I've long maintained that one of the biggest mistakes that the environmental community -- and many of us -- made around climate change is relegating it to being an "environmental issue." It is, of course, but it's also a public health issue, a human rights issue -- and a huge economic issue.
Now that the public conversation about climate change has morphed from the "whether" to the "when" and "how," the topic has come out of the closet somewhat. Pundits and other professionals are finally beginning to discuss our climate future from an economic and business perspective: who stands to gain and lose as the climate shifts?
That's a question addressed by two noteworthy articles published this month: a discussion on "competitive advantage on a warming planet" in the March issue of Harvard Business Review, and a cover story in the April Atlantic on "who loses -- and who wins -- in a warming world."
The HBR article, by World Resources Institute president Jonathan Lash and WRI senior financial analyst Fred Wellington, is presented as "a guide for identifying the ways in which climate change can affect your business and for creating a strategy that will help you manage the risks and pursue the opportunities."
It doesn't exactly deliver all that, but it's well worth reading anyway. After all, this IS Harvard Business Review, the big Kahuna of corporate strategy journals.
Lash and Wellington write that companies' management of climate change is different from other environmental issues from a risk perspective -- it's not simply about regulatory compliance, potential liability from industrial accidents, and pollutant release mitigation. Climate risk is different because the impact is global, the problem is long-term, and the harm is essentially irreversible. Moreover, they say, it's not simply a risk for energy-intensive industries like utilities and chemical manufacturing.
In fact, the most important distinctions to be made when considering environmental risk assessment aren't between sectors but within sectors, where a company's climate-related risk mitigation and product strategies can create competitive advantage.
Lash and Wellington go on to describe the six types of risk: regulatory risk (the impact of emissions caps or carbon taxes); supply chain risk (disruptions or price hikes in materials or energy, in many cases because of the huge distances such supplies are shipped); product and technology risk (companies' varying ability to identify ways to exploit new market opportunities for climate-friendly products and services); litigation risk (the threat of lawsuits for significant carbon generators, similar to the suits faced in the tobacco, pharmaceutical, and asbestos industries); reputation risk (companies found guilty in the court of public opinion for selling or using products, processes, or practices that have a negative impact on the climate); and physical risk (the direct impacts of droughts, floods, storms, rising sea levels, etc.).
The authors proffer "four key steps" to "improving your company's climate competitiveness," none of which will be big news to companies already engaged in this space (but may be news to many of HBR's readers): quantify your carbon footprint; assess your carbon-related risks and opportunities; adapt your business in response to the risks and opportunities; and "do it better than your competitors."
There's some good stuff here, including a several prototypical questions companies might ask themselves (e.g., "How will changes in customer demand patterns affect pricing?" "What threats do we face from low-carbon substitute products?") and an interesting analysis of auto companies' vulnerability to risks and their ability to seize opportunities. It begs the question: Where would your company sit on a similar diagram of your sector?
Meanwhile, over at The Atlantic, journalist Gregg Easterbrook has done a yeoman's job of wrestling with the complex topic of divining climate change's winners and losers. (The article is online, but accessible to subscribers only.) As Easterbrook puts it:
If the global climate continues changing, many people and nations will find themselves in possession of land and resources of rising value, while others will suffer dire losses-and these winners and losers could start appearing faster than you might imagine. Add artificially triggered climate change to the volatility already initiated by globalization, and the next few decades may see previously unthinkable levels of economic upheaval, in which fortunes are won and lost based as much on the physical climate as on the business climate.
The Big Question about climate change, in Easterbrook's world, is: "What in it for me?"
His answer covers a great deal of ground -- and water. (My favorite section: "A 401(k) for a Warming World," with suggestions of what types of stocks to favor or avoid.)
Take land. As has been widely written, a warming world could shift the greenbelt northward, rendering parts of the U.S. Midwest (and other regions at similar latitude) arid and currently frozen land arable. "Climate change could place Russia in possession of the largest new region of pristine, exploitable land since the sailing ships of Europe first spied the shores of what would be called North America," writes Easterbrook. "The snows of Siberia cover soils that have never been depleted by controlled agriculture. What's more, beneath Siberia's snow may lie geologic formations that hold vast deposits of fossil fuels, as well as mineral resources."
