Three reasons companies are being proactive about climate change
For business leaders, climate change is not uncertain or in the future, but part of their everyday decision making in the here and now, says Professor Daniel Vermeer.
"Creating a new energy and resource system on a global scale – and at the speed required – is a daunting challenge and will require trillions of dollars in investment," Vermeer said. "But the cost to society is still dramatically lower than the costs of inaction, and will result in a healthier, cleaner, more stable, and more prosperous state and country in the long run."
Vermeer is an associate professor of the practice at Duke University's Fuqua School of Business, where he leads the Center for Energy, Development, and the Global Environment. Vermeer offered his persepctive at a roundtable on climate change business strategies, co-hosted by the SAS Institute and the Nature Conservancy,
Vermeer sees three main factors driving companies to be proactive about climate change:
Managing increasing risks
"The World Economic Forum publishes an annual Global Risk Report based on input from nearly 1,000 experts and business leaders all over the world," Vermeer said. "Over the last decade, these experts have identified the failure to mitigate and adapt to climate change as the single most important risk to the global economy, along with related issues of water stress, food insecurity and the health impacts. Companies rely on raw materials and efficient supply chains to grow their business; our collective failure to invest in cleaner energy and more resilient infrastructure translates into greater disruption and costs. As economies shift toward more low-carbon development, there are significant risks facing companies and industries that miss these transitions, and are not prepared to participate in these new markets."
Responding to pressures for greater transparency
"There is also a quiet revolution happening in financial markets, as investors increasingly expect companies to disclose their social and environmental performance and plans, including their carbon footprint," Vermeer said. "Investors want to know if the company is vulnerable to direct climate events, policy developments, or changes in societal expectations. An explosion in computational power and sensing technology means that vastly more data is available, and companies cannot hide. Michael Bloomberg's Task Force on Climate-Related Disclosure recently published guidelines for corporate reporting on climate change, encouraging efforts to not just reduce their carbon footprint, but to stress-test the company's business model in light of plausible climate scenarios."
Capturing rapid growth opportunities
"Renewable energy, climate-responsive agriculture, and new models of transportation will create entire new industries in coming decades, such as carbon capture and vertical farming," Vermeer said. "These sectors have global reach and enormous market potential. I have spent significant time with Ingersoll Rand and other North Carolina companies in recent years, identifying business opportunities to use climate change as a catalyst for innovation and new market creation. It is compelling to be part of building a new energy system that not only protects the climate, but launches the next industrial revolution. In these cases, the imperatives of decarbonizing our economy and creating new climate wealth go hand in hand."