Doha, Qatar was host for this year’s World Climate Summit and the Global Climate Talks. Nearly 200 countries attended COP18 and it was a great experience to watch the different cultures interact and work together. It is often in the mix between people – and by facilitating large-scale collaboration between businesses, financiers, NGO’s and regional, national and global regulators – that you get real impactful commitments and actions.
And there is no doubt that business and investors, pension funds and other financiers were sending a clear message to other business, financiers and governments: You better start Reduce, Rethink and Report.
The speakers at the World Climate Summit were among others leaders from Bank of America Merrill Lynch, Siemens, Phillips, Pension Denmark, Islamic Development Bank, World Bank, National Australia Bank, IETA, Iberdrola, BMW together with NGO’s and government representatives from the US White House Council, EU Commissioner, UN Executive Secretary etc. Please see www.wclimate.com
The business community has talked about efficiency for a long time, both in term of cost-efficient solutions and time-efficient solutions. But there is no doubt in the minds of global leaders that we need resource efficiency more than ever. Many global companies have already embedded a “shadow-price” on carbon and other resources in order to be ready when a real price will be introduced.
Christiana Figueres, UN’s Executive Secretary for the Global Climate Negotiations, started her speech by calling for an urgent need for action: “We will need to be 10 times more efficient so all investment in resource efficiency is a no brainer as it will pay for itself”. Paul Simpson, the CEO from Carbon Disclosure Project, who is speaking on behalf of 655 investors with assets of US$ 78 trillion added that the listed companies that report to CDP has seen a payback on around 33% on all efficiency projects. And during the World Climate Summit other investors and Pension funds added that resource efficiency projects are the best projects to finance at the moment with low risk and high payback.
The risk of investing in efficiency got even lower when Gary S. Guzy, Deputy Director and General Counsel for the White House Council on Environmental Quality told the audience that the United States is rolling out a new plan containing five strategies, including an investment strategy that will yield innovation in the private and public sector, and a strategy toward a regulatory initiative that will ensure regulatory stability toward 2025, which will enable business and investors to plan for the long term.
But is it enough to be more efficient and reduce the amount of carbon, water and other resources that we use? Probably not. Companies need to rethink their business model and mitigate resource-risks in their value chain and reap the benefits of being early adaptors.
Some countries have started: It is interesting to see China being among the leaders that build upon the US innovations of Solar Panels and now use solar-panels to heat water and cook food even in colder regions. Likewise is it interesting to see Saudi Arabia, the world’s top oil producer, now turning to a new type of energy to export: solar power. It s believed that Europe will be using electricity transmitted from solar power stations in Saudi Arabia.
But also individual companies and investors need to rethink their business model. A newly released report from the US National Intelligence Council shows a dull future for the companies that don’t rethink their business.
According to the US National Intelligence Council we will see a world population rise to 8.3 billion from 7.1 billion today by 2030 and a middle class doubling to more than 2 billion. The growing middle class will have an appetite for food, water, energy and other resources, which will be in shorter supply. Demand for food will rise 35%; water requirements will rise to 40% more than current sustainable water supplies.
Combined with increased changes in the climate, we will see increasing resource constraints and therefore increased prices. Companies that understand to make a closed-loop for their products will be the winners.
In Doha, the CEO of Carbon Disclosure Project who, as mentioned above, is representing 655 of the worlds leading investors with assets of US$ 78 trillion asked, “How are we measuring and valuing our resources? And added that future Governments and business will be valued on value they created from an equation of: ”Resource input in and wellbeing, profit, public good etc. out”. I’m currently working on such a Natural Capital Accounting project for a client. It is not easy, but it does give a good insight into possible future scenarios and business models. However, I suggest that companies start by measuring and reporting on their resource-footprint – and agree internally on a shadow price – so they are ready when a price is set by suppliers, governments or when investors ask if your business can sustain a 20+% increase in resource prices.
This article was originally posted on CBSR
Helle Bank Jorgensen, CEO of B. Accountability, a consultancy that works for leading companies and organizations within sustainability & climate change. One of these organizations is World Climate Ltd. who is hosting World Climate Summit in Doha, Qatar. Helle has worked with sustainability and climate change since 1990 and has been a partner with PwC for 11 years based in Europe and the US.