By Jessica Lagreid
Undergraduate, W.P. Carey School of Business
Student Worker, Global Institute Of Sustainability
"In periods of great flux and uncertainty, the people who love [change] are going to find opportunities," says Andrew J. Hoffman, the author of Climate Change: What's Your Business Strategy? (2008). Speaking to an ASU audience and reporters on Mar. 19, the University of Michigan professor of sustainable enterprise cast climate change as both a threat and an opportunity.
“You can be completely agnostic about the science of climate change and still see the business implications for how it will change the market for goods and services,” says Hoffman, who describes the issue of climate change as a market shift. “In any market shift,” he says, “there are winners and losers and companies right now need to be thinking: ‘What does it mean for your competitive position?’”
Hoffman advises companies to find a way to fit their climate change strategy into with their overall business strategy. “I hear a lot of companies say, ‘We’re reducing greenhouse gas emissions because it’s the right thing to do.’ If you hear that, you should say ‘That’s all well and good, but what’s the business case?’” Social responsibility, unfortunately, goes out the window in times of financial crisis.
Hoffman believes it is a mistake for companies to approach climate change as a risk management problem. He suggests, instead, that it should be seen as an opportunity for innovation and smart business choices. As with the shift from typewriters to computers or from the Walkman to iPods, the best business strategy is innovation.
According to Hoffman’s research, companies that have voluntarily reduced their greenhouse gas emissions have done so for competitive reasons: to increase profits, preempt government regulations, and enhance their corporate reputations. They recognize that consumers and investors are increasingly seeking environmentally conscious products and services, that governments are already putting a price on carbon emissions, and that energy costs are likely to rise.
Strategic timing and level of commitment are two critical elements affecting a company’s climate change business strategy. “It’s not a question of ‘whether,’ says Hoffman, “but ‘when’…for many companies.” His answer: “The time is now.”
Once the timing decision has been made, then the question is: How far do you jump? “It’s like a wave,” says Hoffman. “You want to be on the crest of that wave, not getting too far down in the trough, but not falling too far back. You really need to be attuned to the market signals that are out there and move with them.”
Hoffman describes how a company can incorporate a more conscious approach to climate change by following an eight-step process. “Climate change cannot be an add-on” says Hoffman, “it must be integrated into a company’s overall strategy to be successful.” A more detailed account of the eight-step process can be found in his most recent book Climate Change: What’s Your Business Strategy? (2008). Designed to be read on a short two hour flight, this book takes a CEO through the steps necessary to successfully move with this market shift.
Ultimately, companies facing climate change will need to seize their opportunity to thrive. "Change is coming," Hoffman says. "That's where it gets fun."