With the critical Copenhagen UN Climate Change Conference just a few weeks away, it is worthwhile to recall what is at stake: any advances made and to be made in global integration, wealth creation, poverty reduction and peace building critically depend on our ability to address climate change now.
At the same time, climate change presents a tremendous opportunity for business to create value. The critical question is whether the private sector can seize this opportunity to retool the global economy and lay the foundation for low-carbon growth.
Of course, much will depend on the capacity and political will of governments to create the regulatory certainty needed to rev up the engine of green growth which drives innovation, spurs massive global investments and enhances efficiencies.
Business has a vital stake in this process. In fact, it is only with the private sector that we will be able to turn the tide on climate change.
How so? For one, companies are masters of persuasion – for better or worse. Business can create and shift demand for products and services, shape public opinion, and influence policy makers. It is about time these capacities are put to good use.
More importantly, the private sector has unmatched resources and know-how to innovate. And much progress has already been made. According to a recent estimate, roughly 40% of future energy growth could be saved if existing technologies were to be applied. For an added incentive, investors everywhere have been steadily building climate risks and opportunities into their decision-making processes. It doesn’t take much to recognize that transformation is indeed possible and economically viable.
Moreover, global growth of the scale seen in the past three decades has been the result of widespread and massive economic integration. The long-term viability of this globally integrated economy is under threat. Without a new climate framework, there is a high likelihood of new trade barriers and other competition-distorting fallouts.
These should be sufficiently compelling arguments.
And yet, while the balance has been visibly shifting, too many continue to sit on the fence, and some are still using their lobbying power to undermine climate action. According to a 2008 study by the Ethical Investment Research Service, only 10% of companies in high impact sectors like oil and gas have adopted a good or advanced response to climate change risk.
It is hard to pinpoint the exact causes of reluctance. Businesses often point to regulatory uncertainties or lack of clarity about carbon-pricing. A crucial factor appears to be that climate change is a long-term systemic challenge, and – lacking the cyclical nature of downturn and recession – is likely to stay with us for a long time. Much of the private sector, however, plans and operates in relative short cycles, having to meet the quarterly or annual expectations of capital owners. Managing this paradigm shift from short-term profit maximization to long-term sustainability will thus be one of the most important tasks ahead.
The good news is that an increasing number of companies – of all sectors, sizes and regions – are leading by example, setting ambitious emission reduction goals, driving innovation and sharing good practices. Much of this has been taking place under the umbrella of Caring for Climate, the UN Global Compact’s own climate engagement platform with more than 360 signatories from 65 countries.
However, the climate leaders can and must do even more to push their peers to action – within their sectors, their markets, down their supply chains. Likewise, business should use its influence with policy makers to lobby for binding carbon reductions and workable technical standards. What we really need is a new era of business statesmanship driven by the simple truth that the price tag of action now is small in comparison to the future cost of inaction.
Finally, while focusing on climate action and the reduction of carbon emissions, the help of business will also be needed to tackle the consequences of climate change, which affects all pillars of human prosperity, such as food security, water supplies, public health, security and stability. Forty-five million people are malnourished due to climate change. Sixty percent of the developing nations’ workforce is linked to areas such as agriculture that are directly affected by climate change. These are alarming numbers likely to rise if we fail to act. We all – business leaders, investors, consumers and citizens – must adapt our value system to these realities. And we must do so now.
