Climate Change Impacts and Sustainable Business Practices
Climate Change: Socio-Economic Effects
Primary effects of climate change:
- Melting of glacial ice caps
- Rising sea levels
- Shifting climate zones
- Changes in rainfall patterns, increase of arid areas
- Increased risk of extreme weather events
- Ocean acidification
- Loss of biodiversity
- Possible changes in ocean currents
Socio-economic effects of climate change:
- Damage to infrastructure and property (flooding, extreme weather)
- Loss of production (agriculture, industry)
- Effects on human health (food and water shortages, heat waves, spread of diseases e.g., malaria, allergies)
Current standing of international efforts:
- Kyoto Protocol: Expired in 2012. Developed countries were required to reduce their emissions by 5% from 1990 levels. There was no reduction requirement for developing countries.
- After Kyoto: No agreement for a new treaty yet. Countries have individual targets (e.g., EU: 20% reduction by 2020). China and India are willing to slow down the increase of greenhouse gas emissions but are not willing to decrease them.
Ecosystem Services
Supporting (nutrient cycling, soil formation) –> Provisioning (food, fresh water, wood, and fiber) –> Regulating (climate regulation, flood regulation, disease regulation, water regulation) –> Cultural (aesthetic, spiritual, educational, recreational)
Reducing Greenhouse Gas Emissions
How can we reduce greenhouse gas emissions?
- Increase energy efficiency (building, transport)
- Switch to renewable energy sources
- Protect and increase forest areas
- Consume less
End-of-Pipe Technology
End-of-pipe solutions address pollution at the end of the production process. Raw materials and energy enter the production process, leading to products. During the production process, raw materials and energy sources are wasted at several points. This waste is unfavorable both from an economic and environmental point of view. Tracing energy and material flows allows for the identification of losses – their amount and location. Comparison with the most developed technology shows the weak points. Tracking material flows makes it possible to calculate the “manufacturing costs” of wastes and other harmful emissions. Improving resource efficiency can reduce emissions to the environment.
Voluntary Tools: The Ten Principles of the UN Global Compact
Human Rights:
- Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights.
- Principle 2: Make sure that they are not complicit in human rights abuses.
Labor:
- Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining.
- Principle 4: The elimination of all forms of forced and compulsory labor.
- Principle 5: The effective abolition of child labor.
- Principle 6: The elimination of discrimination in respect of employment and occupation.
Environment:
- Principle 7: Businesses should support a precautionary approach to environmental challenges.
- Principle 8: Undertake initiatives to promote greater environmental responsibility.
- Principle 9: Encourage the development and diffusion of environmentally friendly technologies.
Anti-Corruption:
- Principle 10: Businesses should work against corruption in all its forms, including extortion and bribery.
Environmental Regulation
Direct Regulation:
Includes bans, pollution limits, and technology standards. Effective if properly enforced. Not efficient because it lacks flexibility (the same reduction is required from everyone, regardless of cost. There is no incentive to reduce pollution below the limit value). Best for dangerous pollutants.
Indirect Regulation:
Includes changes and taxes on pollution, grants, and tax breaks for clean technologies. Creates an economic incentive (but no obligation) to reduce pollution, allowing economic actors to decide how to react. Economically efficient (those who can reduce pollution cheaply will reduce more. Provides constant motivation to reduce pollution and to innovate). Uncertain outcome. Best for less damaging pollutants.
Comparison of Environmental Regulation Approaches
| Direct Regulation (Command & Control) | Indirect Regulation (Economic Instruments) | Voluntary Agreements | Voluntary Behavior | |
|---|---|---|---|---|
| Objective Setting | Regulatory authorities | Regulatory authorities | Company and authority together | Company alone |
| Space for Company | No | Yes | Yes | Yes |
| Control | Authority | Authority? | Market (industrial association, certifying organization) | Market (industrial association, certifying organization) |
| Severity of Problem to Deal With | Severe, big risk (effective but not efficient) | Not very severe, risk is lower (efficient but not always effective) | Not very severe, risk is lower | Not very severe, risk is lower |
| Examples | Norms, penalties | Taxes, permit trading | Environmental objectives | ISO 14001, EMAS, eco-labeling |
Environmental Strategies
- Proactive Beyond Compliance: Voluntary measures beyond legal requirements. Promote more stringent regulations.
- Acquiesce: Comply with regulations, follow industry practices. No participation in the policy process.
- Compromise: Minimal compliance with legal requirements. Active lobbying for less stringent regulation.
- Avoid: Hide and outsource pollution.
- Defy: Ignore environmental problems, deny responsibility. Open confrontation with environmental policy markers and NGOs.
- Manipulate: Exaggerate costs of regulation, question the science. Bribe and threaten policy markets.
Business Opportunities Related to Environmental Protection
According to Reinhardt, these include product differentiation, influencing market conditions, risk reduction, cost reduction, and the creation of new markets.
Steger’s Model of Environmental Strategies
Market Opportunities
- Significant: Offensive
- Small: Indifferent
Environmental Risks
- Small: Defensive
- Significant: Innovative
Defensive Strategy
High environmental impact. Reactive approach. Focus on compliance with environmental regulations. Typically “end-of-pipe” solutions. Environmental protection is a technical issue. Negative communication, avoid conflicts.
Offensive Strategy
Proactive approach, environmental protection is a business opportunity. Continuous improvement of environmental performance, going beyond compliance. Prevention of pollution, development of green products. Develop a positive environmental image.