Ask the Climate Expert
by Dr. Mark C. Trexler
January 2006 |
What’s the best argument to
use to convince my company to engage on the climate change issue as a
business matter?
Source:
Dr. Mark C. Trexler A great
question, one that we're hearing more and more people ask.
Unfortunately, it's a question that can be frustratingly difficult to
answer. What can happen is that as an internal proposal on climate
change action works its way up the management chain, someone starts
asking questions like:
- What if countries default on their Kyoto obligations?
- When will we have a material cap-and-trade program in the United
States?
- Without the United States, will Kyoto survive post-2012?
- What's a reliable estimate of CO2 credit prices going forward?
These questions probably won't be raised if you're talking about
measures that are as much focused on public relations as they are on
risk or opportunity management. But if you're talking about proposals
that involve putting capital at risk -- whether to hedge future
regulatory risk or to take advantage of a perceived business opportunity
-- concerns such as these become more likely.
It is difficult to provide a convincingly rigorous answer to these
questions. In the absence of clear policies and mandates (e.g. a
national cap-and-trade system), the risks and opportunities facing
companies in the climate change arena are usually (at the very least)
debatable. This makes it easy to argue that "it’s too soon to move,
let’s wait." We’re increasingly realizing that by the time an internal
entrepreneur runs into the kinds of questions listed above, he or she
already faces a distinctly uphill battle within the company.
But there is good news:
- It makes a lot of sense for internal entrepreneurs to promote the
kinds of risk and opportunity management strategies that we
increasingly see them suggesting to company decisionmakers. There are
strategies that can be very effective in positioning companies for the
climate change issue, and they often don’t require putting a lot of
capital at risk.
- There’s a way to avoid having these difficult questions cropping
up at the point management reviews a proposal. It does involve more
upfront work to lay the foundation for internal decisionmaking on
climate change. For example, what the internal entrepreneur really
needs initially is guidance on the following question: What do we as a
company want to assume about the future of the climate change issue,
and our positioning for it?
- Do we want to assume that the issue of climate change will
disappear?
- Do we want to assume that climate policy will "stay the course"
over time, with a wide variety of domestic and international
measures being pursued, even if individual measures don’t succeed
and even if we don’t necessarily prevent climate change?
- Do we want to assume that public policy ultimately will reflect
the prevailing science and that dramatic emissions reduction
mandates will be imposed?
Getting corporate management to answer these questions in a way that
supports an entrepreneur’s business proposal up-front, is a much better
way to get such a proposal approved than waiting and trying to
convincingly answer the questions posed at the outset. In effect,
climate business initiatives require much more "foundation laying" for
management decisionmaking than many other business issues do.
The good news is that the "foundation laying" can be done, and it can be
done successfully! It’s exciting to see how much interest there is now
within major companies to move forward on climate change. The challenge
is to translate that interest into a solid "business case" for action.
We’re finding that laying a foundation first makes it a lot easier.
The specifics of the "business case" will vary radically from company to
company, depending on industry sector, risk profile, and many other
variables. So there’s no simple answer to exactly what the business case
should look like. The key point is that there are many convincing
businesses cases to be made. And that’s the good news!
-----
Dr. Mark C. Trexler has more than 25 years of energy and
environmental experience, and has focused on global climate change since
joining the World Resources Institute in 1988. He is now president of
Trexler Climate +
Energy Services, which provides strategic, market, and project
services to clients around the world.
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