The business value of promoting climate stability.
Building on BSR's article last month on why climate change matters for every company, managers should be aware of some important, and very specific, opportunities for creating business value while promoting climate stability.
First, the good news: It's not mechanically hard to manage greenhouse gases (GHG), the key ingredient to climate change. There's a saying that "a ton of carbon is a ton" everywhere, which, for climate purposes, is true. And given that roughly two-thirds of global emissions are tied to energy in networks that are already regulated, finding your company's GHG hotspots is no great feat.
Now for the hard part -- responding to the actual problem. Averting climate change requires the will to deal with a decade-plus lag between activity and reward, which our current business and political institutions do not seem very well equipped to handle. It also requires a coordinated global effort in order to avoid "leakage," ensuring that emissions really disappear rather than migrate from one place to another. This has proven to be a great challenge, as country coalitions including the U.S. and China, which comprise approximately half of global emissions, work to find common ground that has so far been elusive.
Even with a growing number of experts, advocates, and average citizens committed to addressing climate change, there remain conspicuous gaps -- in public knowledge, in action, and in results. For example, while scientists agree that global climate change is a genuine, systemic threat, many legislators in the U.S. are quibbling about short-term price hikes in their districts -- which does not bode well as the rest of the world prepares for a global climate treaty.
These gaps may represent serious potholes on the way to climate stability -- but they are also gaping opportunities for smart companies willing to help bridge these divides.
The Gap Between Science and Knowledge
Here's the bad (but not surprising) news: The public thinks there is still debate about climate science. According to an important recent study (PDF), 90 percent of Earth scientists who specialize in climate say the Earth is warming and that human activity is to blame. In contrast, approximately half of all Americans think scientists have yet to settle the matter.
This gap is profoundly consequential because, despite what the truth may be, the life force of decisions for lawmaking politicians and business managers is public opinion.
On the bright side, this gap gives companies a chance to improve the public's environmental literacy, and develop goodwill, credibility, and loyalty by doing so.
So what is a company to do? Start by considering some of the traits of this disparity, such as the knowledge divide. Most climate-related science is updated in scholarly journals, which are expensive, inaccessible, and not targeted to the public. Misinformation, on the other hand, is cheap and easy to access, and mass media -- its conflict-hungry carrier -- often treats science as a matter of opinion, and therefore gives disproportionate coverage to extreme views.
Here's where business comes in: Take a look at how your organization might be causing misinformation and then stop it at the source, especially in your media outreach and branding. A related opportunity is to find ways to share accurate science through your communications efforts.
As BSR has reported in the past, Patagonia brings an educational approach to communicating issues, especially through its website, which teaches consumers about the lifecycle impacts of products. You can also educate your industry, as the apparel company H&M has done by sponsoring a recent BSR-led lifecycle study on carbon dioxide emitted during the manufacture of garments.
The Gap Between Knowledge and Action
We have learned from Princeton University researchers Stephen Pacala and Robert Socolow -- and many others -- that the world has no shortage of technology or financial resources to solve climate change. Furthermore, the popular McKinsey report, "A Cost Curve for Greenhouse Gas Reduction," reveals that many solutions to eliminate emissions result in a net-zero cost.
So what's the delay? One reason is malfunctioning markets. For example, energy service companies perched in border areas like Hong Kong are ready to enter China, the world's biggest energy-efficiency market, but they are blocked by prohibitive transaction costs and project risks due to persistent, entrenched market barriers.
But companies can address challenges like these themselves, and in doing so create value all around. For instance, as part of a recent collaboration with BSR, Walmart launched a supplier energy-efficiency program that created a marketplace pairing more than 30 energy-service companies with more than 300 factory representatives, in turn making both shopping and selling easier.
There is another dimension. Walmart is providing training, practical tools, and encouraging messages to its suppliers to promote energy efficiency. The company's aim is to improve the energy efficiency of 200 Walmart suppliers by 20 percent. This alone is significant, but experience shows that once managers begin to find efficiency gains, they are even more likely to identify and reduce waste, which could create a ripple effect throughout the company and among the company's partners.
Theoretical models such as Pacala and Socolow's studies also fail to account for the internal hurdles that can prevent action. These tend to be situational and include obstacles related to timing, momentum, politics, unfamiliar cultural environments, and human psychology. The lesson here is that starting a new climate change program is no small feat, and should be seen as a major accomplishment and milestone.
In our experience, you can build early momentum by using qualitative and quantitative data to capture quick "wins" that demonstrate the value of making further commitments.
The Gap Between Action and Results
At the World Business Summit on Climate Change in Copenhagen last May, one participant remarked, "It doesn't matter how fast you are moving if you are going in the wrong direction." Unfortunately, with climate change, the reverse is also true: We have the mechanics and are gazing in the right direction, but we are moving too slowly. According to the C-Roads simulator, an MIT-developed software modeling tool, even if the most progressive proposed legislation around the world is enacted, we would still have a long way to go to achieve stabilization targets. Recent findings by Carbon Disclosure Project support this conclusion.
According to conventional wisdom, companies concerned about climate change should focus on reducing emissions from internal operations, management of which is closely tied to their control or ownership. Yet if the goal is to stop climate change, we must make a collective effort to outpace emissions, which continue to grow despite reduction efforts to date. Unfortunately, few companies view it as their job to solve this problem. As a result, the bar is even higher: Instead of reducing emissions by 80 percent from our 1990 baseline, we need to reduce them by 83 percent from 2005.
The problem, says Chris Tuppen, chief sustainability officer at BT, is that we are measuring the wrong thing. While climate business metrics measure carbon dioxide emissions compared to the company's past performance, the metric for the collective goal of solving climate change is carbon dioxide parts per million in the atmosphere with agreed-upon peak dates. That metric is measured by physical science.
Tuppen suggests we change our business metrics: Rather than tracking individual reductions, we should measure what we, collectively, have left to achieve. That thinking led BT to pioneer the CSI Index, which associates the company's emissions with those of the global economy, thereby linking company efforts with national targets, which are based on climate stability.
Undoubtedly, it will be challenging to bring these technical standards to scale, but Tuppen's idea to start with the ultimate goal in mind is a necessary step. His approach is rooted in Peter Senge's "systems thinking" and Harvard Business School's recommendation that sustainability efforts start from the future.
When we start to think more broadly about business progress, it's easy to see more options for action. Auden Schendler, Aspen Skiing Company's executive director of sustainability, says business can have the biggest impact by influencing policy, because climate change is, at its core, a market failure. Without robust climate policies, individual efforts, however "directly" related to operations, will be limited.
Looking at the big picture, influencing policymakers -- whose numbers are relatively few -- is not only likely to make a bigger impact, it's also more manageable than tracking billions of disparate emissions sources. According to Schendler, Aspen has engaged in policy through national advertising, lobbying Congress individually and through coalitions such as Business for Innovative Climate & Energy Policy, leveraging industry trade groups to send letters, and speaking publicly. Schendler himself contributed by writing the book "Getting Green Done."
It is natural when planning and reporting to follow the crowds, but there are opportunities for climate leadership when you look for the gaps in public knowledge, action, and results. Taking them seriously will do wonders for your credibility, and potentially lead to new kinds of business growth.
Ryan Schuchard is manager of environmental research and innovation, and Betsy Fargo is associate of advisory services at BSR.
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