• Home
  • Latest
  • TV
  • Now & Next: How can business survive climate change? – in partnership with The Economist

Now & Next: How can business survive climate change? – in partnership with The Economist

Posted on 13 January 2021

Climate change is currently one of the biggest threats facing humanity and the COVID-19 crisis has highlighted the perils of failing to prepare. Holding off the impacts of climate change will require re-wiring the global economy – but can the corporate world react and adapt in time?

See Mishcon Purpose for further information.

Narrator
Climate change is about to up end the corporate world like never before. 

Massive devastation. Heavy regulation.

Nicolette Bartlett Director, Carbon Disclosure Project
The world’s worst emitting companies, even the worst medium emitting companies are on borrowed time.

Narrator
And lots more litigation.

PG&E’s billion dollar pay-out.

Volkswagen pleading guilty in Detroit for cheating on emissions rules.

Chiti Oti-Obihara - Extinction Rebellion
If businesses refuse to change we will go the way of the dinosaur.

There is ash that is falling.

Narrator
Staving off the catastrophe of climate change requires a rewiring of the entire global economy.  This spells huge opportunities for some.

Sanjeev Gupta - CEO, Liberty Steel
The economic opportunity of this green revolution is not less than original Industrial Revolution.

Narrator
But can the corporate world react and adapt in time?

Richard Sorkin - CEO, Jupiter Intelligence
Climate change is like cancer, the longer you wait the worse your chances are.
 

NOW&NEXT

How can business survive climate change

- October 2nd 2020, Napa Valley, California

Lisa Micheli - President and CEO, Pepperwood Foundation
We were driving through downtown St Helena and you can see the smoke and people’s headlights.  The smoke is so thick it’s like a dense fog.

Narrator
Lisa Micheli is a scientist who advises businesses on the impact of wild fires caused by climate change. Within the past few weeks four out of California’s five biggest recorded wild fires has smothered this famous wine growing region with ash and smoke.

Dan Petroski
The fire stops here, it doesn’t go to the other side of the bridge.

Narrator
Today, Lisa is advising Dan Petroski, wine maker at Larkmead Vineyards on how to reduce its exposure to risks.

Lisa Micheli
It looks like you had a lot of damage down there.

Narrator
Just three days ago fire burned right up to the edge of these vineyards.

Lisa Micheli
That’s what I call a hazard for you. So what was it like when you first headed towards Larkmead?

Dan Petroski
There were fire fighter trucks on the other side of this, the river here. It was the heaviest smog I have been part of, stinging my eyes. Also that, that night a power line went down and hit my car and that’s when I put out a fire over by the winery and that’s when I burnt my boots.

Lisa Micheli
Let’s see those boots. These are…

Dan Petroski
So the rubber on the bottom, the soles of my boots were… well this was actually the fire at Larkmead on the property.

Lisa Micheli
How high do you think the flames got here?

Dan Petroski
There were actually flames straight up. There was one that looked like it was just like super ominous, it was by itself and it was just like a lonely tree with just a straight fire line.

Lisa Micheli
Well this is a great example for the two of us, the place that is burned but if another fire was to start there is plenty left that could burn again.

Narrator
For Larkmead this fire was narrow escape. But in an estate that produces 86% of America’s wine, many other businesses have not been so lucky.

Lisa Micheli
8,000 structures have been lost and nearly 30% of the county of Napa has been consumed in the 2020 fire season. We are dealing with constant power shut offs. During the fire weather to try to avoid fires from starting so this of course is hitting a community that has had two years of fires and then the Covid crisis and so our local businesses are struggling to stay alive.

Narrator
Temperatures in excess of 35 Celsius spoil grapes and force vineyards to shut down. Just over a century ago Napa county hit these temperatures on average six days a year. Now that figure is thirty three days. The average temperature of the planet has already risen by almost 1 degree Celsius since 1970. Climate models suggest that if this reaches 2 degrees the worlds existing wine growing region will shrink by 56%.

