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March 15, 2013

Is Climate Change Really a Business Opportunity?

This blog post was originally published by Dr. Mark C. Trexler in Greenbiz.com on March 4, 2013.

When writing anything about climate change — and particularly about climate risk — I often hear back about the need to mention “opportunities.” The same goes for sustainability. Apparently, the only risks we can hope to manage, and the only things we should consider “sustainable” from a business perspective, are things that make or save companies money.

This has always struck me as odd, given that many of the environmental problems we’re grappling with are generally recognized as attributable to the existence of economic externalities. Broadly speaking, the whole topic of sustainability (and climate change) has evolved from the recognition that we need to deal with nonmonetized externalities. That being the case, how can it be true that everything we do to solve those problems has to make sense without having monetized those very externalities?

The scientific community characterizes climate change as “the” risk of our time. The potential global and societal consequences of climate change over time are clearly game-changing (and not in a good way, even if there may be localized “positive” climate impacts). Over the past 10,000 years, human civilization has developed within a 1 degree Celsius temperature band, along with all of our agricultural systems and ecosystem services, so the idea that we’re now likely to stray several degrees or more outside that band without fully understanding the consequences is the very epitome of societal risk.

Of course, societal risk is not the same thing as individual risk or business risk. One person’s misfortune is often another person’s opportunity, and corporate time horizons are much shorter than societal time horizons. But we don’t generally characterize a global disease pandemic as an “opportunity” just because vaccinemakers will see higher revenues. I don’t see references in the press to the business opportunities awaiting us from major earthquakes or other natural disasters. Moreover, I don’t see earthquake preparedness premised on pursuing only structural and other preparedness measures that are economically justified in their own right. That’s because we recognize earthquakes to be a risk, not an opportunity. The fact that some people will benefit economically as that risk plays out is neither here nor there.

Next page: Communicating risk

Our 2012 e-book, “The Changing Profile of Corporate Climate Change Risk” (DoSustainability, London, 2012), is not named “The Changing Nature of Corporate Climate Opportunities” — and for good reason. Climate change is a serious societal risk, and that risk will trickle down to companies in many ways. Our forthcoming e-book, “Adapting to Climate Change: 2.0 Enterprise Risk Management,” focuses on climate-change adaptation as a risk-management response, rather than an opportunity-management response.

Of course, there will be economic opportunities. But the underlying problem doesn’t have to be characterized as an opportunity for that point to be true. Nor do “risk beneficiaries” need to have a book written specifically about the opportunities of climate change. If they recognize the larger societal risk, most are smart enough to figure their own business opportunities. In other words, the message of “risk” can communicate the topic across the spectrum of risk and opportunity, without getting into the semantically treacherous arena of confusing risk and opportunity.

We’ve gone down a different path when talking about climate-change risk than we have with other risk topics like earthquakes and pandemics. It reflects the real challenges in perceiving and communicating climate risk to individuals and to businesses, even though the societal risk case is clear. That’s why we focus so much in talking about climate change and sustainability on measures that will make companies money. Otherwise, we fear companies will not be interested.

But what that really reflects is that we’ve failed to communicate risk. We would be well-served to supplement our focus on moneymaking with figuring out how to better communicate risk.

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Climatographer Team

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