Paul Douglas: Forecast Calls for Climate Smart Business
April 24, 2012
Paul Douglas’ essay “A Republican Meteorologist looks at Climate Change” went seriously viral in early april, shortly after I had conducted a Skype interview with him for my recent 2 part video.
In a recent follow-up email, he told me “I’m seeing things I never thought I would see in my career. The analogy I give is Mother Nature picking up the Weather DVR, putting our seasons on fast-forward, turning the volume of extreme weather events up to a deafening 11.”
Now he’s back with a new essay in Bloomberg News on Climate-smart business:
When will American business wake up to the scientific reality of climate change?
When the common-sense moderate middle wakes up. When pragmatic entrepreneurs and investors realize an intransigent, inflexible and, worst of all, factually incorrect political stance could lose the U.S. global influence and mountains of cash. We risk our technological and engineering — and moral — leadership to other countries if we continue to deny and debate established science.
I’m a moderate Republican, a Penn State-trained meteorologist and small-business owner, and I’m disheartened by my party’s refusal to acknowledge the physical evidence of climate change. The denial is disconcerting in and of itself, but it could also have serious and long-term economic consequences.
Action in the U.S. is being held back by a potent concoction of political mendacity about science, misleading talking points from anti-science groups, blind party loyalty (on all sides), investment barriers, century-old energy business models and generation gaps. The 21stcentury will be won by the nation that solves the energy-and-climate problem — and the United States is tripping over itself at the starting line.
Something interesting happens once you acknowledge the world is changing: new opportunities emerge. The beauty of free enterprise is that it empowers individuals to take advantage of change. Any smart company or nation is always in what software developers call “perpetual beta,” a state of continuous reinvention and testing of new products, services and business models.
Entrepreneurs new and old thrive on invention and reinvention. They come as young as three-year-old Ever Cat Fuels, in Anoka, Minnesota, which makes fuel from plant oils and animal fats using zircon catalysts. It’s a closed-loop process that uses no water and provides its own power supply. They come as venerable as 120-year-old General Electric, which in May 2005 launched its Ecomagination strategy. The portfolio has generated $85 billion in sales through 2010, in everything from lighting, to solar and wind power, to aviation.
Robert G. Eccles, Ioannis Ioannou, and George Serafeim compared a matched sample of 180 companies, 90 of which they classify as High Sustainability firms and 90 as Low Sustainability firms, in order to examine issues of governance, culture, and performance. Findings for an 18-year period show that High Sustainability firms dramatically outperformed the Low Sustainability ones in terms of both stock market and accounting measures.
For most investors, “sustainability” isn’t about doing the right thing. The conversation has evolved. It’s about doing the smart thing. This demands an answer to the fundamental question: Does it pay to invest in sustainability?Early results are in.This chart, drawn from a Harvard Business School study, tracks the performance of 180 companies over 18 years. The 90 firms that adopted environmentally and socially responsible policies significantly outperformed their peers. Every dollar invested in a portfolio of sustainable companies (blue line) in 1993 would have grown to $22.60 by 2011. That beats the rise to $15.40 for a portfolio of companies less focused on sustainability (purple line).The Harvard report, first released in November, is the most rigorous attempt yet to identify which companies were transforming themselves in sustainable ways before sustainability was “cool.” It’s also the first study to follow companies’ performance for decades — the kind of time frame needed to evaluate transformative long-term strategies — authors Robert Eccles and George Serafeim said in an interview.”These things take time to pay off,” Serafeim said. “If you are short-term oriented, is this a good strategy? No, it won’t pay off. But if you are patient, it will.”