Why global warming is good for business
Climate change isn't all bad news. In fact, there may well be money in it.
SAN FRANCISCO (Business 2.0 Magazine) - We're nine days away from the media event that is Earth Day 2006, so brace yourself for a barrage of depressingly familiar information about the environment's poor health.
Greenland's glaciers melting at an alarming rate? Check. Amazonian ecosystem in near-irreversible collapse? Check. Decomposed vegetation in Siberia, previously buried under permafrost, about to release vast quantities of carbon dioxide into the atmosphere? Check again.
Fully 85% of Americans believe global warming is happening now, according to a recent Time/ABC/Stanford poll. We know we're in the midst of some serious climate change, and don't need pictures of polar bears stuck on fragmenting ice caps to drive the point home.
Long-term changes in the business climate
The problem for the business world is that all of the incremental solutions we keep hearing about - use less electricity, drive a hybrid, buy recycled and organic products - don't exactly set entrepreneurs' imaginations on fire. Sure, such efforts cut energy usage bit by bit, but global warming presents opportunities beyond dutiful belt-tightening.
What makes cashing in on climate change tricky is the fact that it could go in one of two radically different directions. Either the world will continue to heat up, or a complex series of climate changes could tip us over into a sudden new ice age - one so severe, suggests Peter Schwartz, co-founder of the Global Business Network consultancy, that the planet's remaining arable land would only be able to support a mere two billion people. (Schwartz's 2003 report for the Pentagon said plainly that global warming would be a greater threat to national security in the 21st century than terrorism).
But according to global warming scenarios from Australian insurer IAG, we won't see major changes in one direction or the other until at least 2040, long past the tenure of today's CEOs.
Strategies for a warmer (or colder) world
So shelve those plans to manufacture more sunscreen or snowshoes for now. There are, however, three clear trends entrepreneurs can take action on immediately:
1) Consumer guilt. Growing concern about global warming - and the urge to do something about it - is a boon for startups like TerraPass, an outfit that's in the guilt-reduction business. TerraPass offers to offset the amount of carbon dioxide your car emits for between $30 and $80 a year, by investing it in clean energy projects that reduce carbon elsewhere in the world. Barely a year old, and started on a $5,000 loan, the company has 3,000 customers and counting.
2) The Kyoto Treaty. Even though the U.S. hasn't signed on, much of the rest of the world is following an international agreement to reduce carbon emissions. That means a larger market for clean technologies. The best part is that you don't have to own a factory with smokestacks to profit from emissions reductions.
A small Silicon Valley company called Planktos, for example, plans to dump huge quantities of carbon-eating phytoplankton algae in the oceans, and sell the resulting credits to European countries that can't cut their carbon dioxide emissions enough to meet Kyoto targets. Despite the fact that this technology is still in the testing stage, it was so attractive to Vancouver's Solar Energy Ltd. that it bought Planktos last year for $1.3 million.
3) Human relations. When Whole Foods Markets (Research) announced in January that it would buy all of its electricity from wind farms, making itself the corporate world's largest consumer of renewable energy, New York Times columnist Thomas Friedman called them "the most patriotic company in America." Likewise, Wal-Mart (Research), long assailed for its contribution to urban sprawl, is building new stores that use solar energy to reduce costs and boost its image at the same time.
That's the kind of publicity you can take to the bank. Indeed, Sustainability Advantage author Willard cites polls that show more than a fifth of potential job candidates are drawn to such companies. His research also shows more concrete benefits from the adoption of eco-friendly corporate policies: reduced manufacturing expenses, increased market share, a better talent pool and higher productivity. All of this, according to Willard, can lead to a 66% increase in profit on average for small and medium-sized companies that adopt environment-minded practices.
A two-thirds jump in profits, thanks to climate change? That's a far cheerier image of the future for Earth Day than those poor trapped polar bears.
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