Why climate change matters for business.

In last week’s post I made a comparison between the Paris Peace Conference of 1919 and the upcoming 21st meeting of the Conference of the Parties to the United Nations’ 1992 Framework Convention on Climate Change which will also be held in Paris next December. The basic idea of the post is that whatever is agreed to or not agreed to in Paris next year will have an important impact on the world and business for the rest of this century and beyond. What was not spelled out is how this relates directly to business.

Billiard Ball Model

The Overseas Development Institute is a U.K. Based think tank which is focussed on the reduction of poverty around the world. In March, 2014, the Institute published a report which outlines how climate change will impact eight broad goals of development and questions our ability to reduce poverty without tackling climate change. It puts forward the idea that the different issues are influenced by each other much like the balls on a pool table when the rack is struck by the cue ball at the start of a game. Another U.K. group, Green Alliance, used the model in a pamphlet it prepared on the Paris conference next year.

Billiard Ball Model
Billiard Ball Model

Impact on Business

Any change to the climate will have a direct impact on food security, energy and water, and human health. As these issues are effected, other issues will come into play such as overall levels of prosperity and poverty as well as education and gender equality. All of this will have an impact on what the authors of the first report called conflict and security and this blog has been calling geopolitics.

imgresAs my second year MBA students know, I focus much of the time in my course, Strategy & Sustainability, on energy and water as those issues have an enormous impact on all of the others and our choices about energy drive much of the process of climate change itself.

In pool, the 8 ball plays a key function and is always placed in the center of the rack. When it comes to climate change and business, Energy is the 8 ball in the system and will drive much of what happens next.

Not if but when and how much

As anyone who plays pool knows, it is very difficult, if not impossible, to control the balls during the break. The only thing that is predictable is that the harder you hit the cue ball, the more the other balls will move. What is also true is that even a relatively soft break, will cause the balls to move around.

For business, the issue is that even small changes to the environment, such as those being experienced already in many parts of the world, will have an impact on energy costs, raw material availability, legislation, consumer behavior as well other issues.

A good pool player thinks several shots in advance. For business leaders, the sensible thing is to consider these changes in advance and plan for them .