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Climate change and commerce: back to the future

July 21, 2010

How far ahead do businesses really look? After years of routine excoriation for short-termism, it is hard to imagine them being worried about climate change, a threat that suffers from appearing always to be hurtling towards us – in slow motion.

But things change: consider business planning. In 1980, five year plans were commonplace in small and medium sized businesses – longer for large enterprises. Yet as the temperature of the earth started rising rapidly, so did the speed of change, driven by computers and the telecoms revolution they catalysed – a change that affected the consumers as much as the manufacturers. For business, investment and economic strategists, the entire global trade paradigm has become so volatile, it might appear comical to draft a plan that encompasses more than a year or two.

Except if you are an institutional investor like a pension fund. Or a government contemplating energy supplies, infrastructure and investment, now the cat is out of the IEA bag. Peak oil is nearly on us, and the developed countries are hopelessly unprepared. Strange then to think our lack of preparedness may yet save the government of the day from a nearly intractable problem: how to mitigate climate change effectively without losing the next election.

There is a conflict between electoral cycles and long term business planning. Where commerce wants some kind of predictability, some assurance about energy and infrastructure development would be welcome. Commercial investment is risky enough without having to weather turbulent volte-face politics shaped by focus groups and partisan media while the oil is running out and the planet warming up.

Perhaps it is ironic then that the call to arms that is the Lloyd’s/Chatham House report Sustainable Energy Security: Strategic risks and opportunities for business should be answered so negatively, but as The Guardian reported on the 19th July, the Committee on Climate Change (CCC) were campaigning for continued support of low-carbon technologies, while at the same time Chris Goodhall was documenting “…a reduction of just under 20% of total public expenditure on low-carbon technologies. This figure is on top of the cancellation of the £80m loan to Sheffield Forgemasters that would have paid for much of the installation of a new press to make the huge parts necessary for new nuclear power stations”. As far as a joined-up energy strategy, the UK has yet to formulate one, and commerce is keenly aware of the potential instability this indecision could bring about.

Not a healthy environment for business, one way or another.

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