Climate change: more certainty, greater threats, better business?
05 January 2017
Over the last two years since we launched the megatrends, increasingly accurate scientific predictions indicate that, without significant global action, average temperatures will increase by over two degrees Celsius. That’s the threshold at which potentially irreversible environmental changes are expected to occur. There are some increasingly ominous projections.
For example, warming the planet by 1.5 degrees suggests a six to seven-metre increase in sea levels by 2500. Two years ago, a one-metre rise was expected by 2100. Now, double that estimate looks increasingly possible this century and with that we’re likely to see between 150 million and 200 million people one the move from land today that will be underwater. At the same time, a growing global population is expected to need 35% more food by 2030. The demand for water will rise by 40% on a planet in which only 3% is fresh water and only 25% of that is accessible. Demand for energy around the world is expected to grow by 50%.
But more encouragingly, the advances that have been made in scientific understanding are driving much more political agreement about the actions that are required to mitigate the impact of climate change and resource scarcity on a global basis. The Paris Agreement signed in December 2015 saw governments agree to take the steps needed to limit increased warming to an average of two-degrees. Significantly, they also recognised that this target was inadequate, with the aim of 1.5 degrees suggested to reduce the impact.
Also in 2015, UN member states adopted the Sustainable Development Goals (SGDs), framing 17 goals for sustainable economic development. Progress towards the SDGs will shape legislative and regulatory frameworks as well as investment and aid flows from now on. And these goals are not simply top-down aspirations created by governments. The private sector has been heavily involved in establishing these goals. Businesses increasingly recognise the need to operate with a clear social purpose that underpins their licence to operate, while at the same time supporting the thriving societies and economies in which they are a major stakeholder.
Consequently, we’re seeing the business world and investors responding with activities that support a more sustainable agenda for economic development. For example, as jobs in the fossil fuels sector are declining, we’re seeing rapid employment growth in the renewables industry. Major oil companies are talking actively about transition to a low-carbon economy. Others outside the energy sector are also taking an interest in alternative energy, creating opportunities for others to enter this fast-growing market (Google, for example, is now the largest global investor in alternative energy, behind China and Saudi Arabia).
Companies understand that they need to measure their impacts beyond a sole focus on shareholder returns. There’s a growing body of evidence that shows those that are following this path reap the rewards from doing so. Businesses with strong environmental, social and governance (ESG) attributes consistently outperform the market. While corporate social responsibility used to be seen as expensive and distracting, it’s now increasingly the lens through which society and, critically, investors judge a business.
To find out more about how the climate change and resource scarcity megatrend is shaping the business environment, take a look at the new website.