By Noushi Rahman
Professor of Management, Lubin School of Business
The economic implications of climate change can no longer be viewed as simply the burden of future generations. Impacts on agriculture in particular may give rise to civil conflicts, with significant negative impacts on national economies and, hence, businesses worldwide.
According to the August 15 Harvard Gazette, when political scientist Nathan Black, an Environmental Fellow at the Harvard University Center for the Environment, “considers the potential global consequences of climate change, one thing he sees is war.” Black’s post doctoral work focuses on the civil implications of changes to arable land use. He says:
I think my own research suggests that on average, as arable land supplies decrease due to climate change . . . some places will benefit. Unfortunately, most places [negatively] affected by climate change are also susceptible to violent civil conflict.
The idea is simple: climate change will reduce agriculture space and result in resource shortage, which will cause civil conflicts that can then spill over into regional conflicts and war. The significance to global businesses is huge. An increase in political and economic instability can only impede multinational firms from earning above normal returns.
As a faculty member at Lubin School of Business, I teach that business practices aimed at sustaining the environment can serve as a means to an end. I highlight that genuine sustainability initiatives can build a positive reputation that will then serve as a powerful marketing tool to increase earnings — which is, after all, the ultimate goal of a business. The flip side is the threat of a negative reputation to firms perceived as harming the environment. The logic up to this point is straightforward, even obvious.
In the June 1 EarthDesk, I also discussed firms that have a reputation as being environmentally friendly despite their dubious practices. They earn their pro-environment persona on the backs of environmentally minded consumers of their products, which thus casts a collective ‘pro-environment shadow’ on those firms. The logic here is less obvious.
The population-level ‘macro threat’ that Black argues may be a bit distant compared to the more immediate reputation effects that have been thus far taught in classes dealing with environmental sustainability, but if conflicts, perhaps wars, break out due to climate change, the burden on industry will be enormous.
It is clear that this threat is an even more powerful reason for businesses to be actively engaged in addressing climate change and developing environmentally sustainable practices. It is equally clear that properly articulating this argument should now be fundamental to a 21st century business education.