The Business of Climate Change
Changing Approaches to Accommodate a Changing Climate
Current climate change projections call for average global temperatures and sea levels to rise, with attendant increasing risks of flooding and variability with regards to weather… the coming changes could minimise the ability to utilise land and secure resources, challenging and changing the business landscape as well as the physical one.
Paired with a decreasing reliance on infrastructure’s ability to accommodate the growing threats associated with a changing climate, businesses must quickly invest in the technology and processes necessary to insure their investments against the impacts of a changing climate.
The impacts of climate change cascade from the natural environment, to the built environment, to business environments, with some industries impacted more than others. On the flip side, there are myriad opportunities for businesses and organisations to provide goods and services, innovating their approaches to doing business and adopting efforts to mitigate the impacts of a changing climate, branding themselves and the consumers who choose their products in the process.
With climate change there is heightened insecurity in terms of resources becoming scarce, factors that can have lasting implications for people all over the world, given our global market economy. The weather does not discriminate and the costs associated with climate change can be much higher than originally anticipated.
In 2010, 950 natural disasters caused $130 billion USD in global losses, and only a small fraction of that amount was insured. A 2011 report by the National Roundtable on Energy and Environment suggests that climate change could cost Canada close to $5 billion per year by 2020, rising significantly by the middle of the century.
To be sure, climate change is a business issue, as a company’s approach to the environment can impact upon a firm’s reputation, its overall operations and its supply chain network, but also a firm’s financial and legal responsibilities as well as regulatory, social and corporate obligations. Many businesses and firms have already taken steps to insulate and protect themselves from the increasing volatility associated with climate change in the form of risk management, trying to understand and mitigate the impacts of uncertain market and environmental conditions and their impact on operations.
Thanks to international efforts like Kyoto, the International Panel on Climate Change, and other research centres and organisations, work is being done to build government policies and approaches to doing business in an environmentally sustainable way, advocating for the necessary changes in policy and action. Many companies have taken their corporate obligations to the environment and thus society seriously, by taking action to decrease greenhouse gas emissions in their own operations, trying to lead by example and inspire others to do the same.
Kellogg, for example, has recently taken broad action in its own operations, requiring suppliers to reduce and report emissions and setting company-wide targets to reduce its own emissions on the way to its goal of carbon neutrality.
In the US, the Climate Action Partnership (USCAP) formed in 2007 with the goal of influencing the US Government’s regulation of greenhouse gas emissions. Many companies and organisations have joined these efforts such as GE, Alcoa, the Natural Resources Defense Council and ConocoPhillips, to name a few. Companies like Royal Dutch Shell, Texaco, Ford and GM have joined the Center for Climate and Energy Solutions. Significant efforts have also been made thanks to the Carbon Disclosure Project (2000) that by 2007 published emissions data from 2400 of the world’s largest corporations, holding them publicly accountable.
In fact, in 2010, 56 per cent of Canadian companies who participated in the Carbon Disclosure Project said that they were exposed to risk from the impacts of climate change. This was a large increase from the 17 per cent of respondents who answered yes to exposure in 2003. In 2010, there were also 38 per cent of respondents who felt that opportunities existed as a direct result of climate change.
Companies the world over are starting to see the value in increasing knowledge and access to data related to climate change and its varying impacts. It is important to share knowledge across industries and implement adaptive measures to build capacity and infrastructure. A competitive business that is able to succeed in managing risks and seizing opportunities in a changing climate will see legal and insurance benefits while increasing their reputation and access to capital. By investing proactively in infrastructure and processes, not only decreasing emissions but protecting against a changing climate, assets are protected and can assist in a company’s stability and longevity.
Although businesses often choose to address risk through mitigation rather than adaptation, both serve to protect a business’ investments and future in the marketplace. In these capacities, firms can utilise clean and green business strategies to reduce energy and waste in their processes and operations while decreasing operational risk and thus costs, improving their bottom line. Such actions require significant forecasting and strategising to gather information about the broad range of impacts as well as the best ways to cost effectively manage them. Many tools and financial models exist for businesses to quantify and capitalise on risk, deciding on the best course of action, tailored to their long term goals as a company.
Arguably, the best way for businesses to proceed is proactively, investing in research, innovation, and technologies dedicated to meeting lower emissions targets and safeguarding against the potential damages associated with a changing climate, while also setting industry standards and encouraging industries to implement new ideas and approaches to be more energy efficient in the public and private sectors. It is more cost effective for companies, municipalities and even countries, to upgrade infrastructure and incorporate policies related to climate change, proactively investing capital for the long term to avoid exposure to risks, instead of being forced to reactively retrofit and repair when it is too late and the damage is done.
By adapting, businesses can capitalise on changing conditions in both the short and long term as many businesses and countries have already. On a short term basis, companies who have found their niche, such as snow makers in popular skiing regions who are seeing less snow due to global warming, are capitalising on emerging gaps in the market for as long as it can be sustained.
Taking it to the next level, some companies and organisations have even taken the steps to become carbon neutral, whereby they have a zero net carbon footprint through a combination of efforts to reduce and avoid emissions and using offsets or buying carbon credits, where possible, to achieve carbon neutrality. An example of long term efforts to capitalise on climate change and its impacts can be found in the country of Greenland, which has experienced melt, allowing for better access to fishing and other resources. In fact, these shifts could help bolster a relatively small national economy into a much larger one.
No doubt, countries, like businesses, are faced with the same struggles of mitigation and adaptation to climate change and its impacts, realising the importance of accommodating these changes before it is too late. Big companies, like advanced nations, are better equipped to deal with these threats as they have better access to resources and information than smaller, less advanced companies and nations.
Yet any efforts toward decreasing emissions and targeting climate change will have wide-spread benefits. Adaptive measures are made in local contexts though they have a global impact, and the private and public spheres must work together and share information and technology to secure a future in which business can move forward, finding a viable solution for a complex problem with many variables.
The best ways to start are by raising awareness, assessing and managing risks and opportunities that present themselves, and creating policies and standards to lead markets and people to adapt to a changing climate in such a way that protects both investments and future viability.