The Business of Climate Change

Global Game Jam (via Flickr) and available for use under the CC license.

With recent news that the United States is pulling out of the Paris Accord, it is more important than ever for businesses and other leaders to take charge of the fight against climate change and deliver concrete emissions reductions. As of Monday, June 5th, 902 businesses and investors, and 183 colleges and universities, from 125 cities committed to continue to ensure the U.S. remains a global leader in reducing carbon emissions. These signatories represent $6.2 trillion of the U.S. economy. 

However, overall, the initiatives implemented by businesses so far have been modest at most, and are not strict enough to prevent the 2°C increase in global temperature from preindustrial levels that the 2015 Paris Agreement warns against.

According to a 2014 McKinsey Global Survey, only 36% of CEOs rank sustainability in their top three priorities, with just 20% of the 2,634 surveyed leaders committed to aggressive sustainability initiatives. Of the CEOs that were the most committed to green practices, dubbed the "sustainability leaders," 51% were privy to the financial benefits that sustainable initiatives could bring to their company (compared to just 18% of their peers). In other words, they had a greater understanding of climate change and risk (albeit financially).

I, therefore, argue that we can increase the number of sustainability leaders by educating students—our future CEOs—on the environmental, social, and economic implications of climate change. Once equipped with this comprehensive knowledge, they will be able to recognize and quantify climate risk, and be driven to launch sustainable business practices at their firms. 

Climate Risk

In my Pay Up, Millenials post, I wrote about the economic costs of climate change to Generation Y due to increased tax bills and the costs of slowed economic growth. While I want to think that people care about climate change because of its harmful effects on weather, wildlife, and the well-being of their children and grandchildren, sometimes you simply have to pull out the dollar signs to really wake someone up to the realities of the issue at hand.

The Risky Business Report, commissioned in part by Mayor Bloomberg, takes the same approach— quantifying the economic consequences of climate change. The report projected that the average American can experience close to two months of days over 95°F by 2050—three times the average temperature throughout the last thirty years. Such heat stress results in decreased labor productivity for businesses.

The report also projected that, as a result of rising sea levels, $106 billion worth of coastal infrastructure can be underwater by 2050. With the gross domestic product (GDP) of many regions of the United States largely dependent on coastal businesses, this represents a huge financial risk for individual companies and the overall economy.

While 2050 may seem a ways off, many businesses are already experiencing the effects of climate change through extreme weather. In 2012, Superstorm Sandy flooded 23,400 New York businesses and left an additional 70,000 business that were outside the flood zone without power. More recently, in April 2017, over 100 factories in Dongguan, China were flooded and their inventory destroyed after excessive rainfall. 

Expanding the Role of Business Schools 

Luckily, management has the ability to help mitigate climate risk through the reduction of carbon emissions. But, many are not taking the rigorous steps needed. 

And the question is, "why?"

Perceived financial costs may be a barrier to change, but I believe that one of the greatest impediments is a lack of understanding. 

The first step in enacting change is education; before leaders can devise sustainable business plans, they must first understand the global phenomenon, the risks it poses, and the options available to create more sustainable firms. As a result, it is the duty of business schools to prepare the next generation of leaders to acknowledge and fight against climate change by offering sustainable business programs.

The development of such programs, however, has been slow. The word ‘sustainability,’ as it relates to the idea of preventing natural resource depletion, has started to gain ground in the vernacular of the 1970s-80s. As a result, the field is relatively new. Business schools are still trying to design courses and programs accordingly, hire professors with the relevant expertise, and find ways to create a more multidisciplinary approach by relating the material from the sustainability courses to that of other business classes. 

In spite of these efforts, Nancy Landrum, Professor of Sustainable Business Management at Loyola University, argues that business schools are failing their students. Landrum's analysis of introductory business sustainability courses found that the intro courses surveyed were mainly electives, rather than mandatory core classes, and that many business schools did not offer any degree on the subject. 

Landrum's analysis also found that there was only a 20% overlap in assigned readings between intro courses of the surveyed business schools. This shows the lack of a clear common view among business schools as to what should be taught in these classes.

Lastly, of the intro class assigned readings surveyed, 55% took a “weak sustainability position." In other words, they advocated for modest, gradual changes, rather than the aggressive sustainable business policies needed to truly mitigate climate risk. As Landrum writes, such humble approaches are "a far cry from what science tells us is needed."

Based on these results, it could be recommended that business schools:

·       Include a sustainable business course in the core curriculum 

·       Offer more degree options in sustainable business

·       Create some standardization by collaborating with other business schools to agree on readings and core learning objectives that students should take away from their intro and upper-level sustainable business classes

·       Assign readings that take a more aggressive stance on climate change in order to stress the need to act with rigor and immediacy 

Corporate Social Responsibility 

Once a leader is equipped with a comprehensive understanding of climate change and trained in sustainable business practices, it is their corporate social responsibility to use that information to make smart decisions and protect their businesses against climate risk.

We have the knowledge to create more prosperous and sustainable businesses.

We just have to share it.  

 

Author Bio:

Samantha is a rising senior at Barnard College, Columbia University. She hopes that through blogging, she can help change the way people view their actions in relation to the earth, encouraging them to lead more eco-friendly lives.