Every time I think about writing about climate change, I think about my friends Fred, Kevin and Pat. All three are kind, religious and charitable souls who don’t believe in climate change. They believe that my emotions are being manipulated by folks like Al Gore (and most of the environmental and scientific community) for their personal financial gain and, worse yet, by people with anti-West and even anti-civilization agenda. I tell myself that nothing I write can change their minds—and trying to do so will only inflame them.
In business settings, chances are high that there are folks like Fred, Kevin or Pat on most management teams and Boards of Directors. Their vocal disbelief represents a small minority but sows uncertainty and tension that makes for uncomfortable conversation. Even more stifling for many business leaders is the keen awareness that the invisible hand of the market will punish them severely if moves to address the seemingly far-off effects of climate change distracts from near-term profits and share prices.
So, what can business leaders do about climate change? What can one person or one company do about such a planet-wide issue? If nations are frozen by political gridlock, management and directors aren’t aligned and investors are poised to punish you, isn’t it wiser to spend finite time, attention and capital on other, more actionable matters?
It turns out there is a straightforward, near-term game plan that business leaders can adopt–without waiting for political gridlock to ease or tempting investor ire. The plan, in the form of three simple but far-reaching lessons for industry, comes from the U.S. Department of Defense (DoD), one of few institutions still relatively immune to charges of being environmentalists’ pawns or anti-western conspirators.
These lessons are captured in a report by the Center for Climate Security, a non-partisan group of highly accomplished military and national security veterans:
1. Acknowledge the risks. Climate impacts are materially affecting business facilities, operations and supply chains. Whatever one might think about the causes of climate change, these effects will get predictably worse. The damages are not just physical; they can also damage social infrastructure and the political stability upon which all businesses depend. All risks should be identified and assessed so they can be properly considered.
For the U.S. military, the risks are significant. The DoD operates roughly $1 trillion of infrastructure with more than two million military and civilian employees. One study found that about half of U.S.-based installations have been affected by climate change, including flooding, wind, extreme temperatures, drought and wildfire. Another study found that sea level rise and flooding will create significant physical vulnerabilities on a global scale—U.S. military capability depends on 95,471 miles of coastline with 1,774 sites. Vulnerabilities will also arise from beyond the DoD facilitates themselves since most of these sites rely on neighboring communities for utilities (electricity, water and wastewater treatment), transportation networks (roads and rail), civilian employees and some housing. All this could result in loss or degradation of mission capabilities at critical junctures.
Likewise, many industries operate complex physical infrastructure spread across many countries and climate zones. Even more depend on complex logistical networks and supply chains that are also increasingly vulnerable to climate change. Taking the steps to identify, measure and manage the escalating risks due to climate change, and to factor such analysis into strategic investments and decision-making, is simply good business practice.
2. Plan and resource for avoiding climate risk. A critical aspect of advance planning is to protect future investments. Any significant investment in new infrastructure should include a thorough climate vulnerability assessment of the proposed location. Risks specific to construction, transportation, outdoor work and other operations should be identified and addressed.
The U.S. military’s first step in adapting to climate change was to incorporate climate risks into its roughly $10 billion annual construction budget. The DoD incorporates climate data and vulnerability assessments into all installation planning. It determines where ports are likely to be adversely affected or made unusable. It prioritizes energy resilience planning based on the assumption that storms will knock out transmission infrastructure more often. It structures rebuilding and repair work to aim for greater hardening in order to deduce damage when similar storms strike again. More has to be done, to be sure. In 2017, an analysis showed that the dry docks at the Norfolk Naval Shipyard were not designed to withstand expected higher seas and stronger storms. Only then did the Navy include higher floodwalls in its shipyard modernization plan.
Similarly, business leaders should prioritize adaptation and resilience investments to protect infrastructure, operations and assets from the immediate and predictable changes in climate. This applies to critical existing infrastructure as well; these need to be assessed for possible relocation, business model change or resilience investments.
3. Invest in energy efficiency and renewable energy to save costs, contribute to risk reduction and yield reputational dividends. Investments in products and technologies can provide near-term savings and, in the long term, enable climate adaption and mitigation. The business case can therefore be immediate while the financial upside and the benefits of environmental stability will grow due to climate risk.
The DoD has pursued energy efficiency and renewable energy initiatives for years for the sake of better mission assurance and cost efficiency. On site renewable energy, for example, not only reduces costs but also reduces reliance on external electrical grids and diesel fuel deliveries for generators. The DoD spends nearly $4 billion on energy each year, so any increases in efficiency yields significant savings. Importantly, such efforts also contribute to the long-term mitigation of the risks discussed above.
In the same way, business leaders should direct appropriate parts of their organizations to pursue energy efficiency, renewables and sustainability. The business case for cost savings and operational benefits is relatively straightforward. Greater management attention and urgency is needed to prioritize such efforts as if business viability depended on it—as it does.
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The experience of the U.S. military is that there is much that individual organizations can do to manage the predictable—or at least foreseeable—implications of climate change. Doing so also makes clear that some foreseeable scenarios are too extreme and will therefore be unmanageable, however. Collective efforts are required to avoid them.
Even if widely adopted, these three lessons won’t reverse climate change or adequately prepare us for the consequences. That will require market and regulatory mechanisms beyond any business leader’s control. But greater corporate resiliency and self-interested awareness will help in a myriad of significant ways.
It might also help to change the national conversation about climate change. It would help transform climate change from an abstract and awkward-to-talk-about issue into an actionable business operational challenge. This would increase the saliency of the crisis. Climate change would no longer be a far-off 2030 or 2050 forecast; it would be a clear and present 2019 challenge.
Moreover, by explicitly factoring climate risk into business decision making and thus pricing it into market calculations, we begin to limit the market’s insidious tendency to punish business leaders and organizations with the foresight to invest in mitigation and adaptation.
That’s certainly a good start on putting a meaningful dent in the universe.