The Challenge of Climate Change: A New Role for Europe

Climate change presents enormous challenges for the world, and for organizations that are accustomed to doing business in an environment on the verge of radical transformation. The United States' decision to withdraw from the Paris Agreement has added a new complication. Global Network Perspectives asked experts across the Global Network for Advanced Management about impact of climate change—and the U.S. withdrawal—in their regions.

Expert answers by CB Bhattacharya, Professor of Marketing, Pietro Ferrero Chair in Sustainability, and Founding Director of the Center for Sustainable Business, ESMT Berlin.

What are the long-term risks—both for business and the environment—in your region from climate change?

According to a recent European Environment Agency report, continental Europe will be facing rising sea levels and more extreme weather such as storms, flooding, droughts and intense heat waves. As a consequence, we expect an increasing risk of forest fires and energy demand for cooling due to climate change.

Consequences of climate change will also translate into business risks. Agriculture and food production sectors will suffer from shortages due to extreme weather conditions. Insurance sector will face more claims. Prices of raw materials, food, energy, and clothing will increase. Tourism is also highly vulnerable.  

How much are employees and consumers holding companies accountable for their business's stance on climate-related issues?

Stakeholders are becoming more and more vocal about their social and environmental concerns. Digitalization and social media even escalate this situation: people are more connected and closer than ever now. Recent surveys and stakeholder dialogues indicate that there is an increasing trend and perceptions of customers and employees are shifting. Customers reward responsible companies and talent is attracted to these companies in the labor market as well.

What impact, if any, could the United States leaving the Paris Agreement have on your country or region?

This decision has a direct impact on the strategic position of the United States as the world superpower and its role as the architect of the international order. We can already see that China is taking initiative and making a move towards the leadership of the world. Immediately after Trump’s announcement, we have seen Chinese and European leaders side by side criticizing Trump’s decision. Chinese Premier Li Keqiang said that “fighting climate change is a global consensus” and pledged that China would remain committed to the Paris agreement. Similarly, Angela Merkel said "the cooperation of the European Union with China in this area will play a crucial role, especially in regards to new technologies." Germany is also willing to take initiative;  Merkel said, “We Europeans must really take our fate into our own hands. It became clear at the G7, when there was no agreement [on climate] with the USA, how long and rocky this path would be.”

In the EU, there are also some suggestions to induce a carbon tax at the border for all the goods that come from the U.S. This would be a major hit to the companies in the U.S as the EU is the United States’ number one trading partner.

However, as the world’s largest economy and second-largest CO2 emitter, this agreement just cannot function without the contribution of the U.S. This is a given. The EU and the rest of the world will suffer from the dire environmental consequences of this unfortunate decision. On the other hand though, the rest of the world can do so much to hurt the U.S economy. This will be a lose-lose situation for all.

 

Corporate Responsibility and Ethics, Leadership and Change

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