Trump’s Tariffs: Derailing Climate Progress?

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Transcript

Saif Hameed [00:00:00]:

Reducing emissions seems like a super micro problem right now in this context, even though it is a super macro problem in every context. It looks like the desired outcome from this tariff regime is to onshore manufacturing capacity. The US has historically been going towards offshoring capacity into emerging markets and now this tariff regime is basically kind of saying we really want to bring this back onshore. And this may or may not trigger similar momentum in Europe and elsewhere where everyone's trying to kind of onshore some of these capabilities. And then I think what starts to get interesting is to say, well, what does that mean in terms of global emissions? And is it more likely that manufacturing emissions might go down because Europe and arguably even the US are on a more robust trend to reducing their emissions than some of the other countries? Like it's arguably much harder to decarbonize, potentially Lesotho, I'm not sure, but potentially than Germany for instance, or the UK or countries which already have a lot of the supporting infrastructure, regulatory frameworks, incentives to invest in energy transition. So that's kind of one argument that actually this might reduce emissions. I don't think that argument will resonate much with a lot of sustainability professionals who are, I would imagine, quite sympathetic to the countries that they're sourcing from and the economic development arguments on the other side, which are undeniably strong.

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Isobel Wild [00:01:27]:

Hello everyone!. Before we get started, I wanted to introduce you to our new podcast format. Moving forward, we'll be breaking down the week's most important sustainability news headlines. Each episode will also feature a how to segment where we'll tackle the real questions coming from our communities and community and trying to offer some practical insights and strategies will still be incorporating the expert interviews spotlighting corporate sustainability leaders, scientists, ecologists, policymakers and lots more who are changing the game. So on the agenda today, we're discussing the ripple effects of Trump's new tariff policies and global climate action, how dramatic price surges are affecting everyday commodities like your morning coffee. And also just stop oil's surprising decision to disband after years of high profile protests. And for our how to segment, we're focusing on how to run a board meeting that secures genuine buy in for sustainability initiatives. So Saif, how are you doing? Nice to see you again.

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Saif Hameed [00:02:34]:

I'm good, thanks. Nice to see you again too, Izzy. And excited about us testing this new format. Just worth saying to our listeners, we are experimental here at Altruistiq and so we're trialling this to see how it goes. If you like it, let us know. If you don't like it, Let us know. And Izzy, do we have a good way for people to contact us on.

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Isobel Wild [00:02:54]:

The community or via LinkedIn?

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Saif Hameed [00:02:57]:

So if you're not part of the community, you should be. Izzy, do we have a link in Show Notes? Yeah, there will be a link in Show Notes. Fantastic.

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Isobel Wild [00:03:03]:

But let's crack on with the first headline, which is the tariff wars. What do Trump's imposed tariffs mean for global climate action? So if you haven't seen, Trump has announced a minimum of 10% tariff to be slapped from all exports to the US and a 34% duty applies to imports from China and a 20% rate to products from the EU. This has prompted fears of global economic slowdown amongst many others. But Saif, I'd love to get your opinions if this trade war is good or bad news for climate action.

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Saif Hameed [00:03:39]:

The announcements and what has gone out there in the public space is truly seismic. Talking about almost like a once in a century or once or twice in a century change to global trade patterns that is going to be forced as a result of these tariffs. It is hard to overstate just how sides make an impact we are talking about. And to put that into perspective, for some countries, this is going to be crippling. Again, uses that word in a very considered way. There are some, I mean, Lesotho, for example, is looking at its entire textile industry being eviscerated, like just ramped down, basically having benefited from preferential trade status by virtue of being one of the poorest countries on Earth. They've managed to build a denim, a local denim industry exporting to companies like Levi's and Wrangler and others. And now it's just not viable because of the scale of the tariffs that have been put on them.

