Do The Feds Finally Get It?

by Ellen Sinreich on August 27, 2014

We are delighted to see that President Obama is finally focusing on the economic cost of delaying meaningful steps to mitigate climate change. In July, the White House Council of Economic Advisors (CEA) issued a report that emphasizes the enormous economic incentive for expediting climate change mitigation activities.

According