Lisa Micheli
Although I was exposed to the concept of climate change early in my career, I never thought that the impacts we were projecting would come to pass in my lifetime. Our computer model said oh maybe it will happen at the end of the century, you know, 2050, 2060 but we are here in 2020 and we are seeing some of the worst case scenarios come to pass.

Narrator
The physical risks to businesses from climate change stretch far beyond the industry of wine making.

25th named storm of the season.

It is the earliest J-named storm in history.

Narrator
Across the planet businesses of all kinds are facing growing disruption from more extreme floods and storms. Research suggests that climate change could cost 215 big global firms are collecting one trillion dollars, much of this over the next five years. Rich Sorkin is a Co-founder of a leading data analytics company which advises firms on how to mitigate these risks.

Richard Sorkin
The business community is facing more risk from the weather driven by climate change than ever before. The statistics on this are crystal clear. The financial loss from weather related events is at record levels where the impact has been devastating.

Narrator
To protect societies and their businesses from the worst effects of climate change, more funds are needed for adaptive measures, from floating farms and storm resilient seeds to pop-up sea walls. According to one estimate around 180 billion dollars of investment is required each year over the next decade.

Richard Sorkin
If you look ten years forward there won’t be a single large entity on the planet, commercial or Government that doesn’t have a well thought out approach to assessing and addressing physical risks from climate change. It looks a bit like cyber security did ten years ago where businesses by and large were just starting to realise there was an issue but didn’t know what to do about it, didn’t have the tools to address it. Now every major entity on the planet has a well thought out cyber security programme.

Narrator
While they struggle to adapt to the changing physical environment, companies also face a changing regulatory landscape. And recent developments in the world’s two most polluting countries mean this could come quicker than expected.

Joe Biden - President-Elect
In the battle to save our planet by getting climate under control.

China is the world’s largest polluter but it has now vowed to go carbon neutral.

Narrator
The world’s carbon emissions have jumped in the past three decades by more than 60%. Over 70% of this pollution can be traced back to just 100 companies. Mostly through the products they sell such as oil or coal. Leading climate scientist, Gavin Schmidt argues that Government’s will soon find there is no option but to heavily increase regulation on businesses.

Gavin Schmidt - Director, Nasa Goddard Institute for Space Studies
Some companies have as large a carbon footprint as, as some small countries right so, so they have I think an equal responsibility to, to try and do something about the problem. You know, it’s all well and good trying to get Somalia to change it’s, it’s policies but it is irrelevant in terms of carbon but if you can get Walmart to change its policies or Apple or Google then you can do something much more fundamental.

Narrator
Progress has been slow since the 2015 International Paris Agreement to keep global warming below 2 degrees. The UN climate champion responsible for working with business believes it is time to force the pace.

Nigel Topping - UN High Level Climate Action Champion
So collectively we are not moving fast enough. Collectively we don’t have enough policy ambition and collectively we don’t have enough business ambition. This is going to be regulated and you can’t just wait until the regulations come and then start changing it.

Narrator
There is pressure on Governments to bring in regulation of the corporate world now. It’s coming from consumers and climate activists and it’s the focus of this Extinction Rebellion protest in London.

Economic interests who are prepared to sacrifice your long-term future for their short-term profits.

Chiti Oti-Obihara
I think primarily everyone is here protesting today because there is a real sense of being let down.

Narrator
Chiti Oti-Obihara is a former banker who is now Extinction Rebellion’s spokesperson on banks and the economy.

Chiti Oti-Obihara
It is profoundly important to bring pressure to bear on those larger players to change their practice and set a good example so that everyone else can follow. Greenpeace are involved, Friends of the Earth are involved, there are several parties got together to say how do we make the Government actually keep to its promise.

Yeah.

Chiti Oti-Obihara
They’ve declared a climate change emergency and since then you know, nothing has happened.

Narrator
Like many, Extinction Rebellion argues one policy is crucial, forcing businesses to come clean about their levels of emissions.

