Climate, Water and Corporations: No Room for Business as Usual

Mostly hidden inside the climate issue, beneath the sometimes overwhelming din of deniers versus believers, major corporations are becoming believers. It does not mean they favor strict regulatory schemes; many still say innovation and the free market are adequate. But a steadily increasing number, from clothing to beverage to technology enterprises, have come to realize climate denial is bad business.

Today’s New York Times carries a story that is indicative of the growing tension between business as usual and the climate issue. Industry Awakens to Threat of Climate Change leads with how Coca Cola “lost a lucrative operating license in India because of a serious water shortage.”

“Increased droughts, more unpredictable variability, 100-year floods every two years,” said Jeffrey Seabright, Coke’s vice president for environment and water resources, listing the problems that he said were also disrupting the company’s supply of sugar cane and sugar beets, as well as citrus for its fruit juices. “When we look at our most essential ingredients, we see those events as threats.”

Coke reflects a growing view among American business leaders and mainstream economists who see global warming as a force that contributes to lower gross domestic products, higher food and commodity costs, broken supply chains and increased financial risk. Their position is at striking odds with the longstanding argument, advanced by the coal industry and others, that policies to curb carbon emissions are more economically harmful than the impact of climate change.

When I participated in the water segment of IBM’s Smarter Planet program five years ago, I was surprised to learn that climate change figured into the company’s internal, long-term planning. I should not have been. Gambling against a changing climate is reckless, placing at risk any company that must anticipate the reliability of raw materials, security of water, cost of fuel, options for transportation, the likely weather, the competitive global landscape, or a stable marketplace. Which is to say, most companies on the planet.

In 2004, General Electric CEO Jeffrey Immelt asked a team of GE experts to examine the climate issue.  In the book Capitalism at Risk: Rethinking the Role of Business, the authors write:

After nearly a year of information gathering and analysis, the management team settled on an environmentally focused strategy that would cut across five or six key businesses. Immelt had become convinced that the world was changing dramatically and that climate change was a “technical fact.”

One year ago today, this was the lead paragraph in a GE blog post entitled The Great Climate Disconnect:

The year ahead will be dominated by growing tension between ever-stronger evidence of climate change and the inadequacy of the global policy response. Drought in the USA in 2012 highlighted the vulnerability of commodity prices to intensified weather risk, and 2013 is set to be another year of above-average global temperatures. But global greenhouse gas emissions are continuing to rise, putting the world on track for overshooting the 2ºC “safe” target and ending up in a 4ºC world.

The loss of water supplies is a climate concern that threatens the entire business community. Citing climate change and diminishing global water resources Levi Strauss has embarked on a company-wide water initiative.  In a similar campaign Anheuser Busch says it has reduced water usage by 37% over the last four years.

Nicholas D’Onofrio, retired IBM Executive Vice-President for Innovation and Technology, expressed well the new reality business must embrace: “We live in a water economy.”