5 observations when combining sustainability insights and business risks

          An interpretation of a recent sustainability article and the business risks poll result of global 500 companies about the top 5 risks they anticipate in regards of climate change.

          Mr. Daniel Koeppel, an environmental sustainability specialist draws on his professional experience to interpret an article by Mr. Andrew Steer (published on 23/12/201) entitled “5 things we learned in 2013 that could move the needle on Sustainability. Those 5 insights Mr. Steer so eloquently describes are:

          1. Insight      Overspending the Carbon Budget
          2. Insight      Losing Forests 50 Soccer Fields a Minute
          3. Insight      Energy Subsidies: $2 Trillion (2’000’000’000″000 !)
          4. Insight      Wasting Food: It’s Worse than We Thought
          5. Insight      Risky Water

          Daniel then puts what has been learned by Mr. Steer, side by side with the top 5 climate related Business Risks reported by Global 500 Companies, following the Carbon Disclosure Project poll by the website www.EnvironmentalLeader.com. The Risks are:

          1. Risk             Reputation, reported by 51%
          2. Risk             Change in precipitation extremes and droughts, by 45%
          3. Risk             Cap and trade schemes, by 42 %
          4. Risk             Carbon taxes, by 39%
          5. Risk             Fuel & Energy taxes, by 38%
          Graphic of the top 5 risks by Global 500 Companies

          Graphic of the top 5 risks due to climate change    by Global 500 Companies

          Let me state 5 observations about these two groups and provide feedback…… and perhaps some recommendations and suggestions for the concerned business owner or manager.

          The 5 Observations

          I.    Carbon and water – the only two topics, which appear in both groups.
          II.   The interrelation of Carbon Budget and Subsidies.
          III. The interrelation of Insight 2 (loosing forests) and Risk 2 change in precipitation extremes and droughts.
          IV.  Insight 4 and Insight 5 – two basic human requirements or why F&B directors should listen up.
          V.   Reputation – is what takes years to build and seconds to loose.

          Observation I: Carbon and water – the only two topics appearing in both groups.

          Carbon

          This year’s Intergovernmental Panel on Climate Change (IPCC) report once again confirmed the overwhelming scientific consensus that the world is warming, and that it’s caused by human activities. In addition, US President Obama stated, for the first time, clearly during his Jan.30th State of the Union address: {quote}“Climate change is a fact!”{unquote}

          Carbon Budget

          For the first time, these scientists also identified a “carbon budget,” the emissions the world can release while still having a likely chance of limiting warming to 2 degrees C (3.6 degrees F). At present, we’re on track to burn through this budget within the next 30 years. According to a statement from leading scientists, this means that nearly three-quarters of fossil fuel reserves—especially coal—must remain unused if the world is to limit temperature rise to 2°C.

          Water

          In the 2013 World Economic Forum’s survey of top risks, leaders chose water risk in the top three of 50 risks. More than 1.2 billion people currently live in water-scarce regions. Others battle pollution, flooding, and variable supplies. Yet most countries and businesses lack high-quality data on the water risks they face.

          For example, in all the hotels I have worked, there has been one water meter for the entire hotel operation. Making it impossible to clearly measure which processes are more water intense than others. Many managers might think at this point, why bother, water is cheap. My reply would be, tell that to a hotel Manager in Phuket, Thailand where the municipal water cost just (as per January 1st 2014) rose by 40 – 50% from one day to the other.

          Recommendation

          Ensure that basic data concerning carbon, energy, water and waste creation are collected and treated like financial business data. DKNA is at your service with web based tools, benchmarking and best practice comparative feedback.

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          Or continue reading…. : )

          Observation II: The interrelation of Carbon Budget and Subsidies

          This year’s new climate dictionary entry is “stranded assets,” the idea that physical assets (whether coal reserves, or carbon dioxide-emitting plants and equipment) may need to be revalued significantly downwards, as governments finally (and unpredictably) adopt policies to address climate change. This could lead to a “carbon bubble” being popped, with serious economic disruption. The implication is clear: a modest price on carbon should be established now, with a pre-announced escalation. This kind of predictability will lead to more, not less, investment and jobs.

          The International Monetary Fund (IMF), one of world’s most trusted financial institutions, quantified the extent of energy subsidies. Governments are spending $500 million each year to encourage the wasteful use of fossil fuel. That number wasn’t new – although coming from the IMF, it still got the ears of the financial community. But the Fund had the courage to go further. When taking into account the level of taxation on other goods and the fact that energy has an adverse impact on climate, the true subsidy amounts to $2 trillion a year.

