The Business of a Changing Climate

The negative impacts of climate change are happening now, but it’s not all bad news for business with the potential to maximise the opportunities it presents while helping the environment.

In his forthcoming book, Navigating the Adaptive Economy, author David McEwen explores the “disruptive opportunities” of climate change.  

McEwen, director of Adaptive Capability, works with clients across a number of industries to help them adopt practical and effective strategies to reduce their environmental impact while improving business effectiveness and financial sustainability.

In a Q and A, McEwen discusses how climate change is impacting businesses, how leaders can begin to change their practices and the sectors that are likely to boom as the fight against climate change gains momentum.

How is climate change impacting the business landscape?

We take the view that climate change is happening, whether people like it or not. And it’s going to have to change in two main ways. So the first is the physical effects, so how businesses are exposed to things like rising sea levels and warming temperatures… which affects some businesses more than others.

Then the second aspect is the way that consumers and governments respond to that, and we’re starting to see a real crescendo of activity in the way that consumers are responding. There are a growing number of green groups that are advocating quite hard on organisations for them to effectively clean up their act. And no business is immune from that.

A really interesting example was a couple of years ago when Greenpeace had a campaign against Lego for Lego’s support of Shell. Lego used to have a co-branding arrangement with Shell where they sold Lego sets with Shell petrol stations and tanker trucks in Shell stations. And Greenpeace said ‘hang on a sec, Shell’s wanting to drill for oil in the Arctic… what are you doing aligning your brand with their brand’, and after x-million signatures on Greenpeace’s petition and a very interesting video featuring a Lego diorama of the Arctic that they then filled with oil, Lego announced that they would end their co-branding arrangement with Shell.

So you’ve got that campaign from the green groups, you’ve got the divestment campaign from the likes of the Asset Owners Disclosure Project and the Carbon Disclosure Project and various other groups that are advocating for funding managers of banks to get out of fossil fuel investment, and then you’ve got consumers who are starting to take a much harder look… at the products that they buy, both residential consumers and some corporate procurement agents.

With the advent of the Paris Agreement, where everyone is hanging onto every word president-elect Trump says… it is then putting a heightened emphasis on governments to act and that action will, over the next few years, start to translate into carbon pricing and other measures that will affect different sectors in different ways.

Along with all of these pressures, should businesses also see it as their responsibility to tackle climate change?

Absolutely, and the message that we advocate is that actions for corporates on climate change, it’s not about changing lightbulbs, it’s actually about stepping back and looking at the business from a strategic level, and saying ‘look if the climate’s changing and that’s going to have an underlying impact on the way world views corporate activity’ – because it’s corporate activity that has led to the problem – ‘then corporate activity can help solve the problem’.

We advocate to our clients that they have a look at a number of aspects of their strategy. And we boil it down to making sure they’re producing the right products in the right ways for the right markets at the right time.

What we mean by that is, the right products – so products that people will actually need and want to buy in a climate changing world. One example of that, which I’ve heard anecdotally, is that there’s a company in the UK that was making soups stocks, and it’s retooled its production line slightly, it’s using the same production line but is now producing a range of dessert toppings. So they’re effectively future-proofing their business against warmer summers and milder winters, and have that as a secondary revenue source.

Produced in the right way [means] the most energy efficient, the least polluting and so on. One example of that is construction products, so concrete and steel are two of the most greenhouse gas producing construction products that you can get. Each of them produces about 5 per cent of global greenhouse emissions each year. But there’s now products available that are emerging as competitors to concrete and steel, one is the engineered timbered market – cross-laminated timber. That could be a real game-changer for the construction industry in terms of demonstrating, ‘hey, yeah we can use products other than concrete and steel for high-rise construction’.

How can businesses start to look at changing what they do?

In the book we provide a methodology and we’ve got a diagnostic tool that we run on our clients. That looks at a variety of things, it looks at the governance structures they’ve got, it looks at the way they’re measuring their environmental impact. One of the things we find is most larger organisations have a pretty good idea of what their direct emissions are, but they’ve got very little idea of what the emissions are upstream in their supply chains. And they also don’t necessarily have a very clear idea of what the emissions and environmental impact is associated with the end use of the products and services they provide, and also what happens at the end of life for those products and services. So developing that measurement discipline will help organisations make more informed decisions about the types of products they produce and how they produce them. And also it will help identify opportunities for closing the loop and making more use of recycled materials.

We look at the variety of ways that they’re seeking to contain their environmental impact and reduce their environmental impact. We look at how they engage with the various stakeholder groups, employees and shareholders or governments or the community at large, making sure that those communications are honest and informed by appropriate scientific material as opposed to some of the greenwash that gets bandied about.

And we also look at how they approach risk management, so the assessment and mitigation of risks associated with climate change, both their exposure to the physical effects of changing weather and then how they deal with making their business as resilient as possible, which then flows into the strategic thing about making sure that their products are fit for a climate changing world.

For businesses looking at adapting to climate change, should they be concerned, or are there a lot of opportunities?

There is a lot of opportunity… the book has a whole major section on what are the major opportunities in terms of the types of products and services that people will need. So there’s new product and service opportunities, there’s a lot of opportunity in infrastructure for example, so coastal infrastructure, water and wastewater projects, disaster management.

There’s a lot of opportunities for companies that are going green, they are actively looking to close to loop on their production processes and look at that cradle-to-cradle cycle for their products and services. And there’s also a lot of opportunity for innovators in sectors such as healthcare, food production, transportation, and energy and energy efficiency.

We see quite a lot of upside potential for quite a lot of sectors in the economy.

Businesses tackling climate change are emerging everywhere. Listen to People Power on Not for Podcast, part two of our three-part Green Nation series exploring the transition to clean energy.