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Overlooking The Business Case For Climate Change Adaptation

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CLIMATE CHANGE ADAPTATION
Combatting epic wildfires in Russia. Climate experts say this sort of thing will become increasingly common in coming decades, and businesses would seem to have a strong financial interest in preparing for it. A new report suggests that precious few are doing so. | AP File

Marc Karell, a climate change and environmental services consultant based in Mamaroneck, N.Y., recalled a lecture he delivered not long ago to a group of industrial environmental managers.

"I told them that one aspect of a warming climate will be its impacts on public health," Karell said in a recent phone call. "A warmer planet means that mosquitoes will be able to fly in a wider range around the equator than they can now, and therefore, they’ll have access to hundreds of millions more people who were not exposed to it previously."

A member of the audience whose company manufactures and sells equipment that deals with malaria in the developing world, raised his hand. "You could see the lightbulb going off over his head," Karell said. "The guy said, 'If we’re going to have more malaria, we could sell this stuff in so many more places,' -- and then he put his hand over his mouth," Karell recalled, "realizing that he’d just said something that was probably very, very politically incorrect."

A growing chorus of advocates, consultants and organizations -- including some toiling in areas likely to be hardest hit by global warming -- are now arguing that such embarrassment needs to stop. "This is, after all, what business is all about -- reacting to change, Karell said. "A good company prepares for, reacts to and takes advantage of change."

In other words, while high-profile investments in technologies and policies aimed at curbing global warming have grown significantly over the last decade (total global investment in clean energy topped $240 billion in 2010, according to Bloomberg New Energy Finance, a new high and more than four times the $51 million invested in 2004), such efforts, no matter how successful, won't be enough to halt changes that are likely already underway.

That doesn't mean investments and policies aimed at curbing emissions, transitioning to cleaner fuels and implementing efficiency programs ought to be abandoned. Former vice president Al Gore, for example, argued in a sweeping essay published Wednesday in Rolling Stone that far greater progress on that front has been relentlessly sabotaged by "Polluters and Ideologues" who are are "trampling all over the 'rules' of democratic discourse."

"They are financing pseudoscientists whose job is to manufacture doubt about what is true and what is false," Gore continued, "buying elected officials wholesale with bribes that the politicians themselves have made 'legal' and can now be made in secret; spending hundreds of millions of dollars each year on misleading advertisements in the mass media; hiring four anti-climate lobbyists for every member of the U.S. Senate and House of Representatives."

Still, ardent advocates for combating climate change, including Gore, know that the planet doesn't wait for dithering politicians and that the climate is already changing -- and will continue to do so.

Crass as it sounds, there's plenty of money to be made in adapting to those changes, too -- and plenty to be lost by ignoring it.

As suggested by a new report published jointly this week by the United Nations, the World Resources Institute and Oxfam America, these are points that precious few companies, both in the U.S. and around the globe, have yet to fully grasp.

The report, "Adapting for a Green Economy: Companies, Communities and Climate Change," took the pulse of dozens of companies that, as signatories to a U.N.-sponsored compact committing them to addressing climate change, are already considered to be at the forefront of the issue. The survey included such prominent names as Coca-Cola and DuPont, the American chemical giant, as well as dozens of foreign companies including Swiss Re, the global reinsurance firm, and the China National Offshore Oil Corporation, one of that country's three main national oil companies.

And yet while 83 percent of the firms that responded to the survey said they believed that climate change impacts posed a risk to their products or service -- and a full 86 percent said climate change risks, or investing in adaptation solutions, pose a business opportunity -- precious few could articulate ways in which they'd integrated adaptation risks and potential rewards into their business models.

Why does this matter? Well, despite relentless efforts in this country among polluters and their friends in Congress to forestall ambitious energy and climate policy, new regulations in various parts of the world are inevitable. A recent economic analysis by the investment consulting firm Mercer suggested that "the economic cost of climate policy for the market to absorb is estimated to amount to as much as approximately $8 trillion cumulatively, by 2030."

