Six months ago, negotiators at the United Nations’ Glasgow climate summit celebrated a series of new commitments to lower global greenhouse gas emissions and build resilience to the impacts of climate change. Analysts concluded that the new promises, including phasing out coal, would bend the global warming trajectory, though still fall short of the Paris climate agreement. Today, the world looks ever more complex. Russia is waging a war on European soil, with global implications for energy and food supplies. Some leaders who a few months ago were vowing to phase out fossil fuels are now encouraging fossil fuel companies to ramp up production. 

In the U.S., the Biden administration has struggled to get its promised actions through Congress. Last-ditch efforts have been underway to salvage some kind of climate and energy bill from the abandoned Build Back Better plan. Without it, U.S. commitments to reduce emissions by over 50 percent by 2030 look fanciful, and the rest of the world knows it – adding another blow to U.S. credibility overseas. Meanwhile, severe famines have hit Yemen and the Horn of Africa. Extreme heat has been threatening lives across India and Pakistan. Australia faced historic flooding, and the Southwestern U.S. cannot keep up with the wildfires.

At the halfway point of this year’s climate negotiations, with the next U.N. climate conference in November 2022, here are three areas to watch for progress and cooperation in a world full of danger and division.

Crisis Response with Long-Term Benefits

Russia’s invasion of Ukraine has added to a triple whammy of food price, fuel price and inflationary spikes in a global economy still struggling to emerge from the pandemic. But Russia’s aggression has also forced Europe and others to move away from dependence on Russian oil, gas and coal. The G7 – Canada, France, Germany, Italy, Japan, the U.K. and the U.S. – pledged on May 8, 2022, to phase out or ban Russian oil and accelerate their shifts to clean energy.

In the short term, Europe’s pivot means much more energy efficiency – the International Energy Agency estimates that the European Union can save 15%-20% of energy demand with efficiency measures. It also means importing oil and gas from elsewhere. In the medium term, the answer lies in ramping up renewable energy.

There are issues to solve. As Europe buys up gas from other places, it risks reducing gas supplies relied on by other countries, and forcing some of those countries to return to coal, a more carbon-intense fuel that destroys air quality. Some countries will need help expanding renewable energy and stabilizing energy prices to avoid a backlash to pro-climate policies. As the West races to renewables, it will also need to secure a supply chain for critical minerals and metals necessary for batteries and renewable energy technology, including replacing an overdependence on China with multiple supply sources.

Ensuring Integrity in Corporate Commitments

Finance leaders and other private sector coalitions made headline-grabbing commitments at the Glasgow climate conference in November 2021. They promised to accelerate their transitions to net-zero emissions by 2050, and some firms and financiers were specific about ending financing for coal plants that don’t capture and store their carboncutting methane emissions and supporting ending deforestation. Their promises faced cries of “greenwashing” from many climate advocacy groups. 

Some efforts are now underway to hold companies, as well as countries, to their commitments. A U.N. group chaired by former Canadian Environment Minister Catherine McKenna, for instance, is now working on a framework to hold companies, cities, states and banks to account when they claim to have “net-zero” emissions. This is designed to ensure that companies that pledged last year to meet net-zero now say how, and on what scientific basis. 

For many companies, especially those with large emissions footprints (like fashion), part of their commitment to get to net-zero includes buying carbon offsets – often investments in nature – to balance the ledger. This summer, two efforts to put guardrails around voluntary carbon markets are expected to issue their first sets of guidance for issuers of carbon credits and for firms that want to use voluntary carbon markets to fulfill their net-zero claims. The goal is to ensure carbon markets reduce emissions and provide a steady stream of revenue for parts of the world that need finance for their green growth.