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Saif Hameed [00:04:43]:

And so if you just take that as one example and imagine that there are going to be cases that are more extreme and slightly less extreme, but you're looking at perhaps, you know, I would imagine one of the top five export industries for that country being basically just dismantled as a result of this. And so leave aside climate change mitigation, just the sheer economic impact, I think we're not even comprehending fully the ripple effect of this. It looks like the amount of thought that went into this could have been a lot more, let's say, just putting it one way. And I think that was diplomatic, being a bit diplomatic. And I think that the formula that was applied here could have been considered more deeply. The other thing, I guess, is that it is also unclear whether this is an opening gambit to force negotiation. And actually there's A lot of indications that the administration in the US now looking to negotiate from this very hard position based on what, what countries come back to them with in terms of incentives, sweeteners and so on. So like you know, one has to kind of wait a bit and see what, where, where all this settles.

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Saif Hameed [00:05:56]:

But it's, it's certain that this has caused a massive, massive curveball for economies and also by that token for business. I was just speaking a few hours ago with the chief strategy officer at a major global food ingredients company and they were telling me that their sustainability team is actually this week fully working on tariff implications and understanding what's going to happen as a result of these tariffs. And that's perhaps because their sustainability team overlaps a bit with regulatory affairs, management and so on, or is, you know, maybe a little more integrated into the supply chain. But I think right now the sort of the eye of Sauron within every corporation is kind of really trying to zero well away from the small fellowship working towards climate change and just much more on this big, big hairy beast of tariffs. So that I think is like an immediate impact that we're seeing.

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Isobel Wild [00:06:52]:

But what does it mean for, I mean it just is causing like huge supply chain chaos ultimately. But what does it mean for, I don't know your supply chains as well as sustainability. At the end of the day, reducing.

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Saif Hameed [00:07:07]:

Emissions seems like a super micro problem right now in this context, even though it is a super macro problem in every context. But you know, like it looks like the direct, it looks like the desired outcome from this tariff regime is to onshore manufacturing, basically onshore manufacturing capacity. The US has historically been going towards offshoring capacity into emerging markets. And now this tariff regime is basically kind of saying we really want to bring this back onshore. And this may or may not trigger similar momentum in Europe and elsewhere where everyone's trying to kind of onshore some of these capabilities. And then I think what starts to get interesting is to say, well what does that mean in terms of global emissions? And is it more likely that manufacturing emissions might go down because Europe and arguably even the US or on a more robust trend to reducing their emissions than some of the other countries. Like it's arguably much harder to decarbonize, potentially lesotho, I'm not sure, but potentially that Germany for instance, or the UK or countries which already have a lot of the supporting infrastructure, regulatory frameworks, incentives to invest in energy transition. So that's kind of one argument that actually this might reduce emissions.

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Saif Hameed [00:08:22]:

I don't think that argument will resonate much with a lot of sustainability professionals who are, I would imagine, quite sympathetic to the countries that they're sourcing from and the economic development arguments on the other side, which are undeniably strong. At the same time, what happens in these other countries, you kind of sort of decimate local suppliers, local supply chain ecosystems. What does that do to the economy? What does that do to the appetite to focus on other pressing issues such as climate change mitigation? I think that that appetite collapses because right now every, every country in the global south is thinking about how to navigate this new challenge rather than the challenge of, of 1.5 degrees.

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Isobel Wild [00:09:06]:

Domestic production ultimately in a lot of places will actually just drive up costs because a central tenant, global traders, that nations focus on making goods where they have competitive markets. So Brazil specialise in coffee production because they've got favourable climatic conditions to coffee, for instance. So what does that mean for the consumer and what does that mean for business who are then having to relocate and find own domestic industries for this where they haven't had to? I mean, in the UK, for instance, we haven't, we have completely tried to push down those kind of industries and become more of an export importing country. So it's going to be huge on the consumer as well as businesses.

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Saif Hameed [00:09:47]:

Yeah, yeah. I mean, the Pareto principle has been well established really in the corporate world and in just the global trade narrative, which is not just countries should do what countries are good at and companies should do what companies are good at and assume that actually as long as everyone does that, everyone is most efficient. And this sort of goes a little against that. The US has built really profound strongholds in everything related to intellectual property. You can see the iPhone as a great example of that. All of the IP is owned out of California, really, which means also that almost all the margin ends up also being owned out of California versus the much lower margin production elements which sit in other countries. One interesting example, for instance, that I look at is most vanilla is sourced from a few countries like Madagascar. And that's because of two things.

