Wednesday, March 30, 2016

Strategizing in the face of environmental concern and climate change

In the McKinsey and Company report “What Happens Next?” (Bisson, Kirkland, Stephenson, Viguerie, 2010), the authors acknowledge the projected increase in resource consumption worldwide, the decreasing supply of fossil fuels and other natural resources, and the growing consumer demand for environmental sustainability. Additionally, the Global Trends 2030: Alternative Worlds report (National Intelligence Council, 2012), acknowledges projected increases in food, water, and energy demand in the next 15 + years, which will be complicated by the effects of climate change.

With these inevitable trends and major changes looming in our future (even beginning to occur now), businesses, organizations, and governments of all types will be impacted somehow. Some businesses will be forced by consumer demand to develop environmentally sustainable practices, some will be affected by government regulation related to fossil fuel use and greenhouse gas production, some will incur increased costs as resource scarcity grows. Non-profits of all types will be impacted. For instance, humanitarian organizations face the consequences of mass migration from places heavily impacted by climate change (eg. locations impacted by coastal flooding or severe drought), whereas environmental non-profits face the ever growing challenge of developing programs to mitigate climate change effects. Governments must determine how to regulate greenhouse gas emissions while also planning to deal with the effects of climate change on their countries.

With so many uncertainties and organizations that will most likely be impacted, I have some big questions.  1. How can all of these different types of organizations incorporate such uncertainty surrounding the effects of climate change and the potential for food, water, and natural resource scarcity into their company’s strategy? From my personal observations and experiences, it is difficult to get some companies and governments to consider such uncertainties and to have the forward thinking necessary to incorporate these things into strategy. 2. Additionally, how can adequate planning occur when there are so many unknowns?  3. Going further (and perhaps unrealistically), is it practical for these groups to identify ways that they can reduce their contribution to the problem as part of their strategy development?

As the McKinsey and Company report states, “For CEOs, understanding their true exposure to energy and environmental risk will require more sophistication than ever and will emerge for many as a—if not the—decisive factor determining the long-term viability of their companies” (Bisson, Kirkland, Stephenson, Viguerie, 2010, p. 18). Such strong language makes it sound like such understanding and planning is a necessity, yet how many companies and organizations are actually adequately planning? Are there resources to assist in evaluating an organization's true exposure to these risks?

Bison, P., Kirkland, R., Stephenson, E., & Viguerie, P. (2010). What Happens Next? Five Crucibles of Innovation that will Shape the Coming Decade. McKinsey Special Report.

National Intelligence Council. (2013). Report: Global Trends 2030: Alternative Worlds. 

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