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November 13, 2007
Report by Christina L Madden
Responsible Profit: Climate Change and the Green
Economy, Global
Policy Innovations' third Workshop for Ethics in Business, was held in New
York City on November 2, 2007. This joint Carnegie Council–RSA meeting of business and
civil society leaders was co-sponsored by Booz Allen Hamilton's strategy+business
magazine.
Matthew Taylor, Chief Executive of RSA, opened the
discussion by addressing what he called the "social aspiration gap." Society, he
said, will not reach future objectives for reducing the impact of climate change
without making significant shifts in the way we think and behave.
Taylor believes that the private sector is starting to step up to the plate.
Businesses understand risks and therefore realize the threat climate change
poses to sustainable endeavors. They also know that profit and sustainability
can go hand-in-hand, and since they work globally they are already familiar with
the shrinking world. Nonetheless, Taylor acknowledged several challenges that
must be overcome. Richer countries will need to put national interest aside in
favor of the greater global interest, and this will require coordinated action.
Take, for example, a business meeting where multiple companies are pitching
for a contract. If two representatives fly in and the third connects virtually,
the one who isn't in the room will be at a disadvantage. Only if regulations
require business to be conducted remotely will there be an incentive to reduce
travel emissions.
The key to progress, according to Taylor, depends upon the recognition of
every individual's right to contribute. He believes that a healthy synergy needs
to be found wherein appropriate government regulations encourage consumers to
demand low-carbon products, which will then drive innovations in the
marketplace.
Matt Prescott elaborated on the idea of shared
responsibilities in describing RSA's CarbonLimited project. He noted that the environment is
somewhat intangible to individuals until a major crisis develops. Yet
individuals can play a vital role in reducing emissions, both directly and
indirectly, by making lifestyle changes, demanding low-carbon products from the
private sector, and encouraging government action.
CarbonLimited is modeled after cap-and-trade systems, and is a pro-social, pro-business
device that sets out goals and shared responsibilities for business, government,
and individuals. The nation together would decide on an acceptable level of
total carbon emissions, and carbon credits would be issued to individuals and
used when purchasing fuel and electricity. Those who use less than their
allotted share would be able to sell carbon credits to other individuals or
businesses. This scheme is win-win, according to Prescott, since it provides an
incentive for individuals to reduce emissions, and gives businesses a sense of
investment in the community.
Booz Allen Hamilton Vice President Christopher Kelly
returned to the idea of the social aspiration gap and discussed ways in which megacommunities—businesses, citizens, and governments working
together—can accomplish environmental goals.
He highlighted the work of the Great Barrier Reef Research Foundation as a prime example of a
megacommunity in action. The Foundation was started by a group of business
leaders concerned about the environmental degradation of Australia's Great
Barrier Reef. They soon found that they needed to reach out to a broader array
of stakeholders and thus formed a scientific advisory committee, which was able
to rank the top environmental threats to the reef and put in place a plan of
action to tackle the most significant problems.
The project garnered sustained funding and interest. Members of the
megacommunity approached top CEOs and companies and offered a Chair position for
a fee of $15,000. Chairs would be allowed to participate in the ongoing research
about the reef and critique the business strategies being undertaken by the
foundation.
This example showcases what Kelly deems the most crucial aspects of a
successful megacommunity: mutual leadership, integrated capabilities and
resources, and an overlapping vital interest that motivates people to take
action.
Nikhil Chandavarkar of the United Nations Department of
Economic and Social Affairs focused on the impacts of climate change in
developing nations. He outlined key points, based on a recent UN summit, that he
believes will be central to negotiations on a new protocol to address climate
change.
Developing countries have a different perspective on mitigating climate
change than industrialized countries. India and China focus on per capita
emissions, which in developing nations tend to be lower than the world average,
whereas industrial nations including the United States look instead at absolute
levels. While the UN framework convention includes provisions for equity and for
the right to emit, Chandavarkar pointed to increased Western leadership and
personalized carbon emissions as key steps to reaching consensus in new
mitigation discussions.
Adaptation, technology, and finance are particularly salient topics for
developing nations. Chandavarkar emphasized the insufficient funding available
to developing nations to undertake adaptation measures and noted that it was an
area in which the private sector could play a role. Given that climate change
leads to increased droughts and other natural disasters that are not accounted
for with carbon-offset financing, Chandavarkar believes that businesses
should begin seeking out new investments.
Chandavarkar highlighted six parameters that were laid out by the UN
Secretary-General and President of the General Assembly to guide negotiations on
a new protocol. They include: enhanced leadership of Western countries, both in
curbing emissions and recognizing the need to equalize global per capita
emissions; incentives for developing countries; a special role for populous,
fast-developing countries with large foreign reserves and high total emissions,
though a low per capita rate; increased support for adaptation in
least-developed and low-income developing countries; stronger technological
development and dissemination; and a better use of market approaches, which
would mobilize the resources that are needed to provide incentives for poorer
countries.
Mark Fulton represented the financial services sector and
discussed a Deutsche Asset Management (DeAM) report he edited on the impact of climate change on
investment. According to Fulton, private capital must come into play in order
for climate change to move beyond a moral issue and become a business issue.
This transition is already underway, as companies and investors are beginning to
realize the long-term implications climate change may have on markets and are
seeing opportunities for new innovations and investments.
At the end of September, DeAM had nearly $9 billion invested in
climate-related equity out of about $800 billion under management. While this
number may be small compared to the trillions at play in the global economy,
Fulton says it is a good start, and the markets are expected to grow
substantially within the next decade. Fulton hopes that someday carbon will
become one of the five major price signals, along with the dollar and oil, as
this will determine whether or not carbon is fundamentally affecting the
economy.
Fulton outlined DeAM's four pillars of climate change investment: government
regulation, carbon prices, competition and reputation, and new technologies.
Pragmatic investors are seeing that as governments are creating markets they are
establishing carbon prices, both in the form of an explicit trading price and
with hidden taxes, subsidies, and standards. In the long run, these prices will
be key to determining which technologies are viable in addressing climate
change. Corporations will then be able to make competitive, profitable
investment decisions that will also take into account corporate social
responsibility.
DeAM currently invests in industries and companies involved in both
mitigation and adaptation.
The following are links to audios of this event, along with a video showed at
the event:
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