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Saif Hameed [00:10:46]:

One is that the climate conditions are appropriate and also the vanilla has to be manually pollinated, which means that you have to have very cheap labour doing that. The US is undeniably unsuited to growing vanilla, both from a climate perspective and also from a labour price perspective. But the tariffs don't recognise that. And so you have these massive tariffs on vanilla exporting countries. Is the US prepared to hike the price of vanilla ice cream and all the other stuff that has Vanilla in it or try and produce local synthetics. It's going to be interesting. And what does that do to the vanilla industry while we're, while we're speaking, Right. Like it's unclear.

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Isobel Wild [00:11:29]:

I think also the other angle is energy and I think it's thought that the US might slap a duty on solar products from China, expecting to rise to 60%. And this is coming at a time where solar energy is increasing from US data centres and artificial intelligence use. Kind of what we spoke about in our last podcast last week.

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Saif Hameed [00:11:52]:

Yeah, and I think there's also an interesting angle here about which countries are doubling down on energy transition related R and D. And if you look at the strategy that China has deployed, for example, over the last several years, at some point China decided that owning the energy transition was a strategic imperative for China and they really wanted to dominate the space effectively. And so they built on a nice base in terms of the availability of a lot of the inputs and rare earth materials and so on that enable the energy transition. And they then kind of started really throwing money at a large ecosystem of innovators to see what stuck in terms of batteries, EVs, solar power, solar panels, so on, and all the other infrastructure that goes with it. And they sort of struck incentives at this ecosystem and now you see some companies really emerging out of that as market leaders. BYD being the classic example in the EV space, but where you can have a BYD growing at such a frantic pace, really where it's, you know, that the sales growth numbers are just incredible, the performance of the business is just incredible. And you just think, what is that creating in terms of a supporting ecosystem around batteries and charge points and enabling infrastructure within China and how do those capabilities then start getting exported around the world? I think this is, it's not the opening gambit of the energy transition anymore. We're kind of in the mid game which is going to define which, which of a handful of countries is going to dominate this whole new technology space.

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Saif Hameed [00:13:34]:

And right now I think the smart money would probably bet on China and say, you know, India might not be that far behind.

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Isobel Wild [00:13:41]:

We're moving on to some other, other commodities and agricultural products. So the next headline is vertical price surges. Coffee has gone up 103% in the past 12 months. Cocoa is up 106, 63% and sunflower oil is up 55% over the same time period. Forecasters are also predicting that corn will be hit really hard in 2025. I think if we just look at one coffee, I think Roasters are reeling at raw bean prices and they're trying to push this price onto the consumers. So Lavazza, Nestle, jd, Pete. So all in talks with retailers about passing on these costs.

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Isobel Wild [00:14:23]:

And these costs are rising for a number of reasons, like climatic issues. Vietnam and Indonesia have faced climate issues leading to a 20% production drop in Vietnam in 2024 and a 16% decline in Indonesia. The prices are also just generally rising. The effects of climate change, stricter deforestation laws, as well as production costs, labour costs, all of that. Before we crack on with this conversation, I would just like to add that crop price volatility isn't new. Like this has been happening since the dawn of time. But I think what is notable here is like the extremes and the frequency of these extremes which are becoming harder and harder to manage and mitigate for. And Saif, I'd love your take on this and also maybe just hear your thoughts on how manufacturers can be, what they can be doing to secure their supply chain in these periods of vast and high volatility.

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Saif Hameed [00:15:20]:

Yeah, I mean, I'm going to say something that I think every one of our listeners knows, but agriculture is a very difficult business and in emerging markets in general, I actually think it is very hard for agriculture to become a better business over time. I think that the infrastructure is against it, actually. And let me give a couple of, a couple of examples. If you look at most established agricultural producers which are, I would say the us, Canada, China, Australia and the Netherlands, like these are four or five of the of the most established agricultural producers and exporters in the world. They have the supporting infrastructure to enable the distribution of innovation very effectively. What I mean by that is if you have a new type of fertiliser, it is comparatively quite easy to get that all over America and all over Canada and all over Australia. If you have a new type of irrigation innovation, it is comparatively easy to get this all over these countries because the farms are large, the middlemen are well established, like companies like John Deere and others that sell into these, these organisations are well established. And so there's a ready route to market, which is why if you look at like a, you know, a corn grower in the us, I would hazard a guess that decade on decade the adoption of innovation is significantly higher than what you might have found in like, you know, Pakistan or India or Bangladesh or others.

