Responsible Profit in a Changing Climate

That the climate is changing is now indisputable. The question now is, how warm will it get? This provides opportunities for businesses that consider climate change as a catalyst for disruption and set their strategy accordingly.

Action on climate change has focused on the reduction of greenhouse gas emissions and has created trillion dollar opportunities in renewables, clean tech, energy efficiency and the electrification of transportation. 

While this will continue to gain momentum (gradually displacing traditional fossil fuels over the next few decades) as the cost-benefit proposition continues to improve, a parallel market is emerging around adaptation. This has two parts to it:

Products and services to deal with the physical effects of climate change such as rising sea levels, warming temperatures, extreme weather and ocean acidification; and
A gradual change in consumer buying behaviour – as more people realise the deleterious impact we are collectively having on our planet – towards goods that authentically demonstrate reduced environmental harm or net benefit.

Physical adaptation is already creating opportunities in infrastructure, such as Miami Beach’s US$400m investment to raise and install storm-water pumping stations to address the phenomenon of sunny day flooding (when drains back-flow due to high tides increasingly seen due to sea level rise). Low-lying communities and assets are also exposed to coastal erosion due to growing storm surges. 

Heat waves are already the number one cause of deaths due to natural disasters. Suppliers to the healthcare sector may benefit if they can provide innovative prevention and treatment solutions to increasing levels of heat-related conditions and tropical pests. 

Food production for a growing population against a background of rising temperatures, erratic rainfall patterns, destructive storms and the spread of pests and disease is one of several other sectors ripe for innovation.

Clearly, there will be winners and losers but companies that adopt a sustainable strategy will thrive. 

This means producing the right products (serving a viable market and bucking the trend towards single-use and short-term obsolescence) in the right way (understanding and minimising the lifecycle environmental impacts and implementing closed-loop recyclability) and ensuring the underlying assets and materials sources on which the business depends are themselves sustainable and resilient as climatic and business conditions continue to change.

David McEwen (AGSM MBA (Executive) and winner of the Alumni Association Prize) is a Director at Adaptive Capability, providing strategic advice to help businesses create and preserve value in the face of climate change. His first book, Navigating the Adaptive Economy, was released in November. Visit www.adaptiveeconomybook.com.

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