Nairobi – The future of the private sector will increasingly hinge on the ability of businesses to adapt to the world’s rapidly changing environment and to develop goods and services that can reduce the impacts of climate change, water scarcity, emissions of harmful chemicals, and other environmental concerns.
From extreme weather events, to rising pressures on finite natural resources, changes in the global environment will increasingly impact operating costs, markets for products, the availability of raw materials, and the reputation of businesses, from finance and tourism, to healthcare and transport.
While the risks are significant, such environmental changes also represent major opportunities for businesses that successfully manage them, and seize the demand for sustainable technologies, investments and services.
These are among the main findings of a new report released by the United Nations Environment Programme (UNEP), SustainAbility and Green Light Group, entitled “GEO-5 for Business: Impacts of a Changing Environment on the Corporate Sector”.
“‘GEO-5 for Business’ is in many ways a prospectus for the 21st century company – one that internalizes how rapid and accelerating environmental change will shape risks, but also the need and demand for new sustainable products and market opportunities,” said UN Under Secretary-General and UNEP Executive Director Achim Steiner.
“The report speaks to the reality of climate change and natural resource scarcities and outlines how more creative decisions by the private sector with longer term horizons may assist in meeting these challenges. It makes the case that whether it be in water saving, or climate-proofing infrastructure, the world is going to look for solutions that in turn will drive corporate competitiveness, reputational risk and a transition to an inclusive green economy,” added Mr. Steiner.
The new report is based on UNEP’s Global Environment Outlook (GEO-5); the UN’s most comprehensive assessment of the state of the global environment. According to that report, human pressures on the global environment mean that several critical environmental thresholds are approaching, or have already been surpassed, beyond which abrupt changes to the life-support functions of the planet could occur.
Through a detailed analysis of the construction, chemicals, mining, food, and other industries, ‘GEO-5 for Business’ outlines the specific risks of such changes to each sector, and how businesses can adjust to create long-term competitive advantages.
The report shows that the rising frequency of extreme weather events, often linked to climate change, poses risks to all sectors. Severe floods in Australia in 2010-11, for example, resulted in more than US $ 350 million in claims to re-insurer Munich Re, which contributed to a 38 per cent quarterly drop in profit for the company. The same period of extreme weather in Australia contributed to a loss of US $ 245 million in earnings by mining group Rio Tinto.
Rising temperatures are challenging the future viability of tourism businesses, says the new report. A study cited in ‘GEO-5 for Business’ states that fewer than half of the ski resorts operating in the US northeast are likely to remain economically viable in 30 years, if average winter temperatures increase between 2.5° and 4°F.
The UNEP study says that more than 80 per cent of the capital needed to address climate change may come from the private sector. This can bring about significant ‘green economy’ investment opportunities in the finance sector for green buildings, energy efficiency technology, sustainable transport and other low-carbon products and infrastructure.
In cities, around 60 per cent of the infrastructure needed to meet the needs of the world’s urban population by 2050 still needs to be built, presenting significant business opportunities for greener urban construction and retrofits. Over 1.5 million square feet of building space are being certified with green standards each day.
Water scarcity remains a critical challenge for all sectors profiled in ‘GEO-5 for Business’. Companies in the tourism, chemicals and other sectors could face increased operational costs. In South Africa, platinum mines in the Olifants River system are expected to face water charges ten times their current value by 2020 due to water scarcity. Competition with local communities and other water users could potentially lead to negative impacts on reputation.
Findings by Sector from GEO-5 for Business
- Building and Construction
The sector remains vulnerable to volatility in energy markets and rises in energy prices due to the energy-intensive nature of producing steel, concrete and other materials. Concerns about low water availability in certain regions may limit potential development opportunities. The sector could come under increasing consumer pressure to reduce waste generated during construction.
Urbanization and economic development in emerging economies can translate into substantial demand for new, greener housing and infrastructure. Demand for coastal and flood defences, and structures that can withstand extreme weather, may also rise.
Chemical production is often water intensive. Consequently, the sector will face increasing consumer pressure to be more water-efficient, and to better manage emissions of chemical waste. Increased regulations may phase out, or restrict the use of, certain chemical products. Such regulations can open up market opportunities to provide more sustainable alternatives.
Demand is set to rise for chemicals used in high-performance insulation, energy-efficient lighting, renewable energy technologies, as well as products linked to water-saving technologies, such as purification and desalination. Greater use by companies of more sustainably-produced chemicals, coupled with efforts to minimize adverse impacts, can enhance reputation and brand value.