A climate of change

José María Figueres Olsen and Christiana Figueres
describe how business is leading the way into the decarbonized
economy of the new century

Global climate change has ceased to be strictly an environmental threat, lurking in the future. Its potential impacts could well make it the greatest social and economic challenge that humanity will have to face in the coming century.

There is alarming data. In March of this year an 11,000-square-kilometre iceberg broke away from the Ross Ice Shelf in Antarctica. While breakaways are a natural process, this was the largest iceberg ever recorded. At the other end of the Earth, the Arctic Ocean’s ice cover has thinned by an average of 1.2 metres – some 40 per cent – since 1960. More recently, relatively warm Atlantic water has pushed 20 per cent farther into the Arctic than scientists have ever seen, and that water is almost 1oC warmer than it was a decade ago. The poles are commonly considered to be bellwethers of global climate change, and so activists eagerly point to these and other unusual occurrences, wanting to convince us that they are irrevocable evidence of a warming trend for the planet.

Uncertainty and speculation
Unfortunately, scientists cannot leap to the same conclusions with equal passion. Current scientific knowledge cannot fully attribute the climatic catastrophes occurring before our eyes to unprecedented increases in concentrations of greenhouse gases. There is an admitted consensus that there is discernible human influence on the global climate, but its effects – and the speed at which we will experience them – can only be a matter of speculation.

Nonetheless – suspecting that the human race simply cannot afford the risk of failing to take action – the United Nations produced the Framework Convention on Climate Change in 1992. Its Kyoto Protocol, negotiated in 1997, would curb the greenhouse gas emission trajectories of industrialized nations, with the ultimate aim of beginning to stabilize concentrations in the atmosphere. However, it is highly uncertain whether the Protocol will be ratified by enough countries for it to go into effect before 2008, the beginning of the period during which the commitments they have made must be realized. If neither the Protocol, nor any other similar legal instrument, were to be in force, countries would be under no legally binding responsibility to reduce emissions.

Addressing complexity
Scientific uncertainty has always been with us. Political quagmire is not unusual when dealing with a highly complex phenomenon buttressed by conflicting national interests. What is remarkable, as we begin the year 2000, is the leadership being shown by the private sector.
Efficient energy systems will prevail sooner rather than later

The most striking event of the first months of this year is the demise of the Global Climate Coalition. Created in 1989, the Coalition is the oil and motor industry lobby group par excellence: it seeks to discredit theories of human-induced climate change and argues against reductions in emissions of carbon dioxide. It began to disintegrate when BP Amoco’s Group Chief Executive, Sir John Browne, announced the company’s withdrawal in 1997. Shell, Ford and Daimler Chrysler followed suit during 1999. In the first three months of this year a quick succession of further withdrawals – by Texaco, the Southern Company and General Motors – brought about its final dissolution as a membership coalition open to individual companies.

Many of these visionary corporations are going further and incorporating the mitigation of climate change into their business strategies. BP Amoco and Shell are actively pursuing voluntary plans to reduce greenhouse gases, with the ultimate purpose of seeking the lowest marginal abatement cost of internal emission reduction measures. Tokyo Electric Power has announced an $82-million-dollar investment in reforestation in Australia. Daimler Chrysler’s recent bid for a controlling stake in Mitsubishi Motors Corporation is a result of its need to diversify its mix of products by adding smaller, more fuel-efficient cars.

Revolutionary moves
These, and many other actions by large corporations, might seem senseless in a world marked by the uncertainty of science and regulation. But there are two clear reasons for them.

The first is competition. An energy revolution is now in the making, with advanced new technologies such as fuel cells, photovoltaics, wind turbines and flywheels entering the market. The reason why we moved beyond the horse and buggy a hundred years ago was not because we ran out of hay. Similarly, there is no doubt that the planet still has impressive oil reserves. However, as was the case when the oil era first emerged, those industries that successfully incorporate the new technologies will be well positioned to succeed economically in the 21st century.
Scientific uncertainty has always been with us

Aware that – with or without the Kyoto Protocol – the future trend is toward less carbon-intensive economies, multinational corporations have seen that efficient energy systems with low emissions will prevail sooner rather than later. A slow but massive reallocation of assets has already begun. The shift is having an impact on investment decisions, as analysts begin to benchmark greenhouse gas efficiency as a mainstream component of the corporate investment strategy.

Thus corporate strategies to mitigate climate change are not environmental altruism, but sound economic sense. Projecting an efficient response to global warming is becoming an issue of strategic competitiveness. The more visionary companies are using this tool to gain advantage and market share, both at home and abroad. Indeed, industries that avoid action on climate change today may find that they have been bypassed by the competition, which has sought a strategic advance position in the new decarbonized economy.

The second, and more exciting, reason for a changing corporate behaviour is shareholder value. In September 1999, Dow Jones and the Sam Sustainability Group launched the Dow Jones Sustainability Index, which tracks performance of the leading sustainability-driven companies worldwide. The Index addresses increasing investor interest in companies committed to innovative technology, industrial leadership and social well-being. Forward-looking companies manage the environmental and social factors – as well as the standard economic ones – affecting their businesses. There is mounting evidence that such management is directly related to their superior financial performance.

Paradigm shift
The relationship between these two factors demonstrates a real paradigm shift. Although there are as many definitions of sustainable development as there are people involved in promoting it, the crucial common denominator is assigning economic value to the long-term management of natural resources. The investing public has started to do this. The message is being directly received by listening corporations. National economies will have to follow suit.

The challenge of this new century will be mainstreaming environmental stewardship into our economy. The good news is, we have already started

José María Figueres Olsen is President of the Fundación Costa Rica para el Desarrollo Sostenible and former President of Costa Rica. Christiana Figueres is Executive Director of the Center for Sustainable Development in the Americas.


This issue:
Contents | Editorial K. Toepfer | Time to act | A climate of change | Melding heart and head | Looking through green glasses | Multi-local business | World Environment Day 2000 |
At a glance | Competition | The greening of Goliath | Unfair trade | No sleeping after Seattle | Disproportionate effects | Liberal rations | New millennium, new regulation | Secretary-General’s Report | Pachamama: Our Earth, Our Future


Complementary articles in other issues:
Issue on Climate Change 1997, including
Christiana Figueres and Anne Hambleton: Carbon for sale!
John Browne: A new partnership to make a difference
Issue on Climate & Action 1998, including
Mark Moody-Stuart: Picking up the gauntlet
Richard L. Sandor: Trading gases
Colin Marshall: Change in the air (Tourism) 1999
Margaret G. Kerr: Profits with honour (The Way Ahead) 1997
Sanjoy Hazarika: Bhopal blinded us all (Chemicals) 1997
David T. Buzzelli: Our millennium challenge (Chemicals) 1997