Climate Change Influencing Elections

Climate change is now an increasingly important factor in elections. French President Emmanuel Macron, trying to woo supporters of a candidate to his left and energize young voters, made more dramatic climate pledges, vowing to be “the first major nation to abandon gas, oil and coal.” With Chile’s swing to the left, the country’s redrafted constitution will incorporate climate stewardship. In Australia, Scott Morrison’s government – which supported opening one of the world’s largest coal mines at the same time the Australian private sector is focusing on renewable energy – faces an election on May 21, 2022, with heatwaves and extreme flooding fresh in voters’ minds. Brazil’s Jair Bolsonaro faces opponents in October who are talking about protecting the climate.

Elections are fought and won on pocketbook issues, and energy prices are high and inflation is taking hold. But voters around the world are also experiencing the effects of climate change firsthand and are increasingly concerned.

The Next Climate Conference

Countries will be facing a different set of economic and security challenges when the next round of U.N. talks begins in November in Sharm el-Sheikh, Egypt, compared to the challenges they faced in Glasgow. They will be expected to show progress on their commitments while struggling for bandwidth, dealing with the climate emergency as an integral part of security, economic recovery, and global health.

There is no time to push climate action out into the future. Every decimal point of warming avoided is an opportunity for better health, more prosperity and better security.

Rachel Kyte is the Dean of the Fletcher School at Tufts University. (This article was initially published by The Conversation.)

Luxury goods are slated to start flowing back into Russia despite moves by most non-native brands to pull out of the market in the wake of the deadly attacks on Ukraine led by Vladimir Putin. A 25-page list of exempted brands/products has been released by Russia’s Industry and Trade Ministry, allowing for parallel imports of luxury cars from Bentley, Ferrari, and Rolls-Royce, among others, consumer electronics from Apple and Dyson, cosmetics, and fashion and leather goods in furtherance of what Russian authorities say is an attempt to “defend the interests of domestic consumers for products of those foreign companies that left the Russian market under the sanctions regime imposed by ‘unfriendly’ countries.” 

First released by the Ministry of Industry and Trade of the Russian Federation last month, the order on parallel imports or “grey market goods” (i.e., genuine branded goods obtained from one market that are subsequently imported into another market and sold there without the consent of the trademark holder) provides that Article 1359 (section 6) and Article 1487 of the Russian Civil Code “are not applied” to the approved list of goods, “provided the specified goods were put into circulation outside Russia by the right holders and with their consent.” In accordance with the principle of trademark exhaustion – or the first sale doctrine, as it is known in the U.S., “the products must be legally put into circulation [in] the country of import,” the trade ministry stated.

The Russian ministry distinguished the new scheme from outright counterfeiting (namely, the unauthorized use of a mark that is identical with, or substantially indistinguishable from, another’s registered trademark), asserting in a statement late last week that allowing for “parallel imports does not mean permission to import and circulate counterfeit goods in Russia.” 

Fashion and other luxury brands may be hit particularly hard when it comes to the impending push to get parallel imports into Russia. While the official list of allowable products specifically indicates brands of electronics and automobiles, among other categories of goods, that may be imported into Russia without the threat of trademark infringement ramifications, it does not set out a list of fashion/luxury goods purveyors whose goods may be legally imported into Russia. “Clothing, footwear, and leather goods are listed without any specific brand indications,” Maksym Popov, a partner at Mentors Law Firm in Ukraine, tells TFL. This means that “everything within these categories of goods is subject to parallel imports,” which could serve to flood the market with a barrage of luxury goods in the not-too-distant future. (Not the only categories that lack brand specifications, the Ministry of Industry and Trade’s list also allows for the unfettered import of spare parts for certain machinery, for example.)

The situation is likely to be a “complicated” one for brands, Popov says, noting that trademark holders “will not have the ability to control the importation of goods into Russia through distributors,” as has been an issue for brands in other countries, including China, which routinely sees a significant supply of grey market goods coming by way of multi-brand stores in places like Italy and landing on the mainland after passing through agents in Hong Kong.

As an extreme example, he says, “We may even see Louis Vuitton and Chanel bags sold in multi-brand boutiques.”

