June 24, 2011
Don't Believe in Climate Change? Then Adapt for Competitive Reasons.
by Robert Kropp
SocialFunds.com talks with Hunter Lovins, author of Climate Capitalism and President of Natural
Capitalism Solutions, about the business opportunities presented by adaptation to climate change.
Among the speakers at the BaseCamp SRI conference held
last week in New York was Hunter Lovins, the President and founder of Natural Capitalism Solutions (NCS), an environmental
advocacy and consulting organization. Lovins is also the author of Natural Capitalism and the
recently published sequel, Climate Capitalism.
Lovins set aside sometime during the
conference to talk, often humorously and always in great detail, with SocialFunds.com about the new
book, the work of NCS, and the business opportunities waiting to be seized in response to the
challenges presented by climate change.
"Climate Capitalism argues that even if you're a
profit-maximizing capitalist who believes climate change is a hoax, you'll do exactly what you'd do
if you were scared to death about climate change, because we know how to solve it at a profit,"
Lovins said. "You don't have to believe in the problem to believe in the solution. There are
opportunities to make more money while solving the problem."
Of course, Lovins continued,
"Climate change is real, is proximate, and is very serious. But it's only one of an array of
problems facing capitalism as we know it, from peak oil to water to half the world's population
living on less than $2.50 a day."
However, "US legislators are intent upon denying that
climate change exists and believing that it would be better to let our green tech jobs go to
China," she said. "A number of countries are investing heavily in the green economy, or what the
Chinese call the circular economy."
Germany is one country investing heavily in renewable
energy technologies, in its case solar power. By the end of 2010, Germany had an installed solar
capacity of over 17,000 MW, by far the most in the world. In May of this year, Germany announced
that it would phase out all 17 of its nuclear power plants by 2022 and will rely on renewables
"The German solar industry now has more jobs than the American steel industry,"
Lovins said. "How did the Germans get there? They have good policy, i.e. feed-in tariffs. A study
by Deutsche Bank found that while electricity rates have gone up, they went up less than if the
Germans did nothing." Feed-in tariffs are guarantees of payment at premium rates for electricity
from renewable sources that is fed into the grid.
"If we want out of the recession, we
know how to do it," Lovins said. "Those wild-eyed environmentalists over at Goldman Sachs have
shown that companies that are leaders in environmental, social, and governance (ESG) policy have
25% higher stock value. The Economist Intelligence Unit has shown that ESG leaders have the
fastest-growing stock value."
"We're already at the point where companies making an
authentic commitment are driving their markets, gaining market share, and increasing labor
productivity," Lovins continued. "All aspects of the integrated bottom line."
step toward a low-carbon economy is mitigation through energy efficiency measures, which Lovins
described as "low-hanging fruit that grows back." Energy efficiency not only reduces reliance of
fossil fuels, but also results in significant cost savings within a short period of time. A 2009 report by McKinsey &
Company, for example, projected that a comprehensive national approach to energy efficiency
would lead to energy savings of $1.2 trillion by 2020, and reduce greenhouse gas (GHG) emissions by
1.1 gigatons per year.
"However much we'd like to think we can mitigate our way out of the
climate crisis, it's a little too late," Lovins cautioned. "We're going to have to start adapting.
The extreme weather events we've been seeing are exactly what climate scientists say to expect in
an era of a warming earth."
"It will take the business community waking up and realizing
that it is a competitive issue, an issue of the long-term share performance of companies," she
said, "And the investment community realizing that if they put their money into the companies of
the future, they'll do very well. Their money is at risk if they persist in putting it into
companies that don't get it."
"It's going to take local action," she continued. "Policy is
dead at the national level, it's probably dead at most state levels. It's almost like these people
are intent upon creating another collapse."
"It is the diligent effort in how you
transform how you do business that is taken seriously in the marketplace" and among key
stakeholders, Lovins said, referring to her experience advising L'Oreal, the cosmetics company.
Noting that the company practices energy efficiency, and even has a facility in Canada with a net
zero carbon footprint, Lovins advised L'Oreal to "Consider telling your very good story of
authentic commitment to behaving in a sustainable way. This is what the young people of today
want," she said, referring to studies that show sustainability issues to be important
considerations for college graduates entering the workforce.
"Companies should have solid
relationships with third-party verifiers and non-governmental organizations (NGOs) who will
criticize them when they do something wrong," Lovins said. "Follow Global Reporting Initiative (GRI) protocols. Companies
that are not GRI-compliant are putting themselves at risk."
While a majority of large
companies seems to now understand the importance of sustainability reporting—the 2010 S&P 500 Report of the Carbon Disclosure Project (CDP) found that
59% of companies in the index report on GHG emissions—smaller companies lag far behind, according
to a report
published earlier this year by Pax World
Lovins noted that a service provided by NCS "is aimed at small businesses,
to help them implement sustainable procedures profitably." Referring to a taco maker in California
who wanted to sell his product to Wal-mart, Lovins observed that the first two questions Wal-mart
asks of its suppliers address reporting of GHG emissions and issuing a sustainability report. The
Solutions @ the State of Business product offered by NCS, Lovins said, helped the taco maker save
$450,000 through efficiency measures.
"The economy is clearly in trouble," Lovins said.
"Is the economy going to go over a cliff again? It would not surprise me. Investors ought to be
taking this very seriously." She praised the sustainable investment community for having "a
disproportionate influence on the economy as a whole."