The global financial crisis appears to have introduced yet another layer of uncertainty for businesses grappling with the challenges posed by climate change.
While the Federal Government looks to be standing firm on its commitment to an emissions trading scheme, there are fears about how deeply the financial crisis will cut and what influence that will have on climate change action globally.
Rather than another excuse to wait and see, however, the financial crisis should be a call to action for businesses preparing to operate in a carbon-constrained world. The meltdown in global financial markets has demonstrated the far-reaching consequences of failing to act before a crisis hits, and its management is providing a model for how we might deal with the dilemma of tackling climate change as a global community.
It has highlighted the interdependence of global economies and the value of coordinated action, even when the impact and cost of the crisis are disproportionate across countries.
And most importantly, it has shown that global leaders really can work together in a coordinated way when the crisis is clear enough and everyone has something to lose.
The “carry on not panicking” mantra being espoused by some market watchers in relation to the global financial meltdown does not apply to melting icecaps and rising sea levels. The effects of climate change will not be cyclical or short term – so even with the distraction of the current crisis it is not going away.
The release this year of the Garnaut report and the Federal Government’s Carbon Pollution Reduction Scheme Green Paper put climate change firmly on the corporate agenda for the first time. But the momentum has undoubtedly stalled.
When professional services company GHD ran climate change workshops for managers of some of the country’s largest companies in August and September the response was overwhelming, but a muted response to this month’s workshop suggests companies have adopted a “batten down the hatches” mentality.
The business response to climate change should be no different to any other significant, global change in the business environment – financial crisis or not.
Businesses need to understand the consequences of climate change at a strategic level and follow through with practical actions. The current financial situation makes good planning and management more important now than ever.
Rather than retrospectively reacting to legislation, companies should be proactively identifying what they need to do to be successful in a carbon-constrained national and international economy, and then developing a response that will maximise business value while meeting compliance requirements.
Greenhouse gas measurement is one area in which companies cannot afford to drop the ball, regardless of the financial climate.
Getting the measurement wrong not only creates the potential for exposure to criminal penalties under the recently implemented National Greenhouse and Energy Reporting Act, but could lead to significant additional costs under the proposed CPRS.
Collecting high quality, consistent greenhouse and energy data collected builds a cache of quality information that can guide decisions to invest in energy efficiency and greenhouse gas reduction. With a world recession looming, efficiency improvements (translate – cost reductions) cannot be ignored.
Public perception is also an on-going consideration – growing awareness of climate change and its impacts have led to increased expectations from investors, customers, employees and the broader community, and this increased scrutiny of a company’s “green” credentials is unlikely to go away, no matter what the state of the market.
In fact, mainstream investors are increasingly looking to how companies respond to climate change to provide an indication of management capability and ultimately business performance.
While it could take months, or even years, to recover from the financial meltdown, Australian companies only have a few months’ breathing space on climate change.
The Federal Government is expected to outline the final design of the CPRS in its white paper in December, with the draft legislation to be released in early 2009. Companies need to have a clear understanding of how this scheme will impact them if they are to meaningfully respond to it.
And as world markets begin to recover, the lessons learned from the response to the financial shock are likely to be applied to the global response to climate change.
Companies who fail to respond because they are fixed blindly on the financial crisis may find they have a crisis of another kind on their hands.
This article was published in the Saturday Forum of the Canberra Times on 6 December 2008. Patrick Crittenden was a sustainability and climate change consultant for professional services company GHD at the time.