Climate Change: A greener business revolution
Written by: Admin
The low carbon economy is growing and impacting all sectors. McKinsey & Co. researched six industry sectors: Aluminum, Automotive, Beer, Building insulation, Consumer electronics, and Oil & Gas to analyze the impact of climate change on the businesses.
The report highlights that despite increased awareness about climate change, investors are still not taking appropriate actions. According to the survey in the study, Asset Managers and Advisors are not actively making adjustments to investment decisions because of the climate change. So far, most businesses and investors have wait-and-see approach to the climate change challenge. However, delaying the decision to move towards low carbon economy could significantly impact businesses in coming years.
According to the study, businesses that are well positioned to handle climate change opportunities can increase their value by up to 80%. In contrast, companies that are not proactive in adapting the changes for climate change could lose up to 65% of their value. The value and risks varies by sectors.
The four drivers identified in the study that could potentially change the value are: targeted regulations, consumer behavior, technology innovation, and cost of carbon.
Targeted regulations have already started to shake companies. For example, recently California announced companies to lower energy consumption for televisions. Companies that are well positioned to manufacture TVs with the new standards will have competitive advantages over others in the industry.
Consumer behavior changes will affect demands for products. For example, consumer demand for more fuel efficient cars will shape the auto industry.
Technology innovation plays a significant role in businesses today. The companies that have access to best suitable technology at lower cost will be winners.
Policy changes to control carbon will increase cost of carbon for companies. Companies with lower carbon cost will have competitive advantages.
The challenge for auto industry would be to reduce vehicle emission at lower cost while meeting consumer preferences. Companies in Aluminum industry face challenge of moving to low carbon intensity operations and increasing recycling. Oil and gas companies will be required to maintain below average carbon intensity and diversification to compete. Building insulation industry will need to focus growth in developing markets, maintaining higher margin, and reducing carbon footprint of the products. Consumer electronic companies will need to design products that suit lower carbon lifestyle. Beer industry will need to focus more on packaging changes to be competitive.
Source: Carbon Trust, an independent company setup in 2001 by the UK government to accelerate the low carbon economy.
January 25th, 2010 at 1:00 pm
I think very few people realize that climate change will affect every industry. Almost all of the products we consume utilize fossil fuel: from manufacturing, to production, to transportation. Although the oil and gas industry obviously has to undertake some big changes, the automotive industry has equal pressure to become more environmentally friendly while not losing revenue. Again, this is prevalent in every aspect of automotive business, from industrial tire manufacturers struggling with tighter dumping restrictions, to car manufacturers developing hybrid vehicles, and even the automotive testing industry has focused more on testing vehicles for lower emissions standards.