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The climate change being experienced around the world has left some negative consequences on the environment which has seen constant changes in weather patterns that in turn affects natural resources such as vegetation, water sources, animal and human habitats. Climate change has also had a major impact on the economy growth of the global market as the amount of green house emissions by industries or factories are primarily driven by economic growth.
To deal with the effects of climate change on the economic growth of companies and businesses in the market, companies have come up with ways to minimise the global climatic changes by incorporating social responsibility programs referred to as CSR or green management programs. The purpose of the paper will be to look at the various ecological issues that are caused by global warming and climate change and what market and corporate solutions can be used to solve these ecological problems.
Scientific evidence has shown that there are increasing risks deemed to be serious and irreversible caused by global climate changes. Scientists are now able to attach probabilities to the temperature outcomes and how these outcomes will have an impact on the environments. According to the Stern review, the current level of green house emission gases in the atmosphere is equivalent to 430 parts per million carbon dioxide when compared to the emission levels of 280 parts per million during the industrialization period. Such a high concentration of gases has already caused the global warming around the world to increase by more than half a degree (Stern 2006).
Climate change is seen to be dangerous as it affects the basic elements that people around the world rely on for their survival. Such elements include water, food and land. The Stern review (2006) analyses the ecological issues brought about by climate change with regards to water to be melting glaciers in the North and South Pole that will increase incidences of flooding and reduce water supply affecting one sixth of the world’s population, declining food commodities especially in the African continent that could lead to cases of hunger and malnutrition.
The rising sea levels will lead to devastating statistics where tens of millions of people around the world will die as a result of floods or flood related illnesses. Countries or cities located near the coastal line will mostly be affected by the rising sea levels. The natural ecosystems vulnerability to climate change will lead to 40 percent of animal and plant species facing extinction with a 2 degrees Celsius more warmer climate. The sea and ocean acidification due to the rising levels of carbon dioxide in the environment will have an adverse affect on marine wildlife by depleting fish stocks (Brown 2005).
Climate changes will affect the temperatures leading to shifts or changes in weathers patterns where a country that experiences rain during the beginning of the year will experience heavy rainfall at the end of the year. The changes in weather patterns will make it difficult to predict the El Niño phenomenon making it hard for countries to plan for the heavy rain seasons. Studies done by climatologists have shown that the Amazon rainforest is now more vulnerable to climate changes with indications of drying in the forest taking place. Models used to study changing temperature conditions in the forest have shown that the rainforest has faced some damage as a result of experiencing warm temperatures 2 to 3 degrees higher (Stern 2006).
Ecologically, climate change is viewed to be major threat and challenge to developing countries. This is mainly due to the geographical locations of most of the developing countries which are either found near the coastal line or in highly forested areas. Their geographical locations mean that they experience warmer conditions than before and the amount of rainfall these countries receive is unreliable. This impacts their economies as majority of developing countries around depend on agriculture and the sale of food produce to sustain the income levels (Brown 2005).
The increased costs that result from extreme weather conditions such as hurricanes, typhoons, droughts and floods could lead to a reduction of between 0.5 to 1 percent of the world’s Gross Domestic Product per year. For example in the USA, a 5 to 10 percent increase in temperatures could affect hurricane speeds which would in turn double the costs of trying to contain or deal with hurricane damages. In the UK, flood losses that occur every year would increase 0.2 -0.4 percent of the Gross Domestic as a result of global warming (Stern 2006).
Higher temperatures will mean that the developed countries will face a large scale impacts and effects to the financial and stock exchange markets which would in turn affect world financial markets. Monetary impacts to climate change are expected to be more sever now more than ever. According to Stern, an increase of 2 to 3 degrees Celsius in temperature could lead to a monetary loss in the market of between 0 to 3 percent of global outputs. Future projections show that the warm temperature might increase to 5 to 6 degrees Celsius which would mean that the global output would reduce by 5 to 10 percent (Stern 2006).
Market and Corporate Objectives to Climate Change
The demand for green or environmental responsibility has increased worldwide based on societal demands made to companies to reduce gas emissions, fear of sale losses by businesses and fear of loosing company reputations. Government regulations have also piled on additional pressure for companies to develop more green management activities that will reduce the impacts of global warming. Companies have recognised that green management is not only a defence mechanism for dealing with external pressures but as means for achieving the organization’s mission, vision, goals and objectives (Marcus and Fremeth 2009).
Major companies world wide have adopted green management or environmental social responsibility (ESR) activities as part of their efforts to reduce the effects of global warming around the world. ESR activities conducted by companies are also referred to as corporate social responsibility (CSR) activities that involve integrating social and environmental issues into business operations (McWilliams et al 2006). ESR operations have also arisen as a result of the global market failure caused by the divergent views of company’s private and societal costs.
