Climate change is about to upend the corporate world…
…like never before
Massive devastation
Heavy regulation
The world’s worst emitting companies...
…even the worst medium emitting companies…
…are on borrowed time
And lots more litigation
PG&E’s billion-dollar payout…
Volkswagen pleading guilty in Detroit…
…for cheating on emissions rules
Covid-19 has highlighted the perils of failing to prepare
If businesses refuse to change…
…we will go the way of the dinosaur
There is ash that is falling
Staving off the catastrophe of climate change…
…requires a rewiring of the entire global economy
This spells huge opportunities for some
The economic opportunity of this green revolution…
…is not less than the original Industrial Revolution
But can the corporate world react and adapt in time?
Climate change is like cancer
The longer you wait, the worse your chances are
We’re driving through downtown St Helena…
…and you can see the smoke in people’s headlights
The smoke is so thick it’s like a dense fog
Lisa Micheli is a scientist…
…who advises businesses on the impact of wildfires…
…caused by climate change
Within the past few weeks…
…four out of California’s five biggest recorded wildfires…
…have smothered this famous wine-growing region…
…with ash and smoke
The fire stops here, it doesn’t go on the other side of the bridge
Today, Lisa is advising Dan Petroski…
…winemaker at Larkmead Vineyards…
…on how to reduce its exposure to risks
Looks like you had a lot of damage down there
Just three days ago…
…fire burned right up to the edge of these vineyards
Now that’s what I call a hazard tree
So what was it like…
…when you first headed towards Larkmead?
There were five fire trucks on the other side of the river here…
…it was the heaviest smoke I’ve been part of…
…stinging my eyes…
…also that night a powerline went down and hit my car…
…and that’s when I put out a fire over by the winery…
…and that’s when I burnt my...
Let’s see those boots
So the rubber on the bottom of the soles of my boots
This was actually a fire at Larkmead on the property
How high do you think the flames got here?
There were actually flames straight up
There was one that looked like, it was just like super ominous…
…it was by itself, and it was just like a lonely tree…
…with just a straight fire line
Well, this is a great example for two of us...
…of a place that is burned…
…but if another fire was to start…
…there’s plenty left that could burn again
For Larkmead, this fire was a narrow escape…
…but in a state that produces 86% of America’s wine…
…many other businesses have not been so lucky
8,000 structures have been lost…
…and nearly 30% of the county of Napa…
…has been consumed in the 2020 fire season
We are dealing with constant power shut-offs…
…during the fire weather…
…to try to avoid fires from starting
So this, of course, is hitting a community…
…that’s had two years of fires and then the covid crisis
And so our local businesses are struggling to stay alive
Temperatures in excess of 35 Celsius…
…spoil grapes and force vineyards to shut down
Just over a century ago…
…Napa County hit these temperatures on average six days a year
Now that figure is 33 days
The average temperature of the planet…
…has already risen by almost one degree Celsius since 1970
Climate models suggest that if this reaches two degrees…
…the world’s existing wine-growing region…
…will shrink by 56%
Although I was exposed to the concept of climate change…
…early in my career…
…I never thought that the impacts we were projecting…
…would come to pass in my lifetime
Our computer models said…
…oh well, maybe it will happen at the end of the century…
…you know, 2050, 2060…
…but we’re here in 2020…
…and we’re seeing some of the worst-case scenarios come to pass
The physical risks to businesses from climate change…
…stretch far beyond the industry of winemaking
25th named storm of the season
It is the earliest J-named storm in history
Across the planet…
…businesses of all kinds are facing growing disruption…
…from more extreme floods and storms
Research suggests that climate change…
…could cost 215 big global firms…
…a collective $1trn – much of this over the next five years
Rich Sorkin is the co-founder of a leading data-analytics company…
…which advises firms on how to mitigate these risks
The business community is facing more risk…
…from the weather driven by climate change, than ever before
The statistics on this are crystal clear…
…the financial loss from weather-related events…
…is at record levels and the impact has been devastating
To protect societies and their businesses…
…from the worst effects of climate change…
…more funds are needed for adaptive measures
From floating farms and storm-resilient seeds…
…to pop-up seawalls
According to one estimate…
…around $180bn of investment…
…is required each year over the next decade
If you look ten years forward…
…there won’t be a single large entity on the planet…
…commercial or government…
…that doesn’t have a well-thought-out approach…
…to assessing and addressing physical risks from climate change
It looks a bit like cybersecurity did ten years ago…
…where businesses by and large…
…were just starting to realise there was an issue…
…but didn’t know what to do about it…
…didn’t have the tools to address it
Now, every major entity on the planet…
…has a well-thought-out cybersecurity programme
While they struggle to adapt to the changing physical environment…
…companies also face a changing regulatory landscape
And recent developments in the world’s two most polluting countries…
…mean this could come quicker than expected
And the battle to save our planet by getting climate under control
China is the world’s largest polluter…
…but it’s now vowed to go carbon-neutral
The world’s carbon emissions have jumped…
…in the past three decades by more than 60%
Over 70% of this pollution…
…can be traced back to just 100 companies
Mostly through the products they sell, such as oil or coal
Leading climate scientist, Gavin Schmidt…
…argues that governments will soon find there is no option…
…but to heavily increase regulation on businesses
Some companies have as large a carbon footprint…
…as some small countries, right?