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Saif Hameed [00:16:50]:

Because in these countries and also in most of the countries producing cocoa and coffee and vanilla, you have a lot of smallholder farms, which means that the inherent fragmentation makes it much Harder to distribute change. And the middleman environment is also very fragmented into very small middlemen, all quite distributed, which means that it's very hard to get innovation through. And there has only really been one massive innovation period in a lot of the agriculture in the Global south, which was the green revolution, which Norman Borlaug was a part where they brought dwarf wheat to the market. And there hasn't been really a lot of big trends since then. It's still very far behind. You throw on climate risk and climate risk exposure, and by that I mean not a future abstract, but the volatility that you see today in just temperature levels, which wreaks havoc on many crops. And I think that coffee, cocoa, vanilla are particularly susceptible to this as well. You throw on an additional one which is water scarcity.

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Saif Hameed [00:17:55]:

These crops tend to use a lot of water and water scarcity is very difficult to control. Actually for any of the countries where these crops grow, you then add on another one which is a lot of the land used for these crops. And now I'm thinking about coffee, cocoa and vanilla in particular is also under threat. If you look at Ghana for example, Ghana also has gold reserves. There's a lot of interest in mining those gold reserves and a lot of those gold reserves sit under where they are growing cocoa today. So you have these sorts of challenges as well. And, and all this I think is just likely to put much more stress on prices across these commodities going forward. I would say that as a buyer of these commodities I would probably start trying to get ahead of the curve on where are the agroclimatic zones going to shift.

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Saif Hameed [00:18:41]:

If you look at how wine country is kind of moving gradually from France to England, for example, which is probably anathema for a lot of our listeners, where's cocoa and coffee and vanilla going to, going to shift to? I would over the next several years start trying to understand that a little better and maybe explore pilots or smaller newer suppliers. And I would also look to have engaged conversations around climate risk insurance. And that is something that the suppliers of this space are not going to manage on their own. Even the smaller, even the mid sized intermediaries are not going to manage it on their own. Often insurance products don't exist. And so there's just a lot of work to be done there on managing the financial risk that comes from being exposed to this space.

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Isobel Wild [00:19:25]:

Yeah, I think as well as looking at the migratory patterns or the transitioning agricultural zones, the other big thing to look at is alternatives. And for instance, with coffee, Arabica, coffee has to be grown at very certain elevations, certain altitudes with certain moisture content. Whereas a new varieties like Liberica Coffee is coming to the surface as a, as a market option, which can be grown in more tropical climates, moist, wetter temperatures. So it can be grown, it's doing very well in Indonesia and because of the climates there, it can have monthly, monthly harvest, which is very different from other climates where Arabica grows, where you have, you know, harvest once every few months, if that. So I think alternatives in the zone and looking at genetic modifications and hybrids as well for pests and diseases is also kind of front of mind.

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Saif Hameed [00:20:15]:

You're actually taking us into interesting and somewhat controversial territory, not just with the genetically modified approach, which I think is again controversial in some places, depending on where you do it or which part of the value chain you deploy, but also when you're talking about alternatives, synthetics are an alternative. And if you look at, for instance the fragrances space, which I have some exposure to fragrances from my career, and you look at let's say rose oil and jasmine oil and all the other sort of essential oils that go into high end cosmetics, this is hugely water intensive. Like it's sort of emissions intensive as well. But I think in relative terms the water intensity of these sectors is just off the charts, like it is insane. And it is effectively a large scale export of water from countries which may already be water scarce to the global north, let's say, which is the larger consumer of high end cosmetics, relatively speaking. Maybe I'm wrong there. And if you look at the mid market cosmetics which already use synthetics, arguably the difference is hard to tell for many consumers. And I think that with coffee, cocoa and vanilla there might be the same argument.