Given the meticulous control and purely direct-to-consumer distribution model that is exercised by Chanel, Louis Vuitton, and other similarly situated luxury titans, it seems unlikely that these brands will be among the most heavily impacted by the newly-implemented grey market scheme in Russia. (Chanel, after all, made headlines last month for reportedly implementing a process in its own stores outside of Russia “to ask clients for whom we do not know the main residency to confirm that the items they are purchasing will not be used in Russia,” a move that has spurred furor from Russian shoppers in markets, such as France, Italy, China, and Dubai.) Chances are, brands that boast a network of authorized third-party distributors will find their wares are more readily being imported into the Russian market without their authorization.

The order that serves to relax the law on parallel imports comes after the country’s Ministry of Industry and Trade was authorized to compile a list of goods for which parallel imports would be allowed, which was published – and went into effect – on April 19. That list followed from a previous revelation from the ministry in March when its “Priority Action Plan for Ensuring the Development of the Russian Economy in the Conditions of External Sanctions Pressure” revealed that an influx of grey market goods would likely follow from Western brands’ exodus from the Russian market. In the Priority Action Plan, which surfaced in early March, the Ministry appeared to propose suspending liability for parties engaging in parallel imports for certain – but then undefined – “groups of goods,” thereby, potentially opening the door for a greater share of out-of-channel products to flow into Russia, which maintains some restrictions on the sale of grey market goods. 

As TFL first reported at the time, depending on how long the effects of Russian-focused sanctions implemented by the U.S., European Union, and others, last, which ban the import of luxury goods into Russia (and chances are this is not a temporary situation), the luxury goods ecosystem in Russia may begin to mirror that of other markets that are readily flooded with grey market goods. In the event that companies’ self-operated stores do not return in a timely manner, certain brands may opt to look the other way, enabling multi-brand stores in other markets to order excess goods and ship them to Moscow with the help of parallel importers, and enabling the brands to add those excess sales to their balance sheets.

Brands at the top of the luxury totem pole are not expected to engage in such grey market-feeding activity; their recent revenue reports indicate that they are not suffering as a result of a loss of sales in Russia, which accounts for no more than 4 percent of their annual sales. However, that may not be the case for other brands that traditionally maintain larger footprints in Russia and their distributors, which have proven to be far less immune to the pull-out of the Russian market. (Reuters reported recently that in March, adidas, for example, “warned of a hit to sales from closing in Russia, without giving an estimate. It operates 500 stores in the country, a quarter of its total.” Around the same time, toy maker Hasbro warned that its revenues could hit of approximately $100 million this year due to its decision to halt its sales in Russia.)

“Usually, official distributors are interested in fighting illegally imported goods,” Popov says. “But now that anyone can [indirectly] import goods into the country, will they want to fight it?” 

“If you want sustainable clothes, focus on the farms.” That is what science-focused publication Popular Science declared this past fall, reflecting on the rise in regenerative farming, or farming practices that “restore soil biodiversity, which promotes natural carbon storage, among other benefits.” Gaining traction among a number of players in the fashion space, the latest headline-making effort on this front comes by way of HRH The Prince of Wales’s Sustainable Markets Initiative Fashion Task Force, which revealed a Manifesto for Regenerative Fashion on Wednesday in conjunction with the Circular Bioeconomy Alliance as led by scientist Marc Palahi.

In signing on to the newly-unveiled Manifesto, Task Force members – which include management from brands like Burberry, Giorgio Armani, Moda Operandi, Selfridges, Vestiaire Collective, and Zalando, among others – “are committing their brands, which are amongst the biggest names in the fashion industry, to a progressive shift towards Regenerative Fashion – a circular biobased industry that is inclusive, climate and nature-positive, using newly created or restored regenerative landscapes as the basis for circular bioeconomy value chains,” the group stated. 

