What Can Companies Do to Take on Climate Change?
Leadership Skills are Needed to Grow Business While Getting to Net Zero
Climate change affects everyone. Millions of people are feeling the impact in large and small ways every day – homes being destroyed due to coastal flooding, food supplies disrupted due to drought, poor health from worsening air and water quality, and limited work productivity due to extreme weather. A global transformation is currently underway to cut greenhouse gas emissions to as close to zero as possible. Leaders are discovering that the journey to net zero not only makes sense but profits too. Effective leadership strategy and adaptable management skills will be needed for the journey to net zero.
To get some key insights into what effective leadership development skills will be needed when it comes to climate change and business, we spoke to Geoffrey M. Heal, faculty director of the new Business and Climate: The Journey to Net Zero program starting June 2023.
How does climate change affect business?
Every company in the world more or less is going to be affected either by climate change directly or by the policies implemented with a view to mitigating climate change or adapting to climate change. It's going to be a major theme in the operation of every company between now and 2050. So, if you're a senior executive in a company or hoping to be one anytime in the next couple of decades, then you need to understand how climate change and how climate change related policies are going to affect your organization.
And, they're really incredibly diverse. Obviously, if you're in any weather dependent industry, the increasing incidence of droughts and floods and extreme heat, understanding climate change is extremely important. It's possible that the sea level will rise six or seven feet between now and the end of the century. That means if you own property which is anywhere close to sea level, it can affect the value of your assets even though you may not be affected any other way by climate change. This is something that can have a big impact which effective leadership needs to address.
The interesting thing is even companies that are not obviously dependent on weather are affected by climate change. There's actually a very interesting study from a few years ago by a couple of my colleagues at Columbia. They looked at the output of General Motors' plants. They got data on the daily output of every plant operated by General Motors in North America and found that the output was significantly lower on really hot days. When there was a serious heat wave, output in GM plants dropped by 5 to 10%. You wouldn't think of a General Motors plant as being obviously affected by climate. All the operations are indoors, and they're all in huge factories, and many of the factories are probably air conditioned. But it was still the case that the productivity of their employees was affected in really, really hot weather. 90-plus-degree days had an impact on their level of productivity. So, it really is the case that companies which you don't think of as being obviously exposed to climate change are in fact exposed to climate change. And of course, their customers are exposed to climate. Even though you may think you're independent of the climate, your customers can be affected by climate and that can affect the demand of your products. Your supply chain can be affected by climate.
How can climate change affect supply chain?
In several ways. One example where climate change affected supply chain is Intel and some other computer makers. A lot of the components that they use are made in Southeast Asia. When there was really heavy flooding in Southeast Asia a few years back, particularly flooding in Thailand, a lot of computer makers had real problems with the supply chains because of the weather disruption in Southeast Asia. They were not themselves affected but, because of the complexity of supply chains, disruption almost anywhere in the world can affect a company in the US or Europe.
Dependence on climate and being affected by climate change is almost universal. There are very few companies in the world which are not in some way at risk from climate change and not going to have to adapt their operations in the next couple of decades because of climate change. It will take effective leadership skills to understand the issues around business and climate change and take the steps needed to journey to net zero. Our new program, Business and Climate: The Journey to Net Zero, helps executive business management get the leadership training skills they need to successfully begin that journey.
How does your program address climate change and what’s happening today?
Our Business and Climate: The Journey to Net Zero program is going to address basic background on climate change as well as what’s currently happening today. We’ll make it clear that every business in the world is going to be affected by climate change and you, as effective leadership, must think about its impact. Then we'll talk about what the implications of that are. There are two aspects of this. One is how's the economy going to be impacted because of climate change and what differences will there be between the economy in 2023 and the economy in 2043 as a result of the change in climate or the policies to address the change in climate? And the biggest change is probably going to be transitioning away from fossil fuels. If we're going to solve the problem, we have to stop using fossil fuels. We're hopefully going to see a rapid drop in the use of fossil fuels. That’s part of what we're going to talk about – What does that mean for a wider range of companies?
What other climate change issues do your leadership training programs address?
Our leadership training addresses additional issues like the issue of service, hiring people who are interested and concerned about climate change. That really comes into the agenda of our leadership courses. What are consumer attitudes towards climate and investor attitudes towards climate? Those are important elements to our leadership courses. The fact is that climate change is going to affect everybody and everything and there will have to be major responses to that especially from effective leadership.
Then, the context of what's going to happen will be addressed. What climate change policies will be implemented because of this? These leadership training sessions cover how individuals, be they worker, employees, customers, or investors, react to climate change.
One of the things that companies are increasingly finding is that a lot of younger generations want to work for companies that are making a positive impact in the climate area and don't want to work for companies that do not address climate change. There's been quite a lot of coverage in the Financial Times that oil and gas companies, which traditionally have been able to recruit very able people, are now having difficulty recruiting from top colleges because people don't want to work for an oil or gas company that's perceived as being part of the problem and not part of a solution. Employee reaction to a company's position on climate change will be addressed in greater detail in our leadership training course.
