This presentation is brought to you by Arizona State University’s Julie Ann Wrigley Global Institute of Sustainability, and a generous investment by Julie Ann Wrigley. And as a business executive, you really want to think about climate change as a market shift. 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 your goods and services as you go out there. In any market shift, there are winners and losers. And companies right now need to be thinking about, what is the form of this market shift? And what does it mean for your competitive position vis-a-vis other companies in your sector? I put this up here. And a lot of my students don’t know what this device is in the bottom left here. [LAUGHING] But they do know what this device is over here in the bottom right.
And I asked them, have you ever heard of Olivetti, or Smith Corona, or IBM? And they all perk up. Yes, I know IBM. Well, these were three of the biggest typewriter manufacturers until the market shift. And only one of them made the transition– IBM. Smith Corona and Olivetti are gone. Are we talking about that big a market shift in climate change? As the price gets set for carbon, as investor and consumer markets start to shift, what will this do to the market that you’re in? That’s the way company executives really need to think about this. Leave the science aside. Debate the science if you wish, but the real question is, what does it do to your competitive position? That’s really the way that you need to think about it. Now some companies have developed capacities to watch the science. Swiss Re has climatologists on staff. They’re looking at this issue as an important implication for their investment portfolio and their insurance instruments. And they feel that getting ahead on this– DuPont as well. DuPont is looking at this and said, we’ve seen this one before.
It was called CFCs. It was called ozone depletion. It wiped out a market for one of our products and we need to innovate to get ahead of it. So watching the science is not necessarily a bad strategy. Believing in the science is not a bad strategy. But recognizing the market implications is where you need to be when you think about this as a business issue. Now, when you think about it as a market shift, there are two questions that emerge. And I hear them a lot. And I want to go through them and why they’re the wrong ones. The first one– how much will it cost? This will cost money. Estimates from McKinsey, from the Stern Report, from others, put the number somewhere around 1% of GDP. Now first of all, that’s an interesting number because we can’t measure global GDP within 1% anyway. But it is real numbers.
This is real money. But again, the question is, how much does it cost you? How does it affect your competitive positioning? How does it affect the other companies in your sector? There’s an expression– the cost you face the most in business is the one you have to incur and your competitor does not. And that’s what you need to be looking at in this. Are you a utility that’s very invested in coal? In nuclear? In natural gas? How is this going to change your positioning in the market. These are the kinds of important questions you need to ask, not just the absolute– how much will it cost? The second question– does it pay to be green? This is a question that– it drives me nuts. It’s a nonsensical question. It’s the exact same thing as asking does it pay to innovate. And it’s not a yes or no question. It depends on who does it, when they do it, how they do it. In the face of a market shift on climate change, you have to innovate. How are you going to innovate? When are you going to innovate? Are you the best one to innovate into this new space? These are the kind of questions you want to ask. So move away from this, does it pay to be green– the question makes no sense.
And really start to think about this in brass tacks as a business issue. This presentation is brought to you by Arizona State University’s Julie Ann Wrigley Global Institute of Sustainability, for educational, and non-commercial use only..