According to the Task Force, regenerative fashion landscapes can be created by: (1) Supporting interdependent ecosystems and land uses, such as protected primary forests, pastures, agroforestry systems, regenerative agriculture, and sustainably managed forests that provide for a diversity of biobased textile materials, such as organic cotton, sustainable wood-fibers, wool, leather, cashmere, and silk, while delivering crucial ecosystem services links to water, food, energy, carbon sequestration and biodiversity; (2) Empowering local and indigenous communities to design, manage and benefit in a fair way from the ecosystem services and the fashion value chains rooted in their landscapes; and (3) Implementing practices that shift from high-external input dependent industrial farming towards integrated ecologically-based systems that enhance biodiversity and improve the carbon and water cycles by optimizing human-animal-plant interactions that minimize soil disturbances, increase plant diversity, and enrich soil nutrients. 

Specifically, the first project to fall under the Fashion Task Force’s Regenerative Fashion endeavor, which aims to regenerate land and resources in critical fashion industry sourcing locales, comes by way of the Himalayan Regenerative Fashion Living, a project that seeks to “demonstrate the potential of regenerative fashion to restore harmony between local communities, nature, and the environment while creating sustainable fashion value chains.” (Himalayan nettle, which is one of the longest fibers currently known and considered to be finer, stronger and more elastic than linen, is among one of the key exports from the region for fashion brands, with wild Himalayan nettle fibers being used by brands, such as Pangaia, to manufacture their wares.)

“The Himalayan initiative is a €1 million project that will restore degraded landscapes and recover traditional textile craft skills in order to enhance the local cashmere, cotton and silk economies while addressing global challenges related to climate change and biodiversity loss,” the Task Force announced on Wednesday, noting that work on the project will begin in May 2022 with help on the ground from Reforest Action and the Balipara Foundation. 

Addressing the launch of the Regenerative Fashion Manifesto, Fashion Task Force Chair Federico Marchetti characterized it as “another concrete step towards creating a much more sustainable fashion industry.  It is not simply empty words, the manifesto comes with a concrete €1 million project for the degraded landscapes of the Himalayas [that] will serve as a blue-print for what can be done to shift the fashion industry towards a more equitable, nature positive future.”

As for the impact that regenerative farming can have in helping to clean up the significant footprint created by the fashion industry, it is essential that initiatives on this front come hand-in-hand with larger efforts to address “the dilemma of constantly buying new things, [which] is a problem that needs to be dealt with urgently,” according to Theresa Lieb, an analyst at GreenBiz. This is presumably why the Task Force has paired its regenerative farming venture with its previously-announced Digital ID initiative, which the group says “allows key players in the fashion value chain – including manufacturers, brands, retailers, resellers and recyclers – to provide unprecedented transparency and traceability of the products they sell.” 

One of the ultimate goals of the Digital ID is that it “unlocks new circular services for customers, such as care and repair services, as well as ones focused on resale and recycling” to extend the shelf life of fashion items – and ideally, chip away at the industry’s well-established cycle of promoting the high-volume turnover – and subsequent discarding – of garments and accessories. 

It has been a tough few years for those in business. Lockdowns shut down whole industrial sectors worldwide, turning profitable businesses into loss-making ones, while a lot of smaller businesses went under entirely. Many companies will now be hoping for a return to some type of normality after the COVID crisis. However, there are strong signals that a resumption of how things were is not on the cards any time soon, as the world appears to have entered into an age of accelerating grand crises.

Even before COVID, the climate crisis was increasingly disrupting the world (and the companies operating it in) through extreme weather events. Then, just as some countries had declared their war against COVID to be won, the invasion of Ukraine has not only reshuffled global geopolitics, but also led to a dramatic increase in energy and food prices, having big knock-on effects on a whole host of other sectors. 

One day there may be a time after COVID, after the Ukraine war, and even after the climate crisis. But there’s unlikely to be a point of general stability any time soon. Humanity is pushing environmental limits to breaking point, risking further crises – whether in terms of disease, conflict, or natural disasters. Businesses, therefore, need to shift how they operate. This means responding to current crises, being better prepared for future crises, and addressing their own role in generating these crises in the first place. With that in mind, here are three types of business models companies should start adopting now.

