Facing the Facts: Climate Change Is Bad For Business
Facing the Facts: Climate Change Is Bad For Business
As leaders of the industrialized world continue to squabble at home over how to address the threat of climate change – and even as they battle internal factions who don’t believe the science of climate change – one group of leaders has come out in favor of swift, comprehensive action to prevent global catastrophe. Those leaders come from some of the largest businesses on the planet.
Just one year ago, Hurricane Sandy hit the Northeast with a force not seen in the region in decades. In the aftermath, shipping and distribution of goods in and out of the Northeast was severely disrupted. The costs of these disruptions, as well as the physical damage from the storm, are projected to cost the U.S. economy $20 billion.
Sandy served as a wake up call to business leaders, as it highlighted how grossly unprepared they are in the face of climate change related disasters. In the Midwest, floods and wildfires in recent years have also impacted the business supply chain, costing untold millions worth of economic activity.
But many within the business community understood what was happening, and what it means for the future of business. They know that, at the end of the day, climate change is bad for business.
A recent study by the Carbon Disclosure Project shows that at least 70% of major businesses are concerned about the threats that climate change poses to their companies. 51% of the businesses contacted for the study said that climate change, specifically heavy rains and droughts, has already had a very large impact on operations, always in a negative way.
These aren’t mom and pop operations either. Massive corporations like Wal-Mart, Dell Computers, and L’Oreal are among those who have reported negative economic impacts from climate change related disasters.
The problem is that companies, much like the general public, are reactionary rather than proactive. The CDP report says that events like Hurricane Sandy act as a catalyst to get businesses to take action and develop contingency plans for climate change disasters.
Rather than taking the steps necessary to prevent disruptions, or even further climate damage, today, they wait to raise the alarm bells for their industry after they’ve seen what is possible.
In just the last few years, many of these companies have begun investing in greener technologies to reduce their carbon emissions, as 73% say that they see climate change as a physical threat to the safety of their business.
But not all industries have been waiting for disaster before they take action.
The insurance industry, a group that stands to lose a lot of money in the next few decades as extreme weather becomes the norm, has been working for years to develop mitigation plans for climate change catastrophes. Several state insurance commissions already require insurance providers to include risks associated with climate change in their policies.
While the insurance industry has accepted that climate change is both real and a major threat to their business operations, they continue to support a political party that houses the majority of climate change deniers and polluters. As I wrote in February 2012:
Unfortunately, the industry continues to pour most of their political dollars into the pockets of Republicans who are attempting to dismantle current environmental protections, and who have outright denied the existence of anthropogenic climate change. According to Open Secrets, over the last 20 years, the industry as a whole has given more money to Republicans than Democrats in every election cycle.
The same is true for the other corporations listed above. Dell has been a major funder of the Republican Party, and Wal-Mart is a leader in both Republican donations and lobbying. These companies would rather jeopardize their own financial future for a chance at short-term financial gains, it seems.
And that is the problem for industries who understand that climate change is a problem, yet continue to support politicians and policies that prevent any action: They are incredibly short-sighted, focused solely on yearly profits rather than the longevity of their company.
This shortsightedness is a direct result of the rapid turnover of CEOs. The average tenure of a Fortune 500 CEO is now less than five years. This means that they are focused on making as much money as possible before they retire or are replaced. When dealing with such short time spans, it is virtually impossible to focus on the long run.
Luckily, the major players in the global arena, specifically the International Monetary Fund and the World Bank, understand that climate change needs to be addressed in order for businesses to continue functioning normally. Since politicians the world over seem to take notice when money is involved, perhaps this is the spark they need to get moving before it is too late.
In October 2013, leaders at both the IMF and the World Bank addressed the issue of climate change for the first time. Their take on the issue is even more dire than the business community. Both groups focused solely on the economic impacts that we can expect, and their recommendations are among the most extreme that have ever been proposed, but they believe these are the necessary steps to take in order to avoid climate change-induced global economic collapse.
First off, they believe that ALL fossil fuel emissions need to be halted by the end of the 21st century. Not reduce, not cut back, but completely eliminate all fossil fuel emissions in the next 86 years.
IMF director Christine Legarde said that climate change is an issue that their organizations, and other economic leaders, need to “think about every day.”
The IMF has also called for a “redirection” of the billions of dollars in subsidies that are handed to the fossil fuel industry every year, which would be better spent by putting them towards cleaner, renewable sources of energy. They also stated their plans to get global financial leaders on board with these ideas.
Again, those are some of the most extreme ideas that have been put forward, but they are completely necessary.
Global economic collapse is not to be taken lightly, and if the leaders of the largest financial commissions in the world are to be believed, our current path is leading us right towards a global breakdown.