and/or national level is also less prioritized by certain actors since their operations are global. A last explanation behind limited levels of climate action is the perception that it is not necessary for companies to adopt extensive climate measures internally, due to the fact that their suppliers already set high standards on, and have low emissions from, their production.

Enabling conditions to reach climate action in the Nordic countries

Many Swedish companies are clearly working to reduce their climate impact based on a number of motives. These are focused around risk management, a sense of responsibility to take climate action, as well as attempts to manage the company’s reputation and address the demands of various stakeholders that increasingly express sustainability concerns. The fact that the benefits of taking climate action are mentioned more than the costs could be viewed as surprising in an international context. However, our interviewees explained that this could be the result of high environmental awareness amongst the Swedish public, favorable conditions for taking climate action (such as high availability of renewable energy), and good cooperation between the state and non-state actors. These factors are largely present in the other Nordic countries as well, which could explain why many Nordic companies are taking action on climate change. Of course, there are different challenges in each of the Nordic countries for how to achieve their climate targets, but an increased understanding of companies’ climate action strategies and the exchange of ideas between Nordic actors can facilitate a smoother transition. Moreover, since many Nordic companies operate on an international market, there is scope for influencing emission reductions through their operations abroad.

Fridays for future demonstrations started in Stockholm in 2018 by climate activist Greta Thunberg and have been lauded as partially responsible for the raising of public consciousness around climate change. Photo: Frankie Fouganthin, Wikimedia Commons. CC BY-SA 4.0

It is important to remember, however, that while companies’ voluntary climate targets are an encouraging sign for addressing climate change, achieving these targets will require more cooperation between all sorts of actors, as well as continued pressure on companies to live up to their climate pledges. Given that many companies are struggling as a result of the current pandemic, the relationship between state and non-state actors becomes even more important to move societies into a sustainable recovery. Climate action will thus require both states and non-state actors to show leadership to move toward faster decarbonization for a more sustainable future.