So they have, I think, an equal responsibility…
…to try and do something about the problem
You know, it’s all well and good…
…trying to get Somalia to change its policies…
…but it’s irrelevant in terms of carbon
But if you can get Walmart to change its policies, or Apple or Google…
…then you can do something much more fundamental
Progress has been slow…
…since the 2015 international Paris agreement…
…to keep global warming below two degrees
The UN climate champion…
…responsible for working with business…
…believes it’s time to force the pace
So collectively we’re not moving fast enough
Collectively, we don’t have enough policy ambition…
…and collectively we don’t have enough business ambition
This is going to be regulated…
…and you can’t just wait…
…until the regulations come and then start changing
There is pressure on governments…
…to bring in regulation of the corporate world now
It’s coming from consumers and climate activists
...and it’s the focus of this Extinction Rebellion protest in London
Economic interests who are prepared to sacrifice…
…your long-term future for their short-term profit
I think primarily everyone is here protesting today…
…because there’s a real sense of being let down
Chidi Oti-Obihara is a former banker…
…who is now Extinction Rebellion’s spokesperson…
…on banks and the economy
It’s profoundly important to bring pressure to bear…
…on those larger players to change their practice…
…and set a good example that everyone else can follow
Greenpeace are involved, Friends of the Earth are involved…
…several parties got together…
…to say how do we make the government actually keep to its promise
They’ve declared a climate change emergency…
…and since then nothing’s happened
Like many, Extinction Rebellion argues…
…one policy is crucial – forcing businesses to come clean…
…about their levels of emissions
Lots of banks and lots of people…
…want to see firms show the world…
…their real and full carbon footprint…
…and trying to make that happen as quickly as possible…
…as openly as possible is something that XR is fighting for
But if businesses refuse to change, we will go the way of the dinosaur
We will lose our habitats and potentially lose our lives in numbers
And that’s why groups like us are here…
…asking government to facilitate a business environment…
…that forces businesses to change if need be
Because the stakes are so high
What that change will look like…
…is an obligation for companies to measure…
…as well as disclose their own emissions
Nicolette Bartlett is director of an international non-profit…
…which advises corporations on how to do this
The world’s worst-emitting companies…
…even the worst medium-emitting companies are on borrowed time
Carbon is very, very costly to society
At some point, that will hit their bottom line
It’s guaranteed
So it is a big risk if you’re not seeing it, measuring it…
…reporting it and changing your business practice
Most businesses are not prepared for this transition
Only 16% of listed companies…
…currently calculate and disclose their own carbon footprint
I think it’s becoming harder for companies to greenwash
I think more and more because of this transparency…
…the investor world has really woken up to this
The central banks have really woken up to this
Consumers have really woken up to this…
…and actually during covid even more so
It’s not a marginal issue anymore, it’s front and centre
It’s very difficult for companies to hide
But some big corporations…
…are now jumping before they’re pushed…
…and making big decarbonising pledges
Microsoft just made a major climate pledge…
…promising to go carbon-negative
Amazon will be one of the first companies…
…if not the first company…
…to meet the Paris climate accord ten years early…
What we’ve seen is…
…even in the last year.…
…a doubling of commitments from companies, right?
And they range
They may make a claim around going to be carbon-neutral…
…or they’ll make a claim around I’m going to be net-zero…
…by a certain date
The task of delivering on these pledges is daunting
Firms will have to disclose not just the emissions they produce…
…but also those from their supply chains…
…which on average are over five times bigger
That’s a tall order for the likes of Walmart
It’s promised to cut a billion tonnes of emissions…
…between 2017 and 2030…
…covering 100,000 suppliers across the world
Its supply chain is massive
It’s a very bold target, so the next ten years are going to be critical
I would argue that maybe now some of the lower-hanging fruit…
…the easier stuff has been done in that supply chain
It’s going to take a huge effort across all of those supply chains
It’s absolutely critical…
…that you are able to cover your entire value chain
Ultimately, it’s the world’s most polluting companies…
…that will be hit hardest by carbon regulation…
…and will have to make the most drastic changes to survive
In South Yorkshire in Britain…
…once an industrial heartland…
…heavy industries like coal mining…
…have died out
But at this steel plant in Rotherham…
…climate change has provided a seemingly unlikely opportunity…
…for rejuvenation
Through radical green adaptation
It’s almost God’s power in your hands
It’s such an awesome feeling
Now they’re recycling steel here
According to the CEO…
…this has halved the company’s emissions in Britain…
…and cut costs
For the UK, it’s a no-brainer
For the UK it is absolutely, definitely cheaper to recycle steel…
…than to make new steel
UK exports eight, nine million tonnes of steel scrap already…
…and we export steel scrap and import steel…
…which has made no sense at all
So our model was based on recycling local steel scrap…
…for the local market, which was a better economic model
For the long term…
…the CEO says the company is investing in “green steel”…
…which uses hydrogen to dramatically reduce emissions...