1. Respond to Crises

What is needed are reactive business models that can respond to crises at hand. Such adaptability will naturally have a survival element, in which organizations do whatever is necessary to mitigate negative effects on themselves. This means aligning companies’ management practices with the “new normal” after the crisis, instead of holding on to the old normal from before. Where appropriate, such models should also have a crisis-mitigation element, addressing the wider negative effects of the crisis at hand where they can.

It appears fossil fuel behemoths such as Shell and BP might be starting to do just that. Having long been under attack for knowingly contributing to the climate crisis and counteracting shifts to more sustainable energy systems, they appear to now be adapting to crisis forces. These forces include, most notably, the global trend towards phasing out fossil-fuel vehicles. As such, these companies have begun to transform key aspects of their business. A first move, for example, seems to be repurposing their petrol station operations into an electric vehicle charging infrastructure. As they ride the waves of the climate crisis, we can expect to see them make many disruptive greening changes like this.

2. Be Ready for Future Difficulty

Businesses also need to move from stability-based business models to accepting that the business reality is now one characterized by volatility, uncertainty, complexity and ambiguity. Value propositions encompass the benefits a business offers, for example to its customers, employees, and the community. Building business models for this new world means establishing value propositions for companies that are fit for the long run, that can morph into all kinds of crisis scenarios. It also means being agile and quick to adjust. 

One form this could take, for instance, is for a business to offer products and services that address timeless and fundamental needs like health, food, or security, rather than short-lived superficial wants like those related to fast fashion or the latest technological fads. A good example of such a business model is that of Chinese electronic goods corporation Haier, which has  explicitly tuned in to an ever-changing world, aiming to deliver “products that respond to the constantly changing needs of the modern home.” For instance, Haier responded to Asia’s air pollution crisis by developing an integrated air conditioner and air purifier.

Alongside this, Haier employs its unique “RenDanHeYi” (or 人单合一), which freely translates to “one single person in unity,” way of working, making it a collective of smaller, semi-autonomous companies that gives both individual freedom and collective responsibility to self-organized micro-entrepreneurs. This makes Haier a fluid, agile and resilient organization. By operating as a network of micro-enterprises, each of which works closely with customers to respond to their changing needs and situations, the business can evolve more easily as each new crisis plays out. Because of these features in their business model, Haier has done exceptionally well during and after the COVID crisis.

3. Help Prevent Crises of Tomorrow

Finally, businesses can better set themselves up for the future by adopting models that specifically mitigate or even prevent future crises. While COVID, the Ukraine crisis, and climate change are still ongoing problems, many business models have been geared towards keeping other things from becoming the next grand crisis. Some companies, for example, are adopting business models that promote reconciliation and peace, with view to preventing disruptive future armed conflict. Examples range from former Colombian guerrilla group members building adventure travel businesses that show the previously hidden side of the conflict, to coffee cooperatives in Rwanda designed for Hutus and Tutsis to reconcile through collaboration.

Managing businesses in an age of accelerating crises is challenging. However, transforming business models and managerial practices can go a long way in both making current and future crises manageable, and possibly even mitigating future crises.

Oliver Laasch is a Senior Lecturer in Entrepreneurship and Innovation at the University of Manchester. (This article was initially published by The Conversation.)

Some Russian consumers are being blocked from purchasing coveted Chanel products in the wake of Russia’s invasion of Ukraine, as the brand aims to abide by European Union sanctions that prohibit the export of luxury goods to Russia. A spokesperson for Chanel confirmed that the brand has, in fact, “rolled out a process” in its stores outside of Russia “to ask clients for whom we do not know the main residency to confirm that the items they are purchasing will not be used in Russia,” a move that has spurred furor from Russian shoppers in markets, such as France, Italy, China, and Dubai. 

