Global Warming and Its Effect on Business - Essay Example

Global warming Global warming is affecting business and that includes practically every industry. Businesses have to face tough emission-reduction legislation, backlash from the environmentally concerned consumers, while also trying to manage the weather-related damage to the assets (Lash & Wellington, 2007). Consumers take into account the environmental record while making purchases and investors are already discounting the share prices of firms that are not well positioned to compete in a carbon constrained world. Global warming is supposed to have devastating effects on the Earth and its people. The Earth is heating up and it will affect the crops. The rising of the sea level, the melting of icecaps and the global climatic changes are all the impacts of global warming. Global warming has influenced the business strategies as people try to reduce the greenhouse effect through efficient operations or energy conservations techniques. Regulations are imposed every other day to reduce the quantity of carbon dioxide and other gases emitted into the atmosphere. Nevertheless, it is argued that global warming presents new oppurtunities to businesses; it encourages innovation and creativity with the help of advanced technology. Global warming is believed to be destructive and expensive (Richman, 2007) but smart companies know which way the wind is blowing and how fast the ice is melting (Gunther, 2006). They find new ways to innovate, save energy, cut costs and reduce emissions. Insurers manage $26 trillion of assets of companies and are trying to influence the government to change policies so that radical action can be taken to cut greenhouse gas emissions (Webber, 2002). Businesses have to evaluate the risks and analyze the oppurtunities that climate change has posed (Hagen, 2007). Stronger storms, prolonged droughts in some areas and heavy flooding or precipitation in other areas can adversely affect the immovable properties of businesses. The value of properties in coastal areas could decrease and they may be required to construct sturdier buildings that are more solid and resistant. This translates into oppurtunities for constructions material suppliers as well as for insurance. The insurance company AIG is offering brokerage and greenhouse management services to clients participating in the market for the buying and selling of greenhouse gas emissions allowances and credits (Lash & Wellington, 2007). While the insurance industry is trying to minimize risks from building fires and earthquakes, they are finding new oppurtunities to develop creative loss-prevention solutions and products that will reduce losses emanating from climate change and global warming (Mills & Lecomte, 2007). It will also help to cut the emissions causing global warming. Insurer-initiated hurricane loss prevention methods have already been used by 500 commercial locations thereby demonstrating the benefit to the insurance industry. Investment management firms have also found new oppurtunities. They offer investment products that take into account the climate risks facing the companies held in its portfolios (Lash & Wellington, 2007). Goldman Sachs has implemented a coordinated environmental-policy framework which requires the measurement and reporting of greenhouse gas emissions that are relevant to its internal operations. In doing so, they feel they exhibit their commitment to serve their clients and create long-term value for their shareholders. While on the one hand, many more businesses insure their assets, there is pressure on the firms to use renewable energy sources, thereby increasing the demand for such energy. Companies like American Electric Power Co. (AEP) are investing in renewable energy projects and also exploring ways to burn coal more cleanly (Carey & Shapiro, 2004). While most companies are trying to cut down on their greenhouse emissions, others like General Electric (GE) is anticipating a growing market for its wind power division and for its energy-efficient appliances. The automobile industry, especially manufacturers like General Motors and Toyota are investing in research and development to bring out hydrogen powered cars that do not emit carbon dioxide. Need for carbon-free power means a boost for nuclear reactors. GE has also launched ecoimagination – which are a set of clean technologies serving the transportation, energy, water and consumer product sectors (Lash & Wellington, 2007). Global mean temperature has increased by about 0.6 - 1°C over the last 100 years and will increase in the future as well. The temperature would further increase from 1.4 to 5.8° until 2100 (Burki, Elsasser & Abegg, 2003). In the tourism sector also demands has intensified and businesses have changed their product offerings. According to Scott (2003) summer tourist season would increase dramatically due to global warming. Popular parks in Canada and North America are located in the mountainous regions and visits to the parks would increase specially in areas like the Rocky Mountain National Park (RMNP). This would in turn lead to an increase of 6-10% in economic output and 7-13% increase in local jobs. A behavioural change has been observed in the business travelers that link carbon reduction with the travel process (KDS, 2008). Companies exhibit a growing sense of environmental awareness into traveling smarter, more productively and with less impact on the environment. The companies have demonstrated increase in their corporate social responsibility by adopting self-booking travel systems, by being directly involved in the selection process and selecting travel options according to its impact on the environment. To curtail business travel employees are being given the latest video-conferencing technology which means increased business for the audio-video equipments companies (Gardner & Cohen, 2009). Companies are also investing in developing innovative waste-recovery and recycling initiatives. They are trying to reduce fuel consumption by adopting eco design in material and packaging in order to increase the number of product units that can fit in each truckload. To demonstrate their corporate social responsibilities companies are also turning down the heat and air-conditioning in offices, shutting off the lighting system in non-working hours and installing motion sensors and fluorescent light bulbs (Gardner & Cohen, 2009). If companies do not manage the climate change efficiently, they risk the reputation of the firm and reputation is important to be able to attract investors. They have to satisfy all the stakeholders of the company including the employees, customers and suppliers, the society and the government in addition to the shareholders. To do this companies have started aligning their corporate objectives with the challenges posed by climate change. They also need to quantify their ‘carbon footprint’ which is an indication to the stakeholders that they recognize that climate change is a critical issue (Lash & Wellington, 2007). Companies are taking advantage of technology and introducing innovative products thereby enjoying cost benefits. Caterpillar has introduced very efficient low-emission diesel engines (Lash & Wellington, 2007). In addition, it has found a new line of business. It is making particulate filter systems that can be retrofitted on its own and other manufacturers’ engines. In addition to being innovative and technology friendly, companies are also finding newer means to be competitive and sustain competition. Consumers express concerns national energy security, climate change, local air pollution and the cost of filling up at the pump. Honda and Toyota have addressed these concerns and despite having the most fuel efficient cars, they became leaders by commercializing hybrid vehicles. Wal-Mart too focused on reducing greenhouse gas emissions as they recognized this to be a good business strategy. It saves money for their customers, makes them more efficient in business, and has helped to position them to compete effectively in a carbon-constrained world. Henkel, the German best seller of consumer brands like Dial and Purex, have used this as an opportunity to be sustainable and have competitive advantage over rivals. They have been innovative and creative and introduced new products that are not just eco-friendly but also profitable. They have established a new quality standard as their formulation combines excellent laundry power and performance with optimum environmental quality (Waghorn, 2009). Schneider Electric and its automation subsidiary have also found a new business opportunity. They will audit buildings, suggest engineer efficiency measures, implement retrofits, and provide performance guarantees of energy savings (CSE, 2007). They will also gain back the wasted resources while introducing a new era in social responsibility. It can thus be seen that it depends upon businesses or the industry stalwarts to find opportunities amidst crisis. Climate change has provided ample oppurtunities to firms to expand their scope of business. All it requires is for them to map their risks and evaluate the new opportunities. Every industry has benefited and this does not just mean the manufacturing sector. The manufacturing sector no doubt has employed latest technology to reduce carbon emissions but even sectors like investment banking, insurance and the tourism too have found new ways to expand their services. The firms need to quantify their carbon footprints, assess their risks and oppurtunities, take into account the various regulatory factors including how it would affect their supply chain, incorporate technology to be innovative and attain sustain competitive advantage by their creativity. Instead of anticipating and being apprehensive of the dangers firms that have recognized this as an opportunity have been wise and changed their strategy. The risks can be and should be transformed into oppurtunities as they add value to the company. 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