Daily Archives: March 1, 2009

Addressing Climate Change Requires a Revolution in Business Thinking

A recent article in Strategy + Business discussed the next industrial imperative and the costs of climate change industrialization, which are enormous. According to a 2007 Oxfam International study, the financial impact of climate change on poor nations through drought, crop damage, water shortages, species extinction, and disease already exceeds US $50 Billion annually, and the costs continue to rise as developing countries, like China (that just exceeded US CO2 emission levels), continue to increase their carbon output. Closer to home, insurance premiums are rising rapidly for areas that are (potentially) the hardest hit by climate change. They’ve gone up as much as 20% in coastal Massachusetts, 40% in Florida, and 400% for some offshore oil rigs. The costs now make self-insurance economical for many businesses and home-owners in high-risk areas.

The article points out that we cannot meet the 80-20 challenge under the current industrial system and that success will require a “sea change” in the prevailing kinds of energy we use, cars we drive, buildings we design to live and work in, cites we plan, and ways we travel the world. Although it does not require a return to a pre-industrial way of life, it does require a movement away from the “borrowed energy” society we built during the industrial age to one that lives within the “energy income” granted to us in the form of solar, wind, tidal, and plant-based energy that comes from renewable sources. (Nature produces no waste and every by-product of one natural system is a nutrient for another.)

When you think about it, living within our “energy income” shouldn’t be a problem since the sun emits more energy in one minute than we use in a year (and a single point on the earths surface currently creates enough tidal energy to power the globe), but, as the article points out, it will require new, basic, innovations of a scale and speed never seen before. And the shift must come from businesses that can apply their skills in management, entrepreneurship, and economic acumen to galvanize a collective shift. We all need to be more like Sweden, which depends on oil for only 30% of its energy, down from 77% in 1970, and which recently announced its goal to be the first oil-free economy.

And considering that there are Billions to be saved, and made, it’s a worthwhile effort. DuPont alone has saved $3 Billion in its sustainability efforts. General Mills now earns more money selling its oat hulls (a Cheerios by-product) than it used to spend to dispose of them. And the market for green buildings is expected to reach $38 Billion in 2010.

And we’re only at the tip of the iceberg. It’s going to take a massive shift in business to achieve the 80% reduction goal in 20 years, and a massive amount of innovation, and whoever steps up to the plate with innovative new solutions first is going to reap massive rewards. Just ask GE, whose orders for low-emission air-craft engines and locomotives, wind-power turbines, and new classes of energy-efficient equipment based on its Ecomagination technologies surpassed $70 Billion in the first quarter of 2008.