Saturday, October 13, 2007

Climate Business: Business Climate (Forethought Special Report Harvard Business Review)

A few points on Climate Change from the Harvard Business Review.

●Unknown consequences, effects on ecosystems, societies and businesses.
●Regulations will certainly place a price on carbon, this price is going to go up.
●Excess carbon is excess risk.
●Operational changes include making logistics more efficient and using vehicles that consume less fuel.
●Strategic measures include dematirialisation of services (book-->ebook).
●Localising the sourcing and consumption of goods.
●Businesses that are no longer in demand such as a putatively less desired white van service could find itself unexpectedly on the end of a radical shift in business models.
●Using flexibility of sourcing would give companies that aren't vertically integrated a distinct advantage.
●Demanding zero carbon for the same cost will put SME's at risk, leadership on energy should be a way to avoid this risk.
●Infrastructure destruction (physical impacts) and devaluing (regulatory impacts) are real risks.
●Staff retention and recruitment at risk for irresponsible companies.
●Reporting on GHG emissions is taken as guide of environmental management systems which tend to be good when overall management is good. Not reporting GHG emissions accurately or at all is not a good sign to investors.
●Not all business value shows on the bottom line. In fact 80% of Coke's value is not represented on the books. Sustainability is, like brand, a significant intangible.
●Pensions exposure can be at imprudent levels if fossil fuels are a significant part of the mix.
●The magnitude of the shift from a carbon based to a zero carbon economy is vast, the energy sector is one of the worlds largest. The combination of magnitude and rate means that every company requires a strategy. As with globalisation, the changes will not have by standers, there will be winners and losers.
●The issue is strategic, bold leadership on tough decisions is required, win-win situations are present but not the real important issue.
●Business as usual is risky, weather or not bold unilateral action seems comfortable, the situation is urgent and the companies head is on the line.
●Educating customers and business partners can help to maintain strong relationships and ensure market accessibility for scrutinised industries.

A risk worth hoping for.

There are a lot of reasons for action in the list above but one under rated risk is that of regulatory stringency. I do not believe that the following is being done by any companies, although it wouldn't surprise me if a few world leaders where starting to do the calculations.

  • Work out a ghg concentration that is broadly defined as non-catastrophic (we have passed safe).
  • Calculate how much carbon this equates to.
  • Work out a global emissions reduction pathway.
  • Work out the company or sector quota from this calculation.
This is a plan of hope for the planet, for businesses it is a just feasible risk! If people manage to persuade the governments to save the planet (it is no less) and do what the science is saying then companies will end up with drastic curtailments in carbon emissions quotas.

Absolute reductions of >60% globally over the next 45 years, but with a population 50% greater and a economy 4 times the size, the emissions per unit gdp may have to be >95% less!

How many businesses can cope with us saving ourselves? It makes the whole idea of fundamental business change look a lot more likely. And yes, the science isn't very...convenient, is it?

Related Materials

1. My vlogs on economics and climate change (1,2,3)
2. Posts and videos from Corporate Climate Response conference (CCR)
3.Previous Business and Economics posts.

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