And, of course, there's also consumer attitudes. Consumers are already to some degree displaying a preference for goods which have little impact on the climate, and we expect that to increase. Our faculty will discuss how consumers perceive and react to the issues of companies being green and companies' position on climate change, the marketing psychology around consumers and climate change. Can you expect, for example, to lose customers if you don't take a positive position on climate change? Can you expect to gain customers if you do take a positive position on climate change? How will it affect a company's marketing strategy?
How does your leadership training programs address green finance?
We’ll be diving into how climate change affects business not only from a consumer perspective but also from an investor perspective. It’s clear, with the interest in environmental, social, and governance investing, ESG investing, that investors are already interested in the issue of what's the company's position on climate change. And a lot of investors have pledged to have what they call "net zero" portfolios by 2030 or 2040. Companies are making net zero pledges too. Microsoft has been very articulated in saying, "We're going to be net zero by 2050." In our leadership development training, we’ll spend quite a bit of time taking examples like Microsoft and Google and some of the financial sector companies which have made some fairly eye-catching pledges, and saying, "What exactly do these guys mean by these pledges? And how could they possibly implement these pledges? What are the chances of them being able to deliver what they've said they're going to be able to deliver?"
There are a lot of investors who are seriously trying to construct their portfolios largely around companies that are climate friendly in some sense. And so, what we're going to discuss in our leadership training session is what investors are doing in this context. What do we know about investors? What's likely to happen?
Our faculty has written a lot about green bonds and green finance, the effect that being perceived as green has on company's ability to raise capital and its recent reaction into the way capital markets react to it. They’ve also written about environmental, social, and governance investing from an accounting perspective. The participants in our leadership courses will get an effective view of green finance from an investor perspective.
I always tell my students is that this is really important. Companies operate in three markets. There's a market for the product, there's a market in which they raise capital, and there's a market for employees. They hire people, they recruit capital, and they sell their output. In all three of those markets, there's a concern on the part of their counterparties about what position is on climate change. Customers prefer to buy things which are perceived as climate friendly. Employees prefer to work for companies that are climate friendly, particularly some of the younger, smarter employees. And investors are increasingly concerned about a company's position on climate. With our Business and Climate: The Journey to Net Zero leadership training program, participants will get to understand how consumers, employees, and investors react to a company's position on climate issues.
What changes will companies need to enact to address climate change?
A lot of changes will be required in many organizations and change can be difficult. People are used to doing things in a particular way, particularly when it comes to using energy. People are used to using energy in a very standardized way for a century now. The energy system really hasn't changed very much since the Industrial Revolution. Thomas Edison, if he came back to life tomorrow would recognize most of the electricity system that we use and the way we use energy. There are going to be big changes and those are going to have big implications within organizations. People are going to find their roles changing, the way they do their type of jobs changing, and so on.
Our Business and Climate: The Journey to Net Zero leadership training program will show participants how to manage the impact of change within the organization. Our faculty will instruct on how you can manage these kinds of far-reaching changes and the impacts they’ll have on your organizations. We’ll dive deeper into the questions that participants want answered. What does it mean, internal change, when it comes to your organization? What does it mean for from a customer perspective, from an investor perspective, and from a policy perspective? And how do you put all those perspectives together within your organization and lead your organization through this change?
With this program, we help business management get the effective leadership tools they need to help their company on the journey to net zero.
What can companies do about climate change?
A lot. We’ll discuss several examples in our upcoming Business and Climate: The Journey to Net Zero leadership training program. Through a mixture of case studies and general principles, we’ll share what companies are doing and could be doing about reducing their exposure to climate change, reducing their climate impact, giving themselves more positive orientation as far as investors, consumers, and their employees are concerned. We’ll be addressing what companies should do and what are climate solutions. We’ll give concrete examples of what companies can specifically do to journey to net zero. Then, we’ll discuss what new technologies are likely to emerge and what existing technologies are likely to grow as a result of the concerns about climate change.
What can participants expect from your Business and Climate: Journey to Net Zero program?
This leadership training program is about the impact of climate change from a business perspective. And business can be investors, clients, organizations. In short, we’ve narrowed it down to three key climate change and business areas. One is the impact of climate change and the policies connected with it on the corporation. And second, how corporations can react to that and how they can take advantage of that and minimize the damage from that. Finally, we’ll provide the insights and tools needed to lead organizational change in relation to climate change.
With our Business and Climate: The Journey to Net Zero leadership training program, we start with the general context, clarifying some questions about climate change as a whole including the policies that are currently in place around the globe. And then we’ll do a deeper dive into consumer behavior, and this is market behavior essentially: behavior in capital markets, behavior in labor markets, behavior in the product markets. We’ll review green finance and how investors are reacting to climate change through net zero portfolios and more. And then, we’ll see what can companies do? How can they take advantage of these changes? How can they minimize any damage these changes make to them? And then finally, we help tailor it to you and your organization and how you manage the change within your organizations.
In short, you’ll get an in-depth look at current climate change policy, attitudes of consumers and investors towards climate and green finance, how to be included in an Environmental, Social, and Governance (ESG) portfolio, and strategies to help drive your organization toward a net zero future.
Geoffrey M. Heal is the faculty director of our new Business and Climate: Journey to Net Zero program starting June 13th, 2023. Learn more
Geoffrey M. Heal
Donald C. Waite III Professor of Social Enterprise
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