Climate change –forcing business to innovate

Fighting climate change has become a smart strategy for companies wanting to prosper in the future.
Published: Tue 05 Jul 2016

While the threat of climate change hangs over our heads, there are a number of forward-thinkers who argue that the low carbon transition is presenting many opportunities for many sectors if innovation is thrown into the mix.

One such individual is Sir David King FRS HonFEI, UK Foreign Secretary's Special Representative for Climate Change, who has highlighted the importance of clean energy innovation in tackling the challenge of climate change.

In 2013, Sir David developed the Global Apollo Programme – later renamed Mission Innovation and launched on the first day of COP21 in Paris last December. Since its launch, 20 nations have already joined Mission Innovation, all of which have committed to doubling clean energy research, development and demonstration (RD&D) spend by 2020. This amounts to an annual spend of $30 billion.

In support of economic growth, energy access and security, and an urgent and lasting response to global climate change, Mission Innovation aims to accelerate the pace of clean energy innovation which will be key in achieving performance breakthroughs and cost reduction to provide affordable and reliable clean energy solutions that will revolutionise world energy systems.

Economic benefits and climate change

Sir David also pointed out that the low-carbon transition is the ‘greatest opportunity of our age’. In one of his recent presentations, he drew attention to the economic benefits of the transition to a low-carbon economy.

The figures certainly reflect this. In 2014, more renewable energy was installed worldwide than fossil fuel and in the UK this activity generated £46.2 billion turnover and employed 238,500 workers during that same year.

The potential is clearly evident and figures like the above prove that the private sector, with its financial clout and penchant for innovation, should play a leading role in the struggle for a greener future.

In fact, the private sector was more visible and active in COP 21 than in any of the previous COPs: CEOs from industries as far ranging as cement, to technology and renewables stepped up their efforts to address climate change, making pledges to reduce their carbon footprint, purchase more renewable energy and engage in sustainable resource management. Global financial institutions pledged to make hundreds of billions of new investment over the next 15 years in clean energy and energy efficiency. 

Unfortunately, the fight against climate change is not cheap. Developing countries need about $100 billion of new investments each year over the next 40 years to build resilience to the effects of climate change. Mitigation costs are expected to be in the range of $140–$175 billion per year by 2030.

This staggering bill cannot be carried out by national governments since many are already struggling to make ends meet. They will need to call on the private sector for help.

Participate before climate change takes hold

If global temperatures hit four degrees by 2100, this could result in droughts, flooding and major storms. This would result in financial strife for many companies.

A study by CitiGroup found that rampant warming could shave up to $72 trillion off the world's gross domestic product, while another report in the journal Nature found it could reduce average global incomes by nearly a quarter. A four-degree Celsius jump would also batter sectors like agriculture, real estate, timber, and emerging market equities.

The effects are already evident. Recently, the CEO of Unilever, which had $52 billion in 2014 sales, reported that natural disasters linked to climate change cost the company about $330 million a year.

Making climate-smart investments

With “clean” technology prices dropping, there is no excuse for companies not to make climate-smart investments. It’s not only about protecting the environment-it’s about making good business decisions.

A recent study that looked at a sample of 1,700 leading international firms found that the money they put into reducing greenhouse gas emissions saw an internal rate of return of 27% – an indication that those investments were paying off.For example, in the energy sector investment in renewables, especially in developing countries, are showing good rates of returns.[The emerging market opportunity for renewables.]

Says Dean Scarborough, the CEO of manufacturing firm Avery Dennison: “If we want to stay in business for the long term, contributing to the fight against climate change is just smart strategy.”

 

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