Chiti Oti-Obihara
Lots of banks and lots of people want to see firms show the world their real and full carbon footprint and trying to make that happen as quickly as possible, as openly as possible is something that XR is fighting for. But if businesses refuse to change we will go the way of the dinosaur, we will lose our habitats and potentially lose our lives in numbers and that’s why groups like us are here asking Government to facilitate a business environment that forces businesses to change if need be because the stakes are so high.

Narrator
What that change will look like is an obligation for companies to measure as well as disclose their own emissions. Nicolette Bartlett is director of an International non-profit which advises corporations on how to do this.

Nicolette Bartlett Director, Carbon Disclosure Project
The world’s worst emitting companies, even the worst medium emitting companies are on borrowed time.  Carbon is very, very costly to society. At some point that will hit their bottom line, it’s guaranteed. So it is a big risk if you are not seeing it, measuring it, reporting it and changing your business practice.

Narrator
Most businesses are not prepared for this transition. Only 16% of listed companies currently calculate and disclose their own carbon footprint.

Nicolette Bartlett
I think it’s becoming harder for companies to greenwash. I think more and more because o the transparency, the investor world has really woken up to this. The central banks have really woken up to this, consumers have really woken up to this and actually during Covid even more so. It’s not a marginal issue anymore, it’s front and centre.  It’s very difficult for companies to hide.

Narrator
But some big corporations are now jumping before they are pushed and making big decarbonising pledges.

Microsoft has made a major climate pledge promising to go carbon negative.

Amazon will be one of the first companies, if not the first company to meet the Paris climate accord ten years early.

Nicolette Bartlett
What we’ve seen is even in the last year a doubling of commitments from company’s right and they range, they may make a claim around going to be carbon neutral or they will make a claim around, I’m going to be net zero by a certain date.

Narrator
The task of delivering on these pledges is daunting. Firm’s will have to disclose not just the emissions they produce but also those from their supply chains which on average are over five times bigger. That’s a tall order for the likes of Walmart. It’s promised to cut a billion tons of emissions between 2017 and 2030 covering one hundred thousand suppliers across the world.

Nicolette Bartlett
It’s supply chain is massive. It’s a very bold target. So the next ten years are going to be critical.  I would argue that maybe now some of the, the lower hanging fruit, the easier stuff has been done in that supply chain. It’s going to take a huge effort across all of those supply chains. It’s absolutely critical that you are able to cover your entire value chain.

Narrator
Ultimately it’s the world’s most polluting companies that will be hit hardest by carbon regulation and will have to make the most drastic changes to survive. In South Yorkshire in Britain, once an industrial heartland, heavy industries like coal mining have died out. But at this steel plant in Rotherham, climate change has provided a seemingly unlikely opportunity for rejuvenation through radical green adaptation.

Sanjeev Gupta
It’s almost God’s power in your hands. It’s such an awesome feeling.

Narrator
Now they are recycling steel here. According to the CEO this has halved the company’s emissions in Britain and cut costs.

Sanjeev Gupta
For the UK it’s a no brainer. For the UK it is absolutely definitely cheaper to recycle steel than to make new steel. UK exports eight, nine million tons of steel scrap already and we export steel scrap and import steel which made no sense at all so our model was based on recycling local steel scrap for the local market which was a better economic model.

Narrator
For the long-term the CEO says the company is investing in green steel which uses hydrogen to dramatically reduce emissions even though it could be two decades before this technology is commercially viable.

Sanjeev Gupta
Hydrogen is electro-renewable so it is only just really starting its journey now. As we make more and more hydrogen that technology will become cheaper and cheaper. The same way as wind and solar technology, very expensive ten years ago and has become more and more competitive as we adopted more and more scale and as technology is developed. This journey to green steel is inevitable.

Narrator
And there lies a strong incentive for businesses to adapt to climate change. It could actually be good business in the long run. Those who invest now in expensive decarbonisation may steal a march on the competition.

Nigel Topping - UN High Level Climate Action Champion
We know how industrial transformation takes place, it always happens exponentially and those who get the wrong side of the curve can never catch up. And we see newcomers, right, who bet their arm on that transition becoming the new industrial titans.