Similarly, in the water world, Europe could get inundated by rising seas, but formerly frozen parcels near the poles could suddenly become hot spots, at least in real estate terms. Counsels Easterbrook: "While staying ready to sell your holdings in Europe, look for purchase opportunities near the waters of the Arctic Circle," whose disappearing icebergs could open lanes for shipping and other commerce.
Perhaps. Easterbrook knows as well as anyone that this is all so much conjecture, a bit of a parlor game for now. And whoever the real "winners" and "losers" turn out to be isn't really the point. What's significant -- at least for the time being -- is to ponder such questions. Doing so is the best chance we have of moving the climate conversation into the many arenas in which it needs to take place: beyond the birds and the trees and into the realm of people, their communities, and the economic systems on which we all rely.
And that's what's in it for us.
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The Atlantic article is currently available at this blog, no doubt under fair use for educational purposes:
http://iraqwarit.blogspot.com/2007/03/atlantic-monthly-april-2007-global.html
Posted by: Ed | March 19, 2007 at 12:04 PM
the article stated:
"Lash and Wellington go on to describe the six types of risk: regulatory risk"
Lets all write our government leaders to change net metering laws so that we can all get solar on our roofs and be able to reap the energy benefits.
please visit for more info:
www.jointhesolution.com/yorkville
Posted by: robert veach | March 19, 2007 at 01:53 PM
I think it goes a little deeper than all the above. This society needs to face fundamental questions about itself, though it may not matter in the end. If communism fell because a society without incentives doesn't work, then capitalism faces a similar fate because unfettered exploitation of the Earth has been shown to be killing the planet.
And there is still the moral question of what we're doing to the legacy to our children, beyond merely the economic. If the economy isn't benefitting our children, then what's the point? And are we willing to role the dice to see if climate change will eventually damage our ability to grow food to feed our children? And if we don't care about those questions, then what does that say about our society?
We'll spend billions on a rover to Mars to search for a spec of life, but kill most of the species on this planet and re-arrange its ecosystems? Sorry, that to me is a more important subject than planning for a shipping port on the Arctic Circle. Because that falls right in line with the short-sighted form of capitalism that got us in this situation. Call me a treehugger, but in this era of calls for ethics from business, this is the central question.
Capitalism and all businesspeople with children and/or a conscience, it's your moment of truth.
Posted by: Bogman | March 19, 2007 at 03:53 PM
Bogman has the issue by the throat, what is the legacy we're leaving,... are things better or worse than what we inherited... in human terms the answer may well be yes... more people living longer higher quality lives... However on any other dimension it is hard to see past the planet and other living creatures paying a terrible price for our outcomes.
Mankind needs to develop a contingency plan to get off this rock.But in the meantime ....
Al Gore is right on one point, this is a morale issue.. and has not much to do with economics, social upheaval, displaced refugees, droughts or snow melt. These are all outcomes of our collective behaviour.
If the debate resolves to who will be the winners and losers and what will happen to the economics it will leave us with the same level of thinking that got to this point in the first place...
I read recently that the 'weather is Earth's attempt to balance temperature and pressure' .
Taking the economist line of carbon trading to balance the flows of money and providing wealthy folks the ability to purchase pollution permits does address the central question. What are we collectively to do about what is going on...by definition we need to change what we're doing not purchasing permits or calculating economic risks.
Posted by: peter lockhart | March 19, 2007 at 08:30 PM
At http://www.timesonline.co.uk/tol/news/uk/science/article1480669.ece there is an interview with scientist Mark Lynas, whose new book, "Six Degrees: Our Future on a Hotter Planet" was published March 19.
He describes our climate future - one degree at a time (Celsius)!! Two degrees is the threshold we must not cross or else suffer runaway conditions. To avoid the 2 degree threshold, we must reduce GHG emissions by 60% over the next 10 years!! Is that achievable?? If not, here's what will subsequently happen, all within a relatively short timeframe. I also refer you to a recent interview with James Lovelock, who mentions that Stanford scientists are looking to buy real estate in northern Canada to escape the harshest effects of climate change.
(see Lovelock at http://environment.guardian.co.uk/ethicalliving/story/0,,2034370,00.html )
Posted by: Richy Rich | March 20, 2007 at 03:24 PM