Climate Change impact on Business Leadership and Planning

As we watch the news of enormous red dust clouds over Arizona and Australia due to record drought, the discovery of the record melting of Icebergs in Greenland at a rate that the IPCC models failed to predict, record temperatures being set in northern and western Canada, record flooding in Atlanta which is sweeping people and vehicles away and  record wild-fires in California all at the same time, in addition to the recent first time ever passage of a commercial German vessel through the north east passage without an icebreaker, along with record flooding this year in Taiwan, Burma, and Vietnam, if there was any doubt left that we are experiencing climate change, there certainly isn’t anymore. And anyone who believes that it’s not caused by human activities simply isn’t accepting reality.

The question now is, how will the world be impacted and how will businesses respond? Although there is still far too much rhetoric, even the world leaders at the UN Summit on Climate Change preceding the Copenhagen meeting, most notably Obama noting that “the old habits, the old arguments are irrelevant”, are beginning to speak seriously about the issue. Even China, which understandably refuses hard targets in the light of excessive energy usage and emissions from developed countries, is taking a leadership role in developing solar, wind and other renewable energy sources.

 The question is not about whether changes in business will occur: the question is, what will drive business the most? Will there be sufficient agreement on policy and limits at the global or national government levels or will the change in the earth’s environment itself be the greatest imputus for business to adapt and what will that mean for business?

For example: Policy on climate change will almost certainly lead to cap and trade systems for carbon emissions in North America and other developed and developing countries which will require businesses to begin measuring their outputs and create a new market. Gas mileage targets will help to reduce the fuel consumption and overall emissions, incentives for the expanded use of electric and plug-in hybrid vehicles along with incentives for generation and installation of renewable energy sources and development of carbon capture technologies, will no doubt, continue to expand so called “green” markets.

But all the policy change in the world will likely fall short of the rapidity of change based on observable events and an even larger market is likely to emerge in the business of climate change mitigation. The difference in this market is that it will call upon business leaders to make considerations that they have never made in the past. A global demand for ethics will demand that business leaders begin to consider the personal impact of their leadership upon the environment and humanity as part of their business model. What was previously accepted as common place business practice, even what we now consider acceptable carbon emissions, will begin to be viewed as irresponsible and possibly even criminal from a retrospective view. Just as many people were fooled in war-time situations to ignore their sense of ethics and adopt unacceptable and inhumane behaviours, and then were later charged for crimes against humanity, I have little doubt we will begin to see an increase in cases where business leaders who ignore what is now becoming blatently obvious and who continue to lead the worst poluting businesses and possibly even political leaders who fail to act in the face of clear scientific evidence will eventually be held responsible for criminal behaviour and jailed for not taking more steps to mitigate circumstances which have already lead to disastrous results for millions but which only continue to increase. Those who committed crimes against humanity in the past also falsely convinced themselves of the efficacy of their actions until after they were eventually called to account.

In addition, as changes in the climate begin to impact businesses and people world wide, it is likely that we will all be called upon to take actions that we now consider unlikely or even unthinkable.  Considering the fact that glaciers which supply billions of people with life giving waters are disappearing at alarming rates and are likely to be gone within 10 to 15 years, we can be relatively sure that we are facing mass migration, increased pressure on global water supplies and increased charges for the energy required in attempts to alleviate disasterous changes and human suffering.

While we find it difficult to consider this as a necessity at this juncture, projects developed from the perspective of 100% sustainability (off the grid) will, when looking back 20 years from now, tell us which of our current industry leaders are foresighted and which fail to understand and plan for the future. In the worst case scenario, the additional costs of using LEEDs building standards and installing renewable energy systems which may seem challenging at this stage, will seem like not only a good investment but as the primary decisions that save companies. Given that ocean waters are expected to rise and that current models of warming are proving to be far too conservative, properties which are well above coastal waters and out of the path of potential floods are likely to be better choices for major facilities than those which are designed on or near the coastal properties or near rivers or low lying plains. Companies which strive to take themselves completely off the grid by coupling facilities with solar or wind powered generation, which recirculate collected rain water for processing, and which adjust their working models to take advantage of high power generation periods, which sell off excess energy as part of their business model and which strive to work with other similar companies will be far more successful than those organizations who pay no attention to changing conditions. Since we don’t know exactly where the impacts of climate change will be worst, organizations that choose numerous smaller facilities in locations nearer to their markets rather than larger facilities in one location will be better set to adapt in the event that any one area is confronted with massive flooding, severe storms, drought or forest fires. Just ask the hotel owner in Taiwan who watched helplessly as his hotel fell into the flood waters, companies in New Orleans and Houston impacted by hurricanes, owners of companies in California who have been impacted by brown-outs and fires, and companies in Australia which have been impacted by a lack of fresh water.  

As much as we would like to pat ourselves on the back for taking a few steps at a time to improve our environmental and social records, we may not have that opportunity. The very definition of leadership is changing. No longer is it sufficient for business leaders to be individuals who are business smart. Business leaders increasingly need to be aware of what’s going on in the world and to prepare for contingencies which are increasingly likely to occur. They can no longer afford to ignore the complexity of a world in change. They need to be wise enough to recognize their inability to prepare without consultation and help from outside consulting firms, they need to include Climate Change as a consideration in their business plans, just as they did Y2K, and they need to expect that some there will be a greater need to sensitive to the needs arising from human suffering , potentially even with their own employees, and to provide flexibility in their response to assisting in world events.

My son and I were having a discussion on the subject of climate change and the timing of actions. My comment to him was that the time for action was actually about 20 years ago when the problem was first recognized. But we can’t go back. We can only hope that going forward we will begin to see everyone, including our business and political leaders to begin acting as though there really is a new challenge.

As much as we may feel hopeless at times or see far too little actually happening to preserve our future, I have learned to have faith in the human spirit, I believe that people are fundamentally good, and I full believe that business leaders will, as they begin to become more informed, begin to take more extreme action, even if for no other reason than to protect the future profits of their businesses. It turns out that smart planning and foresight always pays off. 

All the best,

Garth Schmalenberg
Phone: 416-919-6598

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