The threat posed by climate change which is liable to affect the earth’s core temperature is widely accepted by the global community. It is clear that this threat has been lo
ng in the making and will not be resolved by any quick fixes or miracle cures.
The knock-on impacts of climate change for sea levels, rainfall patterns, extreme weather events, and adverse effects on biological ecosystems, not to mention, food production, human health, and habitats, are issues that loom on the horizon ever more clearly every day and require considered thought and action sooner rather than later.
To achieve the goals of the Paris and Glasgow Agreements it is necessary for national policymakers to address the domestic policy environment and to put in place both adaption strategies and economic growth strategies.
These key challenges lie firmly in the ambit of policymakers, however, it is essential that business, as a major stakeholder, play a strong and positive role in helping to shape these political and policy considerations.
It is necessary for businesses to start taking a long view of the climate challenge and consider what is in the overall best interest of their shareholders.
The question needs to be asked, “Is it better to focus on the short term (and often high) profits at the expense of climate considerations and run the risk of destroying the very environment in which the business exists, or is it better to take a longer view of the issue, focus on more modest profits but ensure that the longevity of the business can be sustained”?
To ensure that we don’t literally kill the goose that lays the golden egg, it is essential that businesses gear themselves to be able to make positive and material contributions to the development of a domestic policy environment that focuses on human and institutional capacity development and enables countries to define, design and implement key adaption strategies that meet their specific needs.
It’s also essential that businesses recognise that needs differ from one jurisdiction to another depending on their development and vulnerability to climate change. Business as a stakeholder must seek to play a nuanced and positive role in working with national government authorities to develop the right strategies to address specific needs.
The prevailing approach of business is to focus on the 90-day horizon in terms of whether an investment s making a suitable return or not. CEOs and CFOs are focussing on whether or not they can meet “investor expectations” in the near term. This approach has an instant gratification component to it but ignores the importance of long-term value and building profits that are sustainable and ultimately higher.
Tim Koller, James Manyika, and Sree Ramaswamy writing for Mckinsey in 2017 concluded that firms identified as focused on the long term saw average revenue and earnings growth of 47 percent and 36 percent higher, respectively, and overall total return to shareholders was also higher.
So, if it follows that a longer strategic horizon is better for company value, then it should also follow that it would be good for the climate. If we are going to address the climate challenge effectively, it is essential for companies to get to grips with the challenges as they exist in the places we do business. It is essential to sit down with policymakers and to develop the kind of policies that address the needs of both parties.
Investing in effective adaption strategies and longer-term economic growth of the countries where we do business may cost some money in the short term, but the long-term reward will be significant.
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