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Saif Hameed [00:21:31]:

At what point actually is it better for the environment that we use synthetics, chemicals that mimic the taste because they're just better for the world rather than rely on what is effectively by some definitions slave labour on smallholder farms to produce highly expensive inputs where most of the money exits the country. And you create this dependency of an economy where actually agrochematic zones are going to decimate that dependency in the next couple of decades.

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Isobel Wild [00:22:04]:

I remember when we had tried a bar of no cocoa, chocolate, whilst it was exciting to try, I think there's still some room for improvement in terms of flavour, taste and overall experience. So yeah, that is new horizon, but I think there's some hard yards to do before we get there. Saif, onto our third headline, third and final Just Stop Oil has ended. Calls its end to protest, but does this mean that they've won. So just for people who aren't based in the UK and maybe haven't heard of Just Oil, they're a UK based environmental activist group that aim to end fossil fuel extraction but they recently announced that they will disband at the end of April. Just a hoyle they're notorious for causing stirs. Notably they threw soup at a Van Gogh painting in the National Gallery. They did a chalk dust bomb during the World Snooker Championship, smashed a cabinet containing the Magna Carta in the British Library.

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Isobel Wild [00:23:03]:

They even spotted sprayed temporary paint on the stones at Stonehenge which is very close to my home. So that one definitely hit hit play at the heartstrings more than others. And their process just caused a lot of disruption. Notably they blocked the M25 from four days in 2022. They have claimed victory saying that their initial demand to end new oil and gas is now government policy. So quote unquote, making them one of the most successful civil resistance campaigns in recent history. But Saif, I'd love to just get your take on whether you think they actually have one or whether you think there's actually other kind of incentives at play here.

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Saif Hameed [00:23:44]:

I think that they have made the best of the situation as it is and so the argument that they're taking is that the courts are basically upholding the legislative position on no new oil and gas licences and, and I think they're taking that as their stance that they've won or been effective. And I, I don't think they're wrong. I think that there's another argument you could take which is to say, well, is the job really, is the mission really accomplished? Actually like this is one metric, this is one measure, this is one outcome. If the outcome was actually no new oil and gas licences, then just stock oil is a bit of a lofty thing to call yourself. I think the thing is that just stock oil has basically been a movement and what is interesting about movements is that it's very, very difficult to sustain them over several years.

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Isobel Wild [00:24:48]:

I think another comparison to Dora's Extinction Rebellion. I think all of us were well aware of their, you know, big day in Parliament Square in April when 30,000 came and had that big pink bust and it was such a moment that everyone was behind but now, you know, we don't hear about them at all. I think they've disbanded. But I think this also comes with the backdrop of the Conservative government when they brought in more higher penalties for the obstruction of or like causing public nuisance for kind of protesters. So I think from originally it was a fine of £200. If you were, if you were doing this, it now can go up to 51 weeks in prison or even a potential 10 year sentence. So I think that has also come at a time where this more radical just stop oil group, you know, perhaps the internal kind of desire to do more chaotic and intense active protests, maybe changing into perhaps more moderate or lower risk demonstrations.

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Saif Hameed [00:25:53]:

You know, I was just thinking to myself that like this, like for the last few months actually we think of this which is I kind of have this mental model of the Pakistan index which is when other countries start acting worse than the Pakistan government, then I think, wow, things have really gotten bad. And actually like for most of my life, Europe, the uk, the US have all trended well above the Pakistan index. And actually, you know, since Brexit, I started reevaluating just how, how, how, how these countries have trended and when it comes to protests.

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Isobel Wild [00:26:33]:

Right onto our last section, which is how the how to section, we got asked by a member of our community, how can you run a board meeting that gets by? And for some sustainability, I would actually just love to first ask you, like how do you navigate the no, you know, I think particularly now there's a lot of pushback and as we've been speaking about in recent weeks on the podcast, there's a lot of competing priorities for in a business at the moment. So there's probably going to be a lot many more no's that are coming your way. Be like no, we can't get sign off that no times are tricky but budgets are tight. How do you navigate these? Is it is a no no or is no just the first point to moving to a yes?