          Eliminating energy subsidies can reduce global carbon dioxide emissions by an impressive 15 percent, while also increasing economic growth, lowering budget deficits, and spurring private sector (e.g. renewable energy, energy efficiency) investments. One of the effects will be that some of the unused fossil fuel could remain in the ground!

          Solution Recommendation

          Train your mid management the basic knowledge related to carbon. Ensure that your finance department knows, collects and treats basic data concerning carbon, like sales or cost data.

          DKNA is at your service with web based tools, benchmarking and best practice comparative feedback.

          Observation III: The interrelation of Insight 2 (loosing forests) and Risk 2 (change in precipitation extremes and droughts).

          Losing Forest

          A new report in Science by Professor Matt Hansen showed that the world has been losing 13 million hectares of forest each year. That’s equivalent to the size of England. That’s a tragedy for ecosystems and for the businesses and communities that rely on forest products. There’s an upside, though: Using satellite data, this research provides the first-ever high-resolution, global picture of forest cover change over the last 13 years.

          Precipitation extremes

          Deforestation can have a significant effect on tropical rainfall, new research confirms. The findings have potentially devastating impacts for people living in and near the Amazon and Congo forests.

          A team from the University of Leeds and the NERC Centre for Ecology & Hydrology found that for the majority of the Earth’s tropical land surface, air passing over extensive forests produces at least twice as much rain as air passing over little vegetation. In some cases these forests increased rainfall thousands of kilometers away. (Source: Dr Dominick Spracklen from the School of Earth and Environment at the University of Leeds, 5/10/12)

          There a many reasons for forest cover loss. Increased agricultural production (e.g. food) is one of them.

          Solution Recommendation

          Have your HR and or Training department include your business’s impact on de- forestation and how to counter act.

          DKNA is at your service to support you in the planning and execution of necessary trainings and workshops.

          Observation IV: Wasting food and water risks – two basic human requirements or why F&B directors should listen up.

          Wasting Food

          Sustainably feeding 9 billion people by 2050 is one of the greatest challenges of our era. According to WRI analysis, we will need to produce 69 percent more food calories to achieve this goal. And yet, at present, the world wastes or loses around one-third of all food by volume, and around one-quarter by calorie value. By reducing the amount of food we lose and waste each year by half, we can close the food gap by about 20 percent. This would dramatically improve nutritional standards, and would also make addressing climate change much easier. (Agriculture accounts directly and indirectly for around 30 percent of greenhouse gas emissions).

          Water Risks

          Too little water or too much water both has impacts on food in the form of unpredictable (food) price fluctuations, availability and quality.

          Observation V: Reputation – is what takes years to build and seconds to loose.

          Readers perhaps remember that during and certainly after major natural disasters, which may or may not have been induced by climate change, suddenly some companies where on mayor newspaper’s front page.

          It is therefor interesting to learn that more than half of the global 500 Companies (or 255 companies, to be exact) consider reputation as the top climate related business risk.

          My only inquiry here is: how can climate change be a risk to ones reputation? Isn’t reputation created by (management) action?

          The Search engine Google defines “reputation” as: ”the beliefs or opinions that are generally held about someone or something”.

          Could it be that many business owners and managers believe that they are acting incorrectly in climate change related issues? Or perhaps it is the high complexity of climate change, global warming, sustainability and other eco buzzwords which make reputation-increasing decisions so difficult to push through?

          Solution Recommendation

          My recommendation or solution therefor to any business owner or manager would be to obtain basic knowledge about environmental sustainability and its business impact.

          Please note, I do not recommend growing a beard and donning Birkenstock shoes. What I do recommend is to re-evaluate your business’s core vision in relationship to sustainability. I even go a step further. Why not see how the definition of sustainability (The general definition of sustainability by the OECD: “Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”) can be found or merged in your current business mission?

          If 255 out of the Global 500 Companies believe their reputation is at risk through climate change – I am sure you can find one or two improvements in your business practices by including sustainability actions.

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          Daniel Koeppel

          Daniel is an environmental sustainability specialist with a hospitality background. He is passionate in supporting visionary hotel companies wishing to increase their environmental sustainability know how and solutions. Contact us now for a non-committing assessment!

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