In my experience, even very sharp business leaders tend to misunderstand three facts when thinking about climate change.
The first is how much action we need to take. We're used to hearing that we'll need to reduce our carbon emissions by some percentage. The blunt reality is that to avoid catastrophic climate change, humanity needs to essentially eliminate all emissions. Rather than reducing our pollution by 20%, 50% or even 80%, we'll need to, as the wonks say, "zero out" our emissions.
The second is how fast we're having the need to act forced upon us. Previous goals, set when we knew much less about climate impacts and were more sanguine about early action, tended to focus on distant dates — for example, you still often hear that the figure that the U.S. will need to reduce its climate emissions 80% by 2050. We don't have that kind of time. In order to avoid temperature rises that would be totally catastrophic to the global economy (not to mention humanity itself), we need to begin rapidly reducing global emissions by the end of this decade.
With better science, we've come to understand both the likely risk of raising the planet's average temperature more than 2ºC, and the consequent necessity of not accumulating more than an additional 565 gigatons of CO2 in the atmosphere. Given our current rate of emissions, we'll need a sharp slope towards a "carbon zero" world in order to stay within that budget. Hence the need to stop emitting and do it quickly.
But there's a third fact many business leaders don't always see: how much money there is to be made in this transition to zero. Climate action is the next great boom opportunity.
Quickly getting to carbon neutral societies cannot be achieved by tinkering at the margins. Up until recently, there's been a kind of consensus image of what action on climate might look like: a pastiche of wind turbines, electric cars, green shopping and LEED buildings.
Such steps are insufficient: indeed, the climate action we need involves innovating at a systems level, not just improving the performance of the components of that system.
Take cars. Auto emissions — their manufacture and tailpipe emissions, together with the emissions created by the infrastructure, land use and businesses designed to support their use — make up the largest single source of greenhouse gasses in the U.S.
But the solution to the problem of car emissions will not be found under the hood: even the best cars we can imagine would be unsustainable in an unchanged context of auto-dependent sprawl.That context, though, can change. Indeed, it already is changing, and rapidly.
Compact, walkable neighborhoods are in high demand now, and it's probably the best-proven finding in urban planning that dense communities use less energy on transportation and require fewer cars and less infrastructure to meet the needs of their residents. New housing growth that fills out existing communities, instead of creating more exurban sprawl; investments in walkability; improvements to mass transit; all of these not only dramatically shift driving needs, they improve quality of life. Rebuilding cities will cut auto emissions much faster than technological innovation in the auto industry. And we're entering a city-building boom, both in the U.S. and internationally. Climate, energy and resource issues guarantee that those cities will not work as they do today.
Those ecological pressures mean many other systems within cities will be transformed. Buildings, for instance. Buildings themselves are not just being designed with greater expectations of innovation — for example, the Passivhaus design standard, which can reduce energy costs by up to 90% — but are being designed for consumers who use urban systems differently. Consider the increasing number of single-person households; singles tend to spend much more time out and about, and as a result we see the rise of micro apartments from New York City to Hong Kong. Or consider changing forms of urban consumption, which tend to emphasize having access to things rather than owning them (think of the difference between a gym membership and owning a home gym, or the difference between owning a stack of DVDs and streaming movie rentals online). Buildings in a low-carbon city are not becoming just lower-emissions, but a different kind of product.
Our cities will work very differently for other reasons, too — one that are not primarily ecological, but technological. Your walkshed is the area around you that you feel is within reach by walking. Walkshed technologies are those mobile technologies and distributed sensors and systems that surround a person on foot with a sea of information and access. Already, walkshed technologies mean:
- never getting lost (as long as we can pull up a map on our phone);
- knowing the timetables of services (from passing streetcars to open tables at restaurants);
- being able to see how your peers have rated and responded to the businesses and places around you;
- having access to a host of instant and delivered services;
- socializing and sharing information in networked and spontaneous ways;
- being able to quantify and predict and enhance the performance of urban systems, what some have called the "smart city."
There's more to come, though, much more, as walkshed technologies are gaining the power to do two really remarkable things: facilitate new patterns of association and collaboration, and make useful our surplus capacities. We see the former in trends like co-working (like The Hub), distributed employment (like Taskrabbit), new civic associations, data-driven and member-fueled political campaigns, even online dating. We see the latter in the explosion of sharing services, like car-sharing (like ZipCar), space sharing (Air BnB), tool libraries, and even "pop-up" stores turning empty spaces into profitable businesses on the fly. All of these changes undermine business models we're long assumed were stable — and give rise to lucrative new business models.
Here's the kicker: in this climate-friendly, new urban boom, there's money to be made. Lots of money. Entire business categories are coming into being. Who took seriously car- and ride-sharing services as profitable businesses ten years ago? Who thought fifteen years ago that urban multifamily would be the next boom housing market? Who twenty years ago believed that green building would become not a good deed but an industry standard? The changing reality of cities in the age of climate consequences is throwing aside whole systems we've taken for granted and in their places are springing up new opportunities.
Climate change is not good news for any of us. But because of the massive size of the trends involved — eliminating carbon emissions across a vast global economy, rebuilding and reengineering the cities that at least seven billion people will likely call home by 2050 — the scales of those new opportunities are almost inconceivable.
The potential upside of climate action dwarfs even the great success story of the last 20 years, the rise of the technology industry. Companies can seize these opportunities, if they learn to see the landscape ahead through a new lens of climate necessity magnified by new capacities. This is not about corporate sustainability. It's about fundamental focus. Our world is not what it once was: the situation is more serious, the timing is more pressing, and the fortunes to be made are more astounding. Climate neutrality is not a characteristic of the 21st century economy. It is the 21st century economy.
Article via Harvard Business Review. View it here.