The business of climate
There are several ways to deal with climate change stories. My favourite is to change the channel. On a bad day I may go as far as making a tea and grabbing a comforting snack; on one extreme day, I binge watched 16 hours of a docuseries on Netflix.
So yes, I cringed when my dear Editor told me that we needed to look at climate change. As ever she was right: we need to look at climate change from a business perspective. What do business owners and managers need to do about it?
That is going to take a few columns because it is a big topic. Even so, I am not going to waste your time arguing the science because there is so much thin and emotional pseudo-science out there you can Google it up until Dooms Day. (Ok, pun intended.)
What we do need to listen to is what our suppliers, customers, legislators and competitors are doing about climate change – which sounds exactly like how we conduct a business strategy analysis (for more on this look up Michael Porter of Harvard and his classic Five Forces Model)
What is happening?
I said I would avoid the science, but I am in politics so I am going to bend that truth just for a minute.
The basic theory is that we are changing the air around the earth with our production of certain gasses, which changes the cocktail of our atmosphere.
The gasses around the earth protect us from the full blast of the sun (only about 74 per cent gets through, which explains why it is dangerous for astronauts to take off their shirt and do some sunbathing).
The earth also cools – you feel that every night. Where does the heat go? It radiates out into space – that is unless you put a blanket or a green house on it. And that is what we are told we are seeing: a change in the mixture of gasses making the earth warmer, which is going to mess up the weather and melt the polar ice, which will raise sea levels etc.
What gasses are we talking about?
- Water vapour is the big one. That’s right, pure clouds.
- Carbon Dioxide (CO2): this is what we all exhale and produce every time we burn carbon compounds. So that is coal, wood, petrol and 40-year-old Scotch.
- Methane (CH4): a by-product of coal, natural gas and oil production. Cows produce it every day, and teenage boys who consumed baked beans for breakfast are also a source of Methane.
- Nitrous Oxide (NO): diesel cars are great on CO2, but high in NO, which is why the EU is saying “whoops” over the Euro 6 Standard and perhaps why Australia is stalling on updating car emission standards.
What are we seeing?
The first thing we are seeing is a lot of ill-informed emotional responses. And Politics. Not just the recent election but, for example, Vegan groups arguing that we need to eat less beef because of all the bovine methane production. Everyone is on the bandwagon which makes it hard to get to the facts.
Dig into the details and here is what we see, starting with the Bureau of Meteorology (BOM).
- Nine of the 10 hottest years on record in Australia have occurred since 2005
- 2018 was the third warmest year on record
- Mean average temperature in 2018 was 1.14°C above 1961 -1990 average
So, something is going on. No matter how you slice the data, this is unusual and explains why the big end of town has already reacted.
The Insurance Council of Australia produced a Climate Change Policy in 2016 that relies on “The Inter-governmental Panel on Climate Change (IPCC) asserts that change is occurring and will continue to occur into the future“ and “weather events will change into the future, with uncertain magnitudes and localised impacts.”
The policy goes on to recommend:
- Conservative management (which I translate as higher premiums even before disasters hit)
- Tougher/better building codes
- Anticipating significant migration
With rising premiums, your business is going to need to be smarter when shopping for insurance as premiums rise. We are all going to need to take a big breath and read those lengthy insurance policies and be smarter at what we are buying. You may have a good insurance broker, but I have caught out mine signing me up for products I do not need, or the same coverage twice.
The migration issue is a big one, and I don’t mean from overseas. We see migrations in and out of towns with mining boom and bust cycles. Looking at a graph of real estate prices in the Queensland city of Mackay, it looks like a sketch of the Himalayas.
Now imagine entire rural- or tourism-based regional economies falling through the floor. When the weather changes enough so the crops or the tourists give up, and a town or region dies, people move out – and they need to move somewhere.
The first family to move does OK. The last to move has no one to buy their house. It is an incredibly tough call to make. No one wants to abandon their community, but if the ship is sinking then it is better to be the first to start swimming and establish a new business and a new life in a greener place.
Yes, there will be other areas that will be better for crops than they ever were. And in every area farmers will have to learn that their climate has changed, and they will need to migrate over to different crops and farming methods that will deliver the food we will still need. The power equipment industry needs to work with rural managers to support this fundamental shift.
All this talk of migration is just within Australia where we have the freedom to move. What about when whole countries need to abandon ship?
There are several low-lying island nations in the pacific region that will simply become uninhabitable if water levels rise. Islands go under water but before that, seawater spills into fresh water reservoirs. Australia is the big brother in the region, with lots of space, so we will be expected to perhaps accept whole nations of grieving Islanders.
That is not so crazy and farfetched if you follow through the logic. But it is disturbing.
Oh, and if islands shrink because of melting polar ice, then seawater will flood inland further than we imagined. Again, it will cause a shift in populations, especially around coastal areas.
How will your business adapt?
Next month we will look at more of the wisdom of big business and how smaller businesses can survive the threats of climate change.
PS. Last month I said I would let you know about a tender I was working on for a slice of $90m in work for the Qld Government (as a test of my theories on winning government work). Sorry dear reader, but the decision has failed to meet three deadlines so far and we have no decision. More next month.
Gary Fooks is chair of the Blue-Sky Alliance. Gary has been working on small engine emissions standards since 2005 and was announced as the Environment Minister’s Clean Air Champion in 2015.