The countdown to Copenhagen’s COP15 UN climate conference has begun.  From 7 December 2009, environment ministers and officials from around the globe will gather to determine a successor to the Kyoto protocol.  Here on the other side of the world, the emissions trading debate has been running “hot”. This debate highlights that sustainability is not just an issue for country leaders, policy experts and environmental activists.  It is being discussed in boardrooms around the world as “eco-friendly” becomes the new business norm. As consumers, we are about to encounter a whole new perspective on our acquisitive behaviours.

“Being a good corporate citizen requires more than business as usual – it requires investment in society and the environment.  We are all shareholders in our children’s future and the future of our planet and by working together we can build an economy in which everyone benefits.” (Bill Clinton) Climate change is not just an environmental or compliance issue.  It is a strategic issue that could give a company the edge or leaving it trailing against its competitors if it fails to adapt, no matter what size it is.

According to a recent study in the Harvard Business Review concerns that sustainability initiatives will increase expenses at a time when revenue and costs are under pressure, are short sighted.  This research shows that sustainability initiatives reward business with organisational and technological innovations that yield both bottom line and top line returns.  Becoming environmentally friendly lowers costs because companies end up reducing the inputs they use.  In addition, the process generates additional revenue from better products or enables companies to create new businesses.

Furthermore a recent study conducted by the Department of Environment, Climate Change and Water (NSW) found that people are increasingly keen to work for companies that are environmentally responsible.  Some employers have already struggled to retain or recruit the best staff because they have no position on climate change while their competitors have thrived because of the reputations and clearer communication.  Staff are more engaged with, and more enthusiastic about a company, when they are given the opportunity to help in improving its environment performance and looking for ways to reduce energy and other resource usage.

A recent Google search for the phrase, "Saving the planet one [whatever] at a time" revealed more than 17 million responses, with everything from saving the planet "one flush at a time" to "one hanger at a time" to "one bag, one shower, one burger, one carpet, one idea..."  No matter what the industry, sustainability is today’s buzzword. Cut through all the media hype and what are the five main issues business needs to consider?

Climate change affects everyone so you have to understand its impact.

There is no hiding place in a globalised hyper-connected economy for “carbon dummies or criminals”.  Staff, contractors, supply chains, competitors, customers, directors, shareholders and investors are all affected to some degree by climate change and the legislative response.  Every company is going to needs to know its exposure and have a management plan that is championed from the top. Designing and implementing the plan as well as educating senior management may require specialist help.  Seek it sooner rather than later as it appears likely that corporate governance reforms will increase scrutiny.

Public sentiment is well ahead of the government.

Increased community awareness and responses to events such as floods, bushfires and droughts by the public will not abate.  This shift in sentiment will embolden those calling for change and pressure governments into accelerated action. As a business you need to build and maintain strong community engagement so you understand the customer, public and political environments. 

Climate change is not just about the environment, accounting or community engagement.

Knowing your carbon footprint, staff volunteering and using recycled paper will not set your business apart when everyone is doing it.  This new economy will present opportunities calling for solutions.  You need to be thinking ahead and respond earlier than constrained competitors.  This is the time to build collaborative capacity.  Alliances with other businesses, non government organisations and governments will be critical.  Success in this new economy will often depend on a business’s ability to create new mechanisms for developing products, distributing them and sharing revenues.

No more business as usual

Going forward, business can expect more uncertainty and accelerating rates of change.  Changes to policy, markets and technology will continue to disrupt “business as usual” so an adaptive strategy is needed. However, a word of caution; ensure that learning precedes investments.  Top management’s interest in sustainability sometimes leads to investments in projects without an understanding of how to execute them.  Better to start small, learn fast and scale rapidly.  Break each step into three phases: experiments and pilots, debriefing and learning, and scaling.  The aim of benchmarking is to develop next practices, not merely to mimic best practice.  Accept that the challenge will not be met without course corrections and major changes.  Although directional consistency is important, tactical flexibility is the critical factor.

Carbon will become more costly

The cost of carbon intense electricity generation from black and brown coal will only increase in the transition towards a clean economy.  Policies that sustain the carbon economy are likely to be short term and transitory at best.  Carbon is real and will soon come at a direct or indirect cost.  From a business perspective, reputation, legacy and bottom line could all be at stake through support for short-term protectionism.

Being active, rather than reactive, to the challenges of the new carbon constrained world, is what will set businesses apart from their competitors. We would do well to ponder on the famous opening from Charles Dickens’s A Tale of Two Cities (1859).

It was the best of times, it was the worst of times; it was the age of wisdom, it was the age of foolishness; it was the epoch of belief, it was the epoch of incredulity; it was the season of Light, it was the season of Darkness; it was the spring of hope, it was the winter of despair; we had everything before us, we had nothing before us; we were all going to Heaven, we were all going the other way.