…even though it could be two decades…
…before this technology is commercially viable
Hydrogen is electro-renewable…
…so it’s only just really starting its journey now
As we make more and more hydrogen…
…that technology will become cheaper and cheaper...
…the same way as wind and solar technology…
…were very expensive ten years ago
And they become more and more competitive…
…as we adopted more and more scale…
…and as technologies developed
This journey to green steel is inevitable
And there lies a strong incentive for businesses…
…to adapt to climate change
It could actually be good business in the long run
Those who invest now in expensive decarbonisation…
…may steal a march on the competition
We know how industrial transformation takes place
It always happens exponentially…
…and those who get the wrong side of the curve can never catch up
And we see newcomers, right, who bet the farm…
…on that transition becoming the new industrial titans
This penny has dropped for some fossil-fuel companies…
…in an industry where profits could fall from $39trn to $14trn…
…by 2050
The Danish company Orsted…
…has doubled its share value…
…by completely ditching oil in favour of renewables
This building that we’re sitting in…
…it’s not just about the energy it uses to keep us warm or cool…
…and to put the lights on…
…but it’s also about the materials that made this building
Is it more expensive? At the beginning, yes
But is that going to be a market for the future?
One hundred percent
So I would say it’s logical, visionary business practice
But if the carrot of long-term profits…
…doesn’t incentivise companies to go green…
…there’s a stick that might force more hands in the future
The growing legal risks…
…of failing to adapt to climate change…
…have been highlighted…
…by one utility company in California
Well today PG&E is expected to plead guilty…
…to involuntary manslaughter…
…for the utility’s role in the deadly Camp Fire
In 2019, Pacific Gas and Electric pleaded guilty…
…to one count of illegally starting a fire…
…and 84 counts of involuntary manslaughter…
…the deadliest corporate crime…
…successfully prosecuted in America
PG&E power lines…
…have helped start over 1,500 wildfires…
…in the past six years
In a region where rising temperatures, caused by climate change…
…have increased the risks around fires…
…courts have concluded…
…the company failed to invest in maintaining their equipment
And back in the wine country of Napa Valley…
…local businesses have paid the price
When the doors burned, the wine burned behind it
So I lost about almost 17,000 bottles of wine here…
…in this tunnel here
One of them is the White Rock Vineyard…
…owned by Christopher Vandendriessche and his family
This is my dad Henry, he started…
…this version of White Rock in the Seventies…
…when he replanted the vineyards
This is one of the bottles that partially burned in the fires
When you see that smoke coming in…
…it’s a very visceral feeling, it’s horrible and traumatic
In 2017, fires burned down every structure on their property
I think that there needs to be a culture change at PG&E…
…in order to do a better job of maintaining the networks…
…that they oversee and to reduce the profit motive
The courts have ordered the company…
…to pay out billions in compensation…
…and PG&E says it has changed its ways
I do think that many people who took part in that case…
…feel vindicated
Our entire business community and utilities…
…need to learn how to adapt to a changing climate
Exxon Mobil has long been criticised…
…for allegedly hiding what it knew about climate change
A growing number of companies…
…are facing legal proceedings linked to global warming…
…from allegations of misleading investors about climate risk…
…to public nuisance claims
Between 2000 and 2010…
…about 20 climate-related cases were brought against businesses
But in the past decade that figure has soared to around 120
Bankruptcy, negligence, indictments, loss of reputation…
…all these terrible, awful things are going to happen to more companies…
…if they don’t wake up and start addressing these issues
Lack of effective preparation for covid-19…
…has contributed to devastation around the world
It’s highlighted the importance…
…of acting against climate change now…
…rather than waiting until the crisis worsens
But few companies are heeding this lesson
The longer we go without taking enough action…
…and the harsher the course of correction is…
…then the bigger the stranded assets will be…
…economically and at a human level
Do we manage this or do we screw it up?
The only choice in front of us…
…is to lean into the clean and the green economy
Not leaning in means economies that could be so severely damaged…
…that what we see now as our global capital market…
…would look fundamentally different
This is not an issue that anybody who thinks that they’re a leader…
…can just ignore, right?
This is a fundamental challenge for this century
And anybody who thinks they can sidestep it…
…is not really leading at all
Hi, my name is Guy Scriven…
…I’m The Economist’s climate risk correspondent
If you’d like to read my special report…
…about business and climate change…
…please click on the link opposite
If you want to continue watching our Now&Next series…
…click on the other link
Thank you for watching…
…and don’t forget to subscribe