“The latest sanctions from the European Union and Switzerland prohibit ‘the sale, directly or indirectly, of luxury items to any natural, legal person or entity in the Russian Federation or for use in the Russian Federation,’” Chanel said in a statement on Tuesday, noting that it is “currently working to improve the procedure.” Chanel – which maintains the title of the second largest luxury brand in the world, following only behind Louis Vuitton – also apologized in the statement “for any related misunderstandings and inconveniences” that have stemmed from its efforts to implement the newest EU sanctions that prohibit companies in the 27-member bloc from exporting luxury goods worth more than 300 euros ($330) to Russia. 

(At the same time, U.S. President Biden signed an Executive Order in March that prohibits the exportation of luxury items “to any person located in the Russian Federation,” which the White House says “will ensure that U.S. persons are not providing luxury items, such as high end-watches, luxury vehicles, high-end apparel, high-end alcohol, jewelry, and other goods frequently purchased by Russian elites … who sustain Putin’s war machine.”)

Not an all-out ban, sales associates in Chanel stores are reportedly permitting purchases to Russian shoppers if they can show that they do not reside in Russia and/or agree in writing not to use the goods in Russia or otherwise export them to the country. (Worth noting: It will be interesting to see how Chanel views/treats products that are exported into Russia in violation of sanctions from a warranty perspective. All new Chanel bags and wallets on chain, for instance, that are purchased directly from Chanel enjoy an exclusive 5-year guarantee as of April 2021. There is a chance that bags that are imported in violation of state sanctions may not benefit from such terms of sale.)

It is not clear whether other brands will follow Chanel’s lead, or what the impact of such measures on brands’ bottom lines will be. As TFL previously reported, Chanel and other luxury (and non-luxury) brands have largely ceased operations in the Russian market – which accounts for no more than 3 percent of brands’ annual sales, respectively – in the wake of the war. However, cutting off sales to the richest of Russian consumers as a way to punish Russian President Vladimir Putin and his allies by implementing sanctions and requiring brands to closing their stores in Moscow and other Russian shopping cities is not necessarily straightforward. This is due, in part, to the fact that no shortage of deep-pocketed Russian consumers were already doing the bulk of their luxury shopping outside of the country in markets like London and Dubai, along with Milan and Paris, and presumably have resumed doing so in the midst of the war.

If an array of recent reports are any indication, a fair share of oligarchs and other wealthy Russians have already fled the country, and are shopping in other markets, such as the United Arab Emirates, where luxury brands remain open for business and sanctions similar to those being observed by the EU are not being imposed. As the Guardian reported late last month, no small number of rich Russians have taken to seeking refuge in luxury havens like Dubai, where “the oligarchs and other cashed-up Russians and their riches are welcome,” as the UAE has “not followed western governments in using sanctions as retaliation for the invasion of Ukraine.” 

Jefferies analysts Flavio Cereda and Kathryn Parker stated in a note last month that the true impact of sanctions and store closures in Russia on luxury market players may be difficult to discern, as “many high spenders in this cohort [of consumers] have multiple passports and so, are difficult to identify.” 

While Chanel made no mention of a rise in daigou-type operations in connection with its new screening system, it is relatively easy to see potential similarities coming into play here between the Russian market, which is currently cut off from luxury goods (and will be for the foreseeable future), and the system of parallel trade that enables Chinese consumers to gain access to luxury goods outside of traditional brand-operated channels, thereby, allowing them to sidestep region-specific price hikes that many brands put in place and steep value-added taxes, etc. for goods purchased on the mainland. The chance that such out-of-channel trade will flourish and lead to a free flow of grey market goods (i.e., authentic trademark-bearing products obtained from one market that are subsequently imported into another market and sold there without the consent) in Russia seems even more likely given recent reports that the Russian government has allowed for retailers to freely import and sell trademark-bearing goods without explicit authorization from the brand owners.