Why environmental issues are important for business?

Jan2013Business can’t sustain without a sustainable production and consumption value chain development. Environmental sustainability is now conceived and implemented in regular business operations of companies not merely as a ‘green washing’ approach, rather, for most companies these days; sustainability is the core of corporate strategy. The rationale for this paradigm shift in the corporate strategy [from the old school of thoughts-produce more with less cost] is mainly powered with energy efficiency, process management, introduction of cleantech, green growth etc.

In one of the recent global survey of McKinsey[1], it is stated- companies know that consumers and employees care about the environment, and their interest often presents real business opportunities and risks. According to the survey, an emerging key environmental concern is biodiversity, or the diversity of species, variety of ecosystems, and variability of genes. The survey found that a majority of executives (59 percent), see biodiversity as more of an opportunity than a risk for their companies. They identify a variety of potential opportunities, such as bolstering corporate reputations with environmentally conscious stakeholders by acting to preserve biodiversity and developing new products or ideas from renewable natural resources. The positive outlook on biodiversity is in stark contrast to executives’ views on climate change in late 2007, when only 29 percent saw the issue as more of an opportunity than a threat[2]. Perhaps, addressing climate change over the past few years has changed some executives’ views on the potential upside of environmental issues.

Based on the ongoing discussion in the World Economic Forum (Davos) and the deliberations of Lord Stern, author of the government-commissioned review on climate change that became the reference work for politicians and green campaigners as well as the stern warning of Jim Yong Kim, the new president of the World Bank, are two significant statements in the beginning of 2013, which reaffirms the severity of the climate change problem and necessities to take up this issue as a market determinant, and perhaps, also as a business’s core activities. While Mr. Kim pledged to make tackling climate change as a priority of his 5 year term, he stated that “there will be water and food fights everywhere”. Lord Stern regretted that he underestimated the risks of climate change in his much referred Stern Review Report of 2006 and he now believed that he could have been more ‘blunt’. He said: “Looking back, I underestimated the risks. The planet and the atmosphere seem to be absorbing less carbon than we expected, and emissions are rising pretty strongly. Some of the effects are coming through more quickly than we thought then.”

With these concerns of two world leaders, the critical question for companies and businesses is: should they capitalize on this increasing threat of climate change and aligned their corporate environmental sustainability strategy? The answer is certainly YES. The corporate strategy should be to engage in these environmental value chains through market-based solutions that can quickly and effectively deploy capital to appropriate projects. The companies should use the market more effectively, and look for options with new climate finance mechanism and tools (like nationally appropriate mitigation actions-NAMAs), which will not only bring new investment opportunities to fund private sector sustainability and carbon reduction projects but also create new windows for profits. With corporate strategy ever more sensitive to climate risks and environmental sustainability, the business can adopt for greening of supply chains as a bright spot of opportunity for corporate investment in offsetting – and in some cases “insetting” – particularly in the realm of agriculture[3].

Keshav C Das, Senior Advisor, Climate Finance, REDD, and Renewable Energy

SNV Netherlands Development Organisation

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s