Hurricane Katrina changed business forever. Will today’s extreme weather do the same?
Twelve years ago, Hurricane Katrina ravaged New Orleans. Eleven years ago, Walmart launched its sustainability initiative, deeply affecting how business has been done since then. It wasn’t a coincidence.
During the hurricane and immediate recovery, the government at all levels was overwhelmed by the human and economic needs. It couldn’t deliver basic services like water. But large companies, with their extensive resources and logistics expertise, stepped up. Walmart discovered what it was capable of.
An important shift in how the retail giant approached its business began with then-CEO Lee Scott’s epiphany, penned in a manifesto titled “Twenty First Century Leadership.” Scott realized that the company had a much bigger role to play in society than just delivering everyday products at a low cost and providing jobs. Over the next decade Walmart saved billions of dollars by aggressively cutting its energy use, doubling the efficiency of its fleet, and becoming one of the world’s largest private-sector buyers of renewable energy. But most important, Walmart compelled suppliers to improve their environmental performance.
A climate-changed world is not a theoretical discussion anymore. It’s reality, and the impact on business is significant.
Many can debate how well Walmart has followed through, or whether its environmental gains are lessened by how it has handled other aspects of long-term business sustainability, such as labor and wages. But Walmart’s impacts on other companies, and on the general debate about the role of business in society, are undeniable. The giant created ripples of action.
The storms around the world right now — from Hurricanes Harvey and Irma to the devastating monsoons in Mumbai — are bigger, more devastating, and extreme than even Katrina. Climate chaos is upon us. Will it change the face of business again?
For smart companies it will, and immediately. They’ll be asking themselves several questions, loosely categorized below, or expanding on work they’ve already started.
- Rising seas and extreme weather (assets and operations): Do we — or our major suppliers or customers — have important assets in low-lying areas around the world? How much operational and financial risk do we face, throughout our value chain, from rising seas and mega-storms, or from droughts and water-quality issues?
- Rising expectations: What do our major stakeholders — employees, customers, communities, and even investors — expect from us in terms of action on climate change?
- Rising sun: Are our goals for carbon reduction or renewable energy aggressive enough? Are these targets in line with the ever-tightening science on how much carbon the world can afford to emit?
- Changing political realities: Are we taking a public position and influencing policy (in the U.S. and elsewhere) to keep the world moving on climate action? Sitting this one out is not an option anymore. For example, many of the world’s biggest brands lobbied President Trump to stay in the Paris climate accord, running a full-page ad in the Wall Street Journal. And then, after Trump pulled the U.S. out of the agreement, hundreds of companies made a public declaration that “We Are Still In.”
- Helping out: What can our business do to help in these extreme situations? Do we have special expertise in logistics, or can we shift some production and operations temporarily? Witness how Anheuser-Busch sometimes shifts production at a Georgia facility to put drinking water in cans for emergencieslike Harvey. As Walmart discovered 12 years ago, companies have the scale to help in dire situations.
- Rising revenues: How might our business benefit? It’s OK to ask this — it isn’t taking advantage of a horrible situation. We also need businesses to help prepare for extremes and to aid in recovery afterward. For example, in the immediate aftermath, clean-up is important, and there will be increased sales of replacement furniture, cars, and much more. In the longer run, the construction sector could do well, as will providers of emergency services like portable energy. There are also amazing opportunities to rebuild smarter, more resilient, more sustainable communities. Governments and companies can invest in so-called green infrastructure like natural wetlands to dampen storm surges (versus “gray,” traditional infrastructure like dams and levees) and many more porous roads and surfaces to control flooding.
The bottom line is that a climate-changed world is not a theoretical discussion anymore. It’s reality, and the impact on business is significant. This is blindingly obvious but needs to be said: Cities and regions under water, demolished, or with dispersed or evacuated populations don’t make for healthy economies.
If we don’t see a dramatic shift in how business operates and the kinds of products and services they provide — or how governments and civil society work at all levels — the world will become too unstable for any business, or anyone at all, to thrive. Things have gotten very real. It’s time for businesses to step up.
This post first appeared at Harvard Business Review online.
(Photo credit: Rick Wilson, Reuters)
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