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Saif Hameed [00:27:15]:

So I think that maybe just insight on board meetings, right, like these things don't actually come to board meetings. By the time something gets to the board, unless it has already been fully socialised and agreed upon, someone is managing the board meeting prep the wrong way. The weeks and months prior to the board meeting, all these things should have been socialised. That said, there is still a big question about budget alignment. And what I have noticed, and I'm saying this even from observing how sustainability functions in the world's largest companies go about getting budget and buy in for their initiatives, is that sustainability teams are not experienced budget creators. And that starts to show up actually like they are not experienced at getting buy in internally for the things that they need to spend money on. And that manifests in a couple of ways. One is that they tend to do this too late in the cycle of what they want to achieve.

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Saif Hameed [00:28:17]:

So they start thinking about what they want to do, they do all the validation, they explore, they find the right thing, the right partners, the right pilot, and then they think, okay, where's the money going to go come from? How do I now figure out where I make this work? Whereas most other functions will try and very early on start socialising cost and expectation and budgetary impact before they start getting commitment internally on the exact things that they're going to do and investing real time and effort into it. The second thing is that sustainability teams often don't know who to speak with. And it's not just about, hey, I need to go and find anyone in finance, someone in finance, right? There's usually a complex web of internal stakeholders that you need to get approval from. And it could be as simple as I was speaking with the Chief Sustainability and Strategy and Digital Officer, one role in a multibillion dollar food business just yesterday and he was saying that in their organisation, every budget tree approval over a certain price point needs to have a senior exec sign off. And he said the senior exec's role is just to do one thing, which is to ask the question, is there a solution somewhere else? Is there a partner somewhere else in our organisation that is similar to this and that is already being leveraged and that already tells you how much internal confusion can sometimes exist and navigating these processes and understanding who to speak with, who to unlock what you need to do in terms of preventing so that it doesn't come to this late stage and you get a no. I think it's something that sustainability professionals, being a new function, just haven't gotten on top of fully yet. Finally, I think that there is the positioning aspect, which is almost every function that I think does budget management well will have a practised approach to how they link what they need to spend to a key metric for the business. And usually this will, this will filter up to one of the one or two or three major metrics that matter to the business and we'll find some way to link it to that metric.

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Saif Hameed [00:30:26]:

And maybe that is easy, maybe that is hard, but that is undeniably necessary, especially for sustainability functions in 2025.

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Isobel Wild [00:30:34]:

Okay, and so budget, big bucket there, the other stuff, what, when you're trying to get alignment not just in time, you've got the budget, you now want to get the, like the people power behind it. How do you talk, what evidence, what narrative, what numbers are you bringing to the board meeting or are you trying to like get across to people to actually you create this energy?

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Saif Hameed [00:31:00]:

Yeah, I think that this piece around structuring it in terms of business outcomes is always going to be super important. And I think business outcomes and facilitating alignment across senior stakeholders on why sustainability supports and underpins these business outcomes is something that takes months of preparation. I was at, just earlier this week I was at the Partner to Win conference hosted by Unilever, which is for their couple of hundred top strategic partners in south suppliers. And we were excited to be one of them. And what I thought was really interesting is you had the CEO, the cfo, the CPO, and the heads of all the business units of Unilever, one after the other, taking the stage and telling us about their plans and their views and the road ahead. And for every one of them, sustainability was a part of the narrative. Now it was actually very cohesive and I know Unilever has gotten a lot of critique recently for stepping back from sustainability. But whether it's a step back or step forward or step sideways, what was clear to me sitting, sitting there, you know, in the audience was you have a consistent narrative across all the senior leaders in the business.

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Saif Hameed [00:32:16]:

And I think that that was a lot of preparation work from the sustainability team to create that type of cohesion and as a partner, and I'm looking left and right in the room to like all the big Unilever suppliers and life inputs and packaging and all that stuff. And I think that clarity of message is always important to see from the company talking to you.

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Isobel Wild [00:32:40]:

Awesome. Thank you, Saif. I know there's a lot more to talk about on this topic, but we have run super over time. So if any of our listeners want us to pick up on anything in particular, do let us know via the link to the community in the comments. So, Saif, thank you so much for your insights today. It's been a jam packed episode and looking forward to the next.

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Saif Hameed [00:33:00]:

Likewise. Izzy, thank you so much.

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