Oliver Balch picks out the most important messages from the raft of research on business and climate change released ahead of this week’s UNFCCC conference in Bonn
THE SIGHT OF global business representatives and international bankers at climate conferences is a relatively new phenomenon. Naturally, activists see plots afoot. That Corporate Accountability International, a North American business watchdog, should issue a damning report about backroom lobbying by fossil fuel companies ahead of this week’s UN climate shindig in Bonn, is therefore predictable – although not necessarily without foundation. After all, solar and wind generating capacity may have grown by 30% and 15.9%, respectively, last year but oil and gas consumption are creeping up (by 1.58% in 2016) all the same.Yet if the International Finance Corporation is to be believed, then the presence of the money men is no bad thing. According to the New Climate Economy initiative, the world needs to double its current investment — to about $6tr — between now and 2030 just to meet global clean energy infrastructure needs. According to a new 155-page report by the IFC, the private sector needs to see climate change as a business opportunity and start mobilising more capital to low-carbon solutions if that figure is to be met.
Financiers are not starting from scratch, mind you. As early as 2012, private capital was making up over 62% of total annual climate finance flows (then estimated at $359bn per year), the Climate Policy Initiative found. Today, annual global investment in climate business solutions is over $1.1tr, the IFC states. The big ticket items are renewable energy ($297bn), green buildings ($388bn), climate-smart urban transport ($288bn) and municipal waste management ($160bn). By its own account, the IFC is doing its bit too, investing more than $18bn in long-term financing for climate business since 2005, $4.7bn in the last fiscal year alone.
If the promise of healthy returns isn’t enough to convince business to act, then climate laws hopefully will. More than 1,200 separate pieces of legislation pertaining to global warming now exist around the world, a study by the London School of Economics finds. To help multinational companies keep up with the growing array of national and local legal liabilities they now face, the business-backed groups BSR and We Mean Business have launched an online tool to navigate today’s complex regulatory terrain. The open-source Climate Policy Tracker will help companies be more strategic in their investment decisions, its backers say. That may well be true, but just knowing about emerging legislation would be a start. Take the Kigali Amendment agreement, which came into force a year ago. The legislation is designed to drive down HFC greenhouse gas emissions in Europe’s refrigeration sector. Yet a recent survey commissioned by US tech firm Emerson found that two-fifths (40%) of food retailers in Germany, France, and the UK were unaware of the new law.
Poor countries bear brunt of climate change
AS IF THE world’s poorest countries didn’t already have it hard enough. Now they have the sharp end of pollution to worry about. According to a new multi-party research report, high levels of air, water and soil pollution are currently costing nine million lives per year, the majority (92%) in least-developed countries. The research, which was carried out by 63 researchers from 26 major institutions around the world, finds that in the worst cases (such as India, Somalia, Chad and Madagascar) pollution is directly responsible for up to a quarter of all deaths.
Air pollution tops the list of nasties, causing heart disease, strokes and lung cancer, among other maladies. External air pollution (mostly from vehicles and industry) is credited with 4.5 million deaths a year, while indoor air pollution (caused primarily by burning wood and dung) is calculated to lead to 2.9 million deaths annually. Water pollution comes a close second, with water-borne diseases such as gastrointestinal diseases and parasitic infections leading to 1.8 million fatalities every year. Globally, the welfare losses from pollution stands at an estimated $4.6trn per year, equivalent to more than 6% of global GDP.
Then there are the detrimental effects of climate change to consider. While individuals everywhere are affected by rising temperatures and extreme weather, it is the world’s most vulnerable who will be hit hardest, according to the Intergovernmental Panel on Climate Change (IPCC)’s latest report. Alongside the immediate physical impacts of sharp increases in temperature, extreme heat can severely damage food production.The length of the growing period in some parts of Africa could reduce by up to 20%, the IPCC predicts. The US Department of Agriculture calculates that the number of people at risk of hunger could increase by 175 million (from current levels of around 815 million) as a direct consequence.
Excessive heat can also exacerbate deadly diseases such as schistosomiasisand dengue fever. There are now around 100m infections of dengue registered every year, for example, double the amount in 1990, the aforementioned multi-party study finds. Some are predicting that heat rises will make life so untenable in some parts of Africa and Asia that whole populations will be compelled to move. According to the Environmental Justice Foundation, which just launched a campaign on the issue called Beyond Borders, extreme weather-related disasters caused the displacement of 23.5 million people last year alone.
