Wednesday, April 2, 2014
The cover article for the April, 2014 edition of the Harvard Business Review is entitled, "Resilience in a Hotter World." It provides a fascinating look at how climate change will redefine corporate strategy. It is an interesting market perspective for those of us who may spend a lot of time thinking about resilience from a regulatory perspective. Here is an excerpt from the article intro:
It's impossible to pin any one weather event on climate change, but the scientific consensus is that as the planet gets hotter, the frequency and severity of destructive weather will only increase. Along with -- and often because of -- these weather patterns, we're seeing increases in the prices of most commodities that business and society rely on. This is a sharp reversal of the trend toward lower prices that occurred during the past century. (See the exhibit "Soaring Commodity Prices.") Major storms, droughts, and floods are cutting the supply of some renewable commodities, such as crops and clean water. Nonrenewable resources, such as oil and some metals, are also becoming scarcer. The world won't run out of them immediately, but easily obtained, cheaper stores of them are dwindling. Meanwhile, growing populations and new wealth, particularly in China, are driving up demand for all commodities. This recently happened with cotton. As a consequence, prices for it rose 300% over one two-year period, forcing apparel makers and retailers to choose between passing along the costs to consumers, which would reduce sales, or keeping prices steady and taking a direct hit to margins.
Though companies today face many global-scale challenges -- from destabilizing demographic shifts to the threat of financial system collapse -- extreme weather caused by climate change and increasing limits on resources are both having an unprecedented impact, threatening corporate profits and global prosperity. These "megachallenges" will require companies to fundamentally rethink their strategies and tactics.
The article cannot be linked because its Internet version is behind a paywall; however, it is available at newsstands and also to most academics through online e-libraries.
Stephen R. Miller