Businesses can’t ignore climate change
Every now and again, wandering about the corporate traps, it’s still possible to meet a senior executive who doesn’t think climate change is ‘‘a thing’’. The chief executive of the Institute of Directors, Kirsten Patterson, struck a bit of it last week at a global directors’ summit in Washington, DC.
She told the Environmental Defence Society’s business and climate change conference in Auckland this week that speakers commonly bookended their references to climate change with dismissive asides of the ‘‘if it’s real’’ variety.
Of course, the science will never be settled on climate change. That’s the nature of science – an endless quest for a fuller, more emphatic answer.
In the meantime, we simply have the vast majority of scientific opinion weighing in favour of a dangerously warming world in which extreme weather and rising oceans represent an existential threat to the lives of billions of people, let alone threatened species and ecosystems everywhere.
As a consequence, nobody cares what a company director personally believes about climate change.
A formidably hard-nosed Australian commercial lawyer and pension fund board member, Sarah Baker, told the EDS conference that a director is beholden to obey the Companies Act and act in the best interests of the company.
‘‘Whenever you try to talk about an environmental issue with a board, it doesn’t matter whether they think climate change is a ‘thing’ or not,’’ she said. ‘‘You need to speak to them in language they understand, which is their fiduciary obligations.’’
Since climate change spans not only physical impacts but also threats of regulatory intervention, political action, and changing consumer preferences – to name but a few of the risks – no company board worth its salt can just dismiss the issue and move on.
Even more to the point, the 2015 Paris global climate change accord, which Baker described as ‘‘the mother of all market signals’’, matters to the people whom directors should care about most: their investors.
She cited Larry Fink, chief executive of the world’s largest fund manager, BlackRock, which is a presence on the register of almost every company listed on a stock exchange anywhere in the world.
Fink’s annual letter to the boards of those thousands of companies warned that BlackRock would be exploring climate change in interviews with non-executive directors over the coming year.
He would be looking for ‘‘demonstrable fluency’’ on climate change and, where it was lacking, disinvestment was likely to follow.
When addressed in those terms, considering the potential impacts of climate change becomes a ‘‘board non-negotiable’’, Baker said.
To the vast majority of New Zealand small businesses, where the directors and shareholders are very often the same people, talking oversight by global investors is not strictly relevant.
However, in a country with the seventh-longest coastline in the world, every business with either operations, customers or dependence on roads or other services situated on low-lying coastal land needs to consider what happens if the sea swallows any of them in the next few decades.
Local Government New Zealand president Dave Cull warned conference-goers that businesses ‘‘need to expand their risk awareness to whether they will be able to operate at all’’ since ‘‘billions of dollars of roading, water and building infrastructure are at risk from as little as half a metre rise in sea level’’.
The message to the armchair sceptics is clear: You don’t have to believe in climate change to plan for its impacts, which will include new rules, new customer demands, new costs and new business opportunities. To do otherwise is to have your head in the sand on a beach with a rising tideline. –BusinessDesk
Correction: Sharp-eyed musical pedants have correctly pointed out that Little Feat, not Steely Dan, penned the lyric about ‘‘dudes you misuse on your way up’’, quoted in last week’s column.