If this wasn’t all bad enough, the United Nations has just weighed in with another bone-cruncher of a report. The multilateral organisation’s Conference on Trade and Development (Unctad) agency calculates that 91 of the world’s 135 developing countries (68%) are now dependent on commodity exports, up from 82 (or 61%) in 2015. The rise is most noticeable in Africa, where seven new countries entered the category in 2015, bringing the total to 46. Latin America and the Caribbean remained stable at 28, while the region of Asia and Oceania increased by two to 17. UNCTAD defines a country as “dependent” when its commodity exports account for more than 60% of its total merchandise exports in value terms. Dependency on agricultural commodities dominates (41% of all cases), followed by fuels (30%) and minerals, ores and metals (23%).
On the face of it, the increase sounds like good news. Developing countries earned $2.55trn from commodity exports in 2015, an increase of 25% on 2014, according to UNCTAD’s latest State of Commodity Dependence Report. Commodity dependence, however, leads to what development economist call the “resource curse” or “Dutch disease”. The paradox of abundant resources (such as oil, gas, minerals or cash crops) is that they frequently lead to slower economic development due to political instability (usually prompted by corruption and authoritarianism), lack of investment in non-commodity sectors, concentration of wealth, and volatility in international commodity prices.
‘Weinstein’ in the workplace?
FIRST IT ROCKED HOLLYWOOD. Then it rocked the political establishment. Is the Harvey Weinstein affair now about to rock the business world, too? No one knows yet for sure. But if the focus of sexual harassment charges does turn to the corporate workplace, then it may well open a Pandora’s Box for companies. According to one recent survey, more than half (55%) of UK professionals have witnessed behaviour at work that made them feel uncomfortable. The proportion jumps to two-thirds (66%) for junior managers. The study, which was carried out by the UK charity A Blueprint for Better Business, concentrated on all inappropriate behaviour. All the same, it highlights a major area of concern. One fifth (21%) of middle managers admitted to staying shtum when such occurrences arise.
This seems to be changing. According to a ComRes poll of more than 2,000 British men and women in the aftermath to the Weinstein affair, more than half (53%) of women said that they had faced some form of sexual harassment at work, ranging from inappropriate jokes to physical assault. Nearly two in three (63%) of those who were harassed never reported it at the time. Men are less likely to be harassed, with one-fifth of those interviewed reporting experience of harassment. They are also less likely to report it, with only one in five victims (21%) speaking up. A similar survey by media outlets, the Wall Street Journal and NBC, finds similar levels of harassment in the US workplace, with 48% of women interviewed saying they had been harassed at work at some point in their career. Meanwhile, two-thirds (67%) of Americans believe that sexual harassment happens in “most or almost all” workplaces.
Leaders, get leading
IT IS GENERALLY ASSUMED that the chief executives who decline to champion sustainability within their organisations just don’t “get it”. The response: keep hitting them with the business case until they do. But what if their resistance lies elsewhere? That’s the hypothesis of a research paper published in the latest issue of the Strategic Management Journal. The paper’s authors find that those leaders of Fortune 500 firms who big up the importance of social and environmental management are almost twice as likely (84%) to get fired when profits drop. In instances of “extremely low” levels of financial performance, the increase in likelihood of dismissal jumps to 206%.
Not all chief executives who stick their necks out on sustainability issues get them chopped off. Indeed, they are more than half as likely (53%) as their peers to retain their posts when their companies are performing well. Of the two scenarios – being sacked or staying put - the second eventuality should be the more common. That’s according to chief executives’ own logic, at any rate. Eight out of ten (80%) business leaders say demonstrating a commitment to society represents a “differentiator” in their business, according to last year’s UN Global Compact–Accenture Strategy CEO Study. The same study found that 97% of chief executives believe that sustainability is “important to the future success” of their business.
The disconnect between chief executives’ convictions about sustainability’s contribution to competitiveness and the sometimes sluggish performance of their own companies is easily explained. Put simply: business leaders don’t always practice what they preach. This is highlighted in the eighth annual report on sustainability strategy by MIT Sloan Management Review and The Boston Consulting Group. So while 90% say sustainability is important, only 60% of the firms they oversee actually have sustainability strategies in place and only 25% have established a clear business case for their sustainability efforts. Little surprise that sustainability doesn’t deliver in such circumstances – nor that such sloppy managers should sometimes be shown the door.