A former deputy CEO of the Alstom group, the French-Brazilian national has been involved in various CSR bodies, such as the World Business Council for Sustainable Development, the Corporate Leaders Group on Climate Change and the Cambridge Institute for Sustainability Leadership. For the past several years, he has been leading Earth on Board, a programme to “inform and guide boards of directors in their responsibilities and commitments to environmental issues.” His conviction: companies are the keys to change.

Ahead of his next visit to Luxembourg--he was invited to speak by M&G Investments, La Financière de l’Echiquier and DNCA Investments on the radical transformations that are coming as a result of global warming--Joubert gave an interview to Paperjam + Delano Finance.

Marc Fassone: Why did you launch Earth on Board?

Philippe Joubert: After Alstom, I decided to devote myself to sustainable development, not as an activist, but by explaining to companies--to boards of directors, executive committees and shareholders--that the business model that we have followed until now and which posited nature as free and unlimited is over. We have reached the limits of the planet and we have to change it.

Many people are not convinced of their usefulness and their role. What I try to show them is that they will be caught up in the movement anyway. More specifically, by the new physical risks that arise from climate change.

Let’s take the example of water. We only look at it from the point of view of its availability or its quality without considering its influence on the whole system. A lack of water can paralyse activity. We saw it this summer in China. But few companies make this systemic analysis.

Beyond the physical risks, what other risks can companies face if they are tempted to stick to their traditional business model?

There are legal risks. [That is] the biggest risk today for companies and also the most underestimated. Which has financial and, above all, reputational consequences. This is the consequence of the success of green finance. As it becomes more visible, it will drive investment decisions. Decisions based on the declarations of companies and financial agents. Statements verified by the regulator.

On 24 November, Goldman Sachs was fined several million dollars for misuse of ESG ratings. Less than the modest amount, it is its reputation that is affected. Reputation is the reason why financiers are trusted. If trust is attacked...

For me, this is a fundamental element that is currently being ignored. In my opinion, the emergence of these new risks and the need to be quick to change in order to be able to seize new opportunities are leading to a change in the business model.

What should companies do?

The inevitable change in the business model will produce winners and losers. The transition will not be pleasant... and above all it will be abrupt and brutal. The first thing I think companies need to do is to get out of the shareholder primacy culture and put the bottom line first. Managers need to understand what a company’s raison d'être is. This is the first thing to look at and to consolidate. Few companies--if any--were created ‘to make money’ to put it trivially. They are there to meet a societal need, a need accepted and supported by all stakeholders. It is this need that we must return to. Look at what happened during the covid crisis: governments realised that some companies are more necessary to society than others. These will be in the winner’s bracket.

The second thing is resilience to climate change. What I say to boards of directors is that when you present a risk matrix, you should look at whether all the dangers are taken into account, whether they are environmental or social.

The third point is the real cost of things. We must stop behaving like counterfeiters! Today, we pay dividends and bonuses on profits that do not exist, because we take nature for free and unlimited. We don’t pay the cost, we just pass the bill on to the next generations.

Can this continue?

No. We can see that these externalities are starting to enter the balance sheets in the ‘damage’ column. We spend a lot of time understanding the accounting mechanisms that will enable us to optimise the operating result or the tax result, but we don’t try to integrate the cost of the services rendered by nature.

So how do you calculate the price of nature?

It’s very complicated from an accounting point of view. To keep it simple, the price of nature for me is first of all the impact on our costs of the non-existence of nature’s service. Like the cost of buying bees by a producer to compensate for the absence of pollination.

Take the case of water. In France, Belgium and Italy, some large agri-food groups are beginning to have difficulty renewing their water licences because the local authorities that are being drained want to keep their resources. If you put a real price on water in the balance sheets of all these people, their profits will look a bit different.

You spoke of getting out of the culture of results above all. Is this a message that investors will hear in a period of very bearish markets?

It’s a problem that will take care of itself. There is a lot of emphasis on those 10%-15% of short-term investors. The noise they make with their trades--not to mention the noise of computers doing automatic trading--makes people forget about long-term investors who are able to see and understand the long term. They are aware that the drivers of future results will revolve around social and environmental challenges.

The other mistake frequently made is to consider the environmental and societal transition as a cost, when it is an investment. Future performance should not be measured against past criteria. It is obvious that we have reached the end of planetary resources. If we agree on this, how can we expect a company that does not include the cost of its raw materials and their impact in its forecasts to provide figures on which to make an investment decision?

I am not saying that profit is not important. It is a fundamental tool for investment, growth and attracting capital and talent, but it is not an end in itself and certainly not a reason for a company to exist.

Read the original French version of this interview on the site. This article was published for the Paperjam+Delano Finance newsletter, the weekly source for financial news in Luxembourg. .