In the Shift

When Copenhagen winds up in a week’s time it seems pretty certain the limo we’d hoped would whisk us away to a low carbon world won’t have shown up.  We may have a better idea of  what a limo looks like, and we will probably know what limo companies to avoid in future. But the immediate problem will be what transport is available to shift us to where we want to be.

Coal-fired power station in South Africa

My father-in-law once found himself in the back of a flat-bed with Sam Walton when nobody came to pick the Wal-Mart founder up at Bentonville airport. Business, politicians, NGOs, unions, a whole lot of us will be making use of anything that looks like it has wheels or wings and the strength to get us at least a couple more miles down the road towards climate change transformation.

My interest is companies.  Where can companies go from here? They can wait for the limo: that might seem a low risk option but when was the last time your boss accepted your excuse for being late to the meeting because the taxi didn’t show? Do you think the public, the media, governments, the workforce, your kids will be any kinder when you blame your inaction on someone else?

Or companies can buy into the ‘serious doubts about the veracity of the science’ argument. If you want to explore the is it true is it false debate, the BBC has a nice primer on the for and against arguments. George Soros has repeated the argument others have made that the odds of the science being wrong are so slim that one would be foolish to bet against the odds. “If the choice is between cooking alive and wasting money unnecessarily I would rather waste some money, because long before we cook we are going to kill each other if we don’t deal with climate change.”

Or companies can figure out where to take action. Let me be clear on this: I am not talking about changing light bulbs, cutting back on packaging, or putting in insulation.  Those are good things, and they might be part of drawing a bigger picture.  But I’m interested in the bigger picture.  There are a lot of things that companies can do that will reduce carbon emissions and save the company money – that’s basic eco-efficiency, and it’s the case the CFO needs to be making.  But the action I’m talking about is what bold, imaginative but achievable steps can companies take now they’re aware the Copenhagen limo hasn’t shown?

First off (and all things considered this may not sound like great advice, but stick with me for a while) think the way the climate change politicians are thinking. They went into Copenhagen ready for five tracks of negotiation:

- mitigation

- adaptation

- finance

- technology

- long-term cooperative action

Those are five useful ways for a company to think about its climate change strategy:

- What can we do as a company that will help avoid (ie mitigate against) climate change? Light bulb changing, waste reduction, alternative energy, all of that good eco-efficiency stuff.  But take a moment and think a bit more boldly: are there other steps we could take? What is our equivalent of Wal-Mart’s commitment to revamp all of its retail stores to be powered by 100% renewable energy? Is there a statement we could make as powerful as Marks and Spencer’s announcement to drive down the use of plastic shopping bags? (Oh and if ever you doubted the hypocrisy of the media, take a look at the UK Daily Mail’s coverage of that story, first as an indicator of corporate in 2007 and then as a sign of common cause in 2008 – sometimes you need a bag to vomit into.)

But don’t just think about mitigation. While you’re figuring that out, give some thought as well to adaptation.

- What can we do as a company to get ourselves ready in case climate change gets more serious than we’d like? There’s a lot of uncertainty about what the world will look like if the temperature increases by more than 2C, but you owe it to yourself to see how those scenarios will affect you.  Tighter regulation; migration; food shortages; conflict over water: these are just some of the possible changes that will affect any business.

Thinking about mitigation and adaptation, and the way that throws up challenges and opportunities for your company will help identify the revenue and cost implications of climate change.

- How can we finance what we want to do? Marks & Spencer’s Plan A was intended to be revenue neutral, and has turned out to be profitable even in the recession. Not every company will be so lucky, but every company can look at the financing alternatives. Credits, subsidies, tax incentives, penalties, green venture capital, matching funding: these are just some of the ways a company can get its ideas funded.

- How can technology help my company? Politicians, entrepreneurs and increasingly activist groups are putting more and more emphasis on technological solutions. Partly that’s an indicator of how disappointing the climate change policy process has been, leaving us to look to things like geoengineering and alternative energy to dig us out of this hole. But every company could benefit from mapping out the technological options: the ones that exist, the ones that are likely to exist, and the ones that never will exist. What are the gaps in your strategy where you need a technological solution? What’s the likelihood of the technology coming on stream?  Will it be available and at what price?  Is my company going to be able to take advantage?

A couple of examples. First, imagine I’m in a heavy industry with manufacturing facilities in South Africa. I know that most of my energy comes from coal in one way or another. Looking ahead, it’s fair to assume I will need more of it to come from cleaner energy, either through renewable power or through coal-fired plants fitted with carbon capture and storage.  If that doesn’t happen, then I’m going to have trouble meeting my investors’ demands to show lower emissions as required under the Carbon Disclosure Project for instance. (And that’s a real threat because CDP acts on behalf of 475 institutional investors, holding $55 trillion in assets under management.) The problem is, however, that not only is coal-based energy cheap, it’s the only major source that’s readily available in South Africa. I might wish there was money going into alternative energy, but there isn’t anywhere near enough. I might want carbon capture technology to be installed but it’s too costly, not especially well proven, causes all sorts of protests from communities that live above the captured emissions, and there isn’t enough engineering expertise to make it happen in South Africa at the speed required.  Tricky, huh?

Example two has a more positive glow to it. I own palm oil processing plants in SE Asia, and I’m getting whipped from all directions because of my industry’s relationship to deforestation, loss of peat forests, threats to the orangutan and so on. If I can show I’m avoiding deforestation and even engaging in planting new forests I might be able to access new sources of capital. But right now my industry’s reputation is damaging my company’s financial prospects. I look at the options and there isn’t a high tech quick fix, but what I do have is a thousand small growers who provide a lot of my raw material (ie the oil palm kernels that I process). I notice that their yields are much lower than they could be. If I can improve their yields through some basic agricultural education, then the pressure to cut down forests should diminish without harming my productivity and while increasing the small farmers’ incomes. I will have more kernels to process, and I might even become eligible for some climate change mitigation funds.  A low cost, low tech solution with real benefits.

Mitigation, adaptation, finance and technology: that’s already a lot to think through. But not to think about what long-term collaborative action might deliver would be a missed opportunity for our company. Long-term collaborative action is behind the assault on climate change science in the run-up to COP15, but it’s also behind the P8 Group of public pension funds that has been working since 2007 to see how their industry can address climate change. And it’s behind numerous other collective actions from the well established Responsible Care initiative to the Forest Stewardship Council.

So, five parallel ways to decide what rides are available and which ones to take.  Who knows, they may even be a better alterantive to that gas-guzzling limo.