Going green can be profitable

In recent years, the world has witnessed what many see as the first disastrous impact of climate change – increase in temperature, rise in sea levels, melting ice-caps and glaciers, drought and floods.

None of us can remain aloof from what is happening to the planet, least of all businesses because climate change will affect the way they operate.

 

A good example of this is the recent inundation of two islands in India’s Sundarbans region due to a rise in sea levels.  This sent shock waves around the world and put the spotlight on waterfront development. The Intergovernmental Panel on Climate Change (IPCC) predicts a rise of 30cm to 50cm by 2100 in sea levels.

 

However, the inundation of the Sundarbans illustrates that businesses are far from immune from the impact of climate change.

Experts say 57 per cent of people worldwide believe global warming is a serious problem, 50 per cent believe it is a result of human action, and 42 per cent of them want governments to restrict emissions by companies of carbon dioxide and other pollutants.

 

However, they also feel all is not gloom and doom and though businesses worldwide have been affected by climate change it also presents opportunities to them in terms of developing new technologies and research.

Professor Geoffrey Boulton, Vice-Principal and Regius Professor of Geology and Mineralogy at the University of Edinburgh, Scotland, who has carried out research in the fields of climate change and energy, said natural disasters brought on by climate change impacts businesses in terms of monetary and man-hour losses.

 

He said: “The impact is already being felt in areas such as agri-business, as production in many areas falls and an increasing amount of grain is used for bio-fuels, thus increasing prices and producing shortages. As the frequency of extreme events that damage properties rises, it will have a negative impact on the insurance sector.

 

“Note that hurricane Katrina hit the United States’ GDP by 0.9 per cent in one year. The increased frequency of such events will raise the cost of insurance. Nick Stern, Chief Economist at the Treasury in the United Kingdom, estimates that if the projected two to four degree centigrade increase in global temperature over the next 50 years to 100 years occurs, its impact on global GDP will be 1.5 per cent to three per cent, and the cost of doing nothing is much greater than the cost of reducing gas emission."

Jeremy Bendik-Keymer, assistant professor at the American University of Sharjah and Le Moyne College in the United States, who is the author of The Ecological Life, said: “Even though certain industries such as pharmaceutical, construction and cement do stand to gain in the short term due to disasters and diseases, no one gains if the global economy and global markets suffer due to instability.

 

“This is because multinational corporations are exposed in countless ways to the rest of the economy, and because a functioning economy depends on conditions of relative stability that could be lacking in some of the worst climate change scenarios, especially when political instability resulting from climate conditions such as drought and floods are factored in.”

It is not just disasters brought on by climate change that will hit businesses hard if they fail to make moves to save the environment – rising consumer awareness about the issue will also affect them.

The Nielsen Company’s Consumer Confidence survey on global warming worldwide, conducted in April last year, said: “Fifty-seven per cent of respondents feel global warming is a serious problem, while 34 per cent say it is a ‘fairly serious’ problem.

"Half of the world’s population said global warming is a result of human actions and 43 per cent believe it’s a combination of both natural changes in the climate and human actions. As much as 42 per cent of global consumers believe governments should restrict companies’ emissions of carbon dioxide and other pollutants.”

 

The survey also found consumers globally did not think that as individuals, they could make much of a contribution to address climate change. Reducing air travel was considered least likely to have an impact.

Only three per cent globally thought it would help – although this number was highest in the UK and Germany, where there has been considerable media focus on this issue.

 

Recent reports have claimed local tourism in Germany is booming as consumers make the eco-friendly choice of holidaying at home and a similar trend appears to be taking off in the UK.

According to AC Nielsen’s and Trendwatching’s market research, green products and technology will be one of the top 12 consumer trends to dominate markets globally and in the Middle East in 2008.

 

The upshot of the research conducted by the two companies was that consumers are getting more concerned with saving environmental resources.

Governments and people across the world are striving to create a pollution-free environment and establishing scientific research centres. So companies need to think green. Green buildings, green technology, green consumer goods are going to call the shots worldwide.

However, experts do not view the need for industries to use green technology or conservation methods a bad thing – they say it also creates opportunities.

Professor Boulton said: “Governments forcing businesses to use green technology is not bad, as such developments would also create opportunities for innovative businesses and government investments in new technologies. Companies that produce goods or services that make low demands on carbon resources have the potential to be more profitable.”

Professor Bendik-Keymer said: “Climate change is good for global business because it is creating new markets for new technology, alternative energy, new ways to handle waste and tailoring lifestyles to be greener. Climate change offers many opportunities for Middle Eastern investors to enter new markets. Many new green initiatives take a fair amount of start-up money and investors in this region can back them.  When governments make investment and entrepreneurship easier, they provide an opportunity to move into new, green markets with speed. Governments can offer subsidies to make the green market profitable.”