The New Sustainability

A happy belated new years!

I had an amazing opportunity to dive in Belize, where the positive impact of sustainable tourism was hard to ignore. It was particularly refreshing to see how locals were taking an active approach to protect their long-term natural capital rather than to exploit it to decimation, which is an issue prevalent in many countries of developing Asia where I’ve visited. With travel and tourism contributing to over 30% of the economy in Belize in 2011 and the largest source of foreign exchange, there are tangible benefits to this commitment for every participant in the Belizean economy.

With sustainability fresh on my mind, I read a New York Times article on the economic impact on corporate profits that I thought was particularly interesting. In 2004, Coca-Cola had lost its lucrative operating license in India due to serious water shortages:

Today, after a decade of increasing damage to Coke’s balance sheet as global droughts dried up the water needed to produce its soda, the company has embraced the idea of climate change as an economically disruptive force.

“Increased droughts, more unpredictable variability, 100-year floods every two years,” said Jeffrey Seabright, Coke’s vice president for environment and water resources, listing the problems that he said were also disrupting the company’s supply of sugar cane and sugar beets, as well as citrus for its fruit juices. “When we look at our most essential ingredients, we see those events as threats.”

Coke reflects a growing view among American business leaders and mainstream economists who see global warming as a force that contributes to lower gross domestic products, higher food and commodity costs, broken supply chains and increased financial risk. Their position is at striking odds with the longstanding argument, advanced by the coal industry and others, that policies to curb carbon emissions are more economically harmful than the impact of climate change.

Methodologies to valuate natural resources (vs man-made capital) have long been in existence, and so have the social and moral grounds that led to the rise of corporate sustainability and social responsibility. However, what may be different in the last few years is the tangible economic impact of climate change to the corporate bottom line. The increasing frequency and severity of events (ie. “once-in-a-lifetime” floods, droughts, and pollution, all happening within a short few years) are not only affecting only our product supply chains in far-flung countries, but the very factors of production needed by corporations that come to impact our wallets. Climate change skepticism is then no longer a matter of conservative polemics or political favoritism of Big Business, but a realization by Big Business itself that changes in business operations are inevitable in a world where the status quo no longer holds the same.

Perhaps what is most telling is a new economic commission started by progressive Republican businessmen-turned-politicians as of late. Called Risky Business, it is a joint initiative by the philanthropic offices of former NYC Mayor Michael Bloomberg, former Treasury Secretary and Goldman Sachs CEO Hank Paulson, and Next Generation. As succinctly put by Robert E. Rubin, former Treasury Secretary during the Clinton era, “to make meaningful headway in the economics community and the business community, you’ve got to make [the economic impact of climate change] concrete.” Here’s to a lot of quick action.

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