Narrator
This penny has dropped for some fossil fuel companies. In an industry where profits could fall from $39 trillion to $14 trillion by 2050. The Danish company, Orsted has doubled its share value by completely ditching oil in favour of renewables.

Nicolette Bartlett
This building that we are sitting in, it’s not just about the energy it uses to keep us warm or cool and to put the lights on but it is also about the materials that made this building.  Is it more expensive?  At the beginning yes. But is that going to be a market for the future? 100% so I would say it is logical, visionary business practice.

Narrator
But if the carrot of long-term profits doesn’t incentivise companies to go green, there’s a stick that might force more hands in the future. The growing legal risks of failing to adapt to climate change have been highlighted by one utility company in California.

Well today PG&E is expected to plead guilty to involuntary manslaughter for the utilities role in the deadly campfire.

Narrator
In 2019 Pacific Gas and Electric pleaded guilty to one count of illegally starting a fire and eighty four counts of involuntary manslaughter. The deadliest corporate crime successfully prosecuted in America. PG&E powerlines have helped start over 1,500 wild fires in the past six years. In a region where rising temperatures caused by climate change have increased the risks around fires, Courts have concluded the company failed to invest in maintaining their equipment. And back in the wine country of Napa Valley local businesses have paid the price.

Christopher Vandendriessche
When the doors burned the wine burned behind it so I lost about almost 17,000 bottles of wine here, in this tunnel here.

Narrator
One of them is the White Rock Vineyard owned by Christopher Vandendriessche and his family.

Christopher Vandendriessche
This is my dad Henry, he started this, this version of White Rock in the 70’s when he replanted the vineyards. This is one of the bottles that partially burned in the fires and when you see that smoke coming in it’s a very visceral feeling, it’s horrible and traumatic.

Narrator
In 2017 fires burned down every structure on their property.

Christopher Vandendriessche
I think that there needs to be a culture change at PG&E in order to do a better job of maintaining the networks that they, that they oversee and to reduce the profit motive.

Narrator
The Courts have ordered the company to pay out billions in compensation and PG&E says it has changed it ways.

Lisa Micheli
I do think that many people who took part in that case feel vindicated. Our entire business community and utilities need to learn to adapt to a changing client.

Exxon Mobil has long been criticised for allegedly hiding what it knew about climate change.

Narrator
A growing number of companies are facing legal proceedings linked to global warming, from allegations of misleading investors about climate risk, to public nuisance claims. Between 2000 and 2010 about twenty climate related cases were brought against businesses but in the past decade that figure has soared to around a hundred and twenty.

Richard Sorkin
Bankruptcy, negligence, indictments, loss of reputation all these terrible awful things are going to happen to more companies if they don’t wake up and start addressing these issues.

Narrator
Lack of effective preparation for Covid 19 has contributed to devastation around the world. It’s highlighted the importance of acting against climate change now rather than waiting until the crisis worsens. But few companies are heeding this lesson.

Nigel Topping
The longer we go without taking enough action and the harsher the course correction is then the bigger the stranded assets will be, economically and at human level.  Do we manage this or do we screw it up?

Lisa Micheli
The only choice in front of us is to lean into the clean and the green economy, not leaning in means economies that could be so severely damaged that what we seen now as our global capital market would look fundamentally different.

This is not an issue that anybody who thinks that they are a leader can just ignore right, this is a fundamental challenge for this century and anybody who thinks they can side step it, is not really leading at all.

Guy Scriven - Correspondent, The Economist

Hi my name is Guy Scriven, I am The Economist’s climate risk correspondent. If you would like to read my special report about business and climate change please click on the link opposite.  If you want to continue watching our Now&Next series, click on the other link. Thank you for watching and don’t forget to subscribe.


Visit the Academy for more learning, events, videos, podcasts and reports.

How can we help you?
Help

How can we help you?

Subscribe: I'd like to keep in touch

If your enquiry is urgent please call +44 20 3321 7000

Crisis Hotline

COVID-19 Enquiry

I'm a client

I'm looking for advice

Something else