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The Role of Business in Managing Climate Change

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Growing sustainable businessAs a consultant and eco-entrepreneur I am a champion of sustainable business but I am sometimes confused by green purists who seem antagonistic to the very notion of free enterprise. With slogans like “corporations are the enemy of life,” some ardent eco-activists are quick to dismiss business, but it should be obvious that we cannot make meaningful progress towards managing climate change without the participation of the business community. As Paul Hawken said, “Business is the only mechanism on the planet today powerful enough to produce the changes necessary to reverse global environmental and social degradation.”

Although the business community has come a long way, it still has a long way to go, particularly when viewed against the backdrop of the vast and growing pool of dramatic climate change data.
As a major contributor to global warming the business community has an additional burden of responsibility and a vested interest in doing its part to combat global temperature increases and retreating arctic sea ice.
Important legislative efforts are underway to try to reign in global warming. In the US, climate change legislation will go before the Senate later this year. And in December climate change negotiators will assemble in Copenhagen to hammer out an international agreement that is intended to replace the Kyoto accord and impose international limits on greenhouse gas emissions.  We need legislation and regulation as well as voluntary initiatives because if business does not change its trajectory there will be no future.

Even without a legal mandate, many businesses are showing leadership by voluntarily reducing their carbon emissions. The Carbon Market analyst team at New Energy Finance Ltd has recently released a report entitled The Business Case for Carbon Offsetting. The report indicated that worldwide, the market for voluntarily offsetting carbon emissions doubled between 2007 and 2008 to reach $700 million. Their forecasts suggest that the market could double again by 2012. Currently there are approximately 3,000 organizations from virtually all sectors of the economy that offset some or all of their emissions.

Driven by the desire to meet consumer expectations and enhance their reputations, the business community is making progress in the right direction. And these efforts are not merely cosmetic, as reported in  The Green Economy Post, a growing number of companies are publicly comparing their performance against stringent sustainability indicators.

According to a recent United Nations report, 2008 was a record breaking year for renewable energy investment. “Despite the turmoil in the world’s financial markets, transaction value in the global carbon market grew 87% during 2008, reaching a total of $120 billion.” The report also indicates that renewable and related markets will grow to half a trillion dollars by 2020.

Understandably, private sector investment stalled in 2009 due to the recession, but as the economy recovers, government stimulus money should help to fill the breech. Even though the recession has slowed the growth of sustainable business, the current economic downturn is also helping to auger a shift away from traditional consumerism towards a more responsible and sustainable economic model. As the culture of consumerism changes the business community has a vital role to play in this new sustainable economy.

Increasing levels of investment in sustainable initiatives are helping Green businesses to grow. A report from the  Institutional Investors Group on Climate Change research shows that over 80% of asset managers are referencing climate change in their investment policies. The popularity and performance of sustainable stocks demonstrate that investing in Green is not only good for the planet; it can also yield attractive returns.

Our time may be running out but free enterprise offers an expedient route to produce the far reaching changes required to manage climate change. The pursuit of profit will continue to drive sustainable businesses but as Henry Ford said, “The highest use of capital is not to make more money, but to make money for the betterment of life.”
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Richard Matthews is a consultant, eco-entrepreneur, sustainable investor and writer. He is the author of THE GREEN MARKET, one of the Web’s most comprehensive sources of sustainable tools, resources and information. He is also the author of numerous articles on sustainable positioning, Green investing, enviro-politics and eco-economics.

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