Societal costs are viewed to be private company costs as well as additional external costs that are related to the production of goods and services. These costs include pollution and green house gas emissions as well as costs related to degradation of the environment.The fundamental role for the government is to alleviate the current market failure and address the company social costs. Most companies however have chosen to go beyond government regulation compliance and have instead opted to focus on ESR. The development of ESR activities mostly depends on determining the relationship between regulation and the use of ESR (Siegel 2009).
A recent regulation known as the Cap and Trade relates to the environmental externalities dealing with gas emissions. The Cap and Trade regulation would see the use of economic incentives and market systems to reduce the amount of carbon emissions in the atmosphere. The government would therefore have to place a cap on the amount of emissions released by factories into the atmosphere by allotting emission permits for a specific duration. Companies that were identified to pollute the environment less than their allotted permit would be allowed to sell their rights to pollute to industries or organizations that polluted more. This is would be the trade part of the government regulation (Siegel 2009).
Companies that have been involved in ESR include Wal-Mart which increased its sale of organic foods in 2005 to meet its corporate goal of having 100 percent renewable energy and reduced wastage. British Petroleum also imposed a cap to reduce the amount of green house emissions from its oil companies around the world. This has shown the expectations of the general public to managers and CEOs that they have to protect the environment and reduce the amounts of greenhouse emissions to avoid damaging the environment (Marcus and Fremeth 2009).
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Benefits of using Green Management to the Corporate World
Companies involved in green management activities have been able to minimise some of the adverse effects of gas emissions into the atmosphere that would have caused devastating consequences to the environment. Companies world wide such as Wal-mart and BP have been able to develop products that are environmentally friendly and have fewer gas emissions to the atmosphere. The ESR activities have also enabled the conservation of natural resources such as water and land masses with companies now focusing on alternative sources for raw materials (Marcus and Fremeth 2009).
Many companies and corporations today view green management to be a profitable activity when compared to their views in the past which saw ESR activities to be an impediment to company growth and competitiveness. Today, managers see ESR activities to be major components in ensuring that the company remains innovative and creative. The most notable benefits of green management are that they allow businesses to optimize their production operations by using safer, cheaper and reliable sources of raw materials. Using fewer natural resources in the production process ensures that the economic value of the current product and services are improved. Green management has also enhanced the competitiveness of company products as they have to lower their costs to achieve environmental efficiency (Siegel 2009).
ESR has also enabled most companies to be competitive and remain relevant in today’s harsh economic environment. Businesses do not only have to lower the costs of their goods and services but they are also able to exercise product differentiation when they produce goods/services that are recyclable and environmentally friendly. This product differentiation is able to give the companies a competitive advantage over their rivals. The government’s role in green management is more than just enacting regulations and policies for conserving the environment (Marcus and Fremeth 2009).
Policies developed by the government have evolved from the legally binding mandates that punish polluters to programs and policies that focus more on voluntary government agreements to environmental conservation, governmental research and development programs that will be used in conservation efforts, grants given to green firms, government subsidies, and taxes on company products.
Companies today do not only follow these policies but they also exert pressure on the government during the policy formulation process and by helping to create the policies. The society should be able to rely on corporate and market objectives developed for ESR as these objectives will be used to control the amount of gas emissions in the atmosphere. Companies that practice ESR will produce goods and services that have fewer gas emissions. The amount of pollutant goods will be reduced in the market as a result of mechanisms that have been put in place to signal higher commodity prices that will make the use of cheaper and safer alternatives more viable (Siegel 2009).
Climate change presents a major challenge to the global economy as it creates an environment of uncertainty and risk that might affect company operations, financial and lending institutions as well government procedures. Global climate change has been viewed to be an issue of concern for most countries around the world because of its unpredictable and uncertain nature which makes planning for current and future economical activities difficult. Reducing the risks of climate change should be a collective partnership between the society, government and the corporate world.
ESR/CSR activities designed by companies and the market can be used to deal with ecological effects caused by climate changes to the economy and the environment. This is as a result of the beneficial value these activities have added to the company’s operations and the economic market by reducing gas emissions in the atmosphere while at the same time creating safer products. Such positive indicators strengthen the viability of ESR and green management to the societies around the world.
Brown, A. (2005) Paramedic to the planet. The Guardian Review, pp. 12.
Marcus, A.A. and Fremeth, A.R. (2009) Green management matters regardless. Academy of Management Perspectives, Vol. 23, No.3, pp 17-26.
McWilliams, A., D. Siegel & P. Wright (2006), Corporate Social Responsibility: strategic implications, Journal of Management Studies, Vol. 43, No.1, pp 1-18.
Siegel, D. S. (2009) Green management matter only if it yields more green: an economic/strategic perspective. Academy of Management Perspectives, Vol.23, No.3, pp 5-16
Stern (2006) Stern review: the economics of climate change. Web.