And while public policy will inevitably be the main driver in addressing those areas likely to be hardest hit by global warming, businesses also have a major role to play in helping some of the planet's most vulnerable communities weather the worst of it -- from rising seas to scorched crops and diminished fresh water supplies, among other potential effects.

"Community risks are business risks," said Heather Coleman, a senior policy advisor on climate change at Oxfam and a contributor to this week's new report. "When there’s a massive flood in Pakistan, for instance, those communities in many respects represent the labor force for some global companies, and crops that companies are sourcing there, the yield is demolished. Companies are not immune to these risks."

It only makes good business sense then, the report argues, to help those communities shore up roads and other critical infrastructure; to fortify ports, railroads and airports; and to ensure that access to critical resources like water and power are resilient to potential changes.

Samantha Putt del Pino, a co-director for business engagement in climate and technology at the World Resources Institute, added that the healthier and more resilient these communities are, the more likely they will become prosperous markets themselves.

"If you take a look at Fortune Global 500, they talk about their growth markets, but if you look at where that growth market is -- it’s in those developing nations," Putt del Pino said. If those populations are not resilient, companies are losing the very areas they are depending on for their future growth."

That should be a clarion call for groups like the U.S. Chamber of Commerce, the nation's main business lobby, which has long argued -- albeit with the intent of beating back what it considered burdensome climate policy -- that communities are well positioned to adapt to climate change.

Problem is, it's hard to divorce businesses from the communities that work for them, supply them with raw materials, buy their products and use their services.

Some companies are beginning to get it. Coca-Cola, for example, has invested in a partnership linking over 50,000 small farmers in Uganda and Kenya, creating "a network of local suppliers for their fruit juices," according to the report. "This grants communities access to market opportunities and diversified incomes, while at the same time creating a more robust and productive local supply chain for Coca-Cola.

CEMEX, the Mexican building materials and cement supplier, the report noted, is "actively working to develop more resilient and affordable housing for low-income communities, which are often the most vulnerable to climate change."

But these efforts remain isolated from the larger business models under which companies operate, Coleman said. Indeed, there were so few good examples of companies truly integrating the potential risks and rewards of climate change into their corporate cultures, that few case studies were available for citing.

What gives? Among other things, companies in the latest survey said they remain confused by the volume of long-term scientific data relating to climate risks, and how best to integrate that into decisions relating to operations on the ground in specific locations. Others said continued uncertainty over future climate impacts made taking investment risks difficult, as did the inherently long-delayed return on such investments, which will inevitably be measured in decades, even if the need for investment is now.

The need for investment is most certainly now -- and the wisdom Coleman, Putt del Pino an their co-authors attempt to impart applies equally to companies whose supply chains don't necessarily reach Bangladesh.

Coleman pointed to the American energy firm Entergy as a standout example of a firm that gets it -- having watched some of the southern communities it serves get battered over the last several years by hurricanes and floods of increased frequency and intensity. The company commissioned a report to look at the potential economic risks of climate change along the Gulf Coast. That report, published last fall, concluded among other things that over the next 20 years, the Gulf Coast could face cumulative economic damages reaching as high as $350 billion. "In the 2030 timeframe, hurricane Katrina/Rita-type years of economic impact may become a once in every generation event as opposed to once every ~100 years today," the report stated.

But even with evidence of shifting and more violent weather appearing to swirl and simmer before our very eyes -- at home and abroad -- many companies remain fixated on the status quo.

Sure, reasonable people hold differing opinions on what any one storm or season suggests. But there's little doubt that, over the coming decades, such weather is likely to become more common.

"The last couple months we've been hearing a lot more about risks and adaptation," said Karell, the environmental consultant from New York. "You've got wildfires out West and flooding in the South and there's just a lot more of it occurring, and the public is starting to put the dots together. And at some point, companies are going to have to say, 'Gee, this is going to impact my business. I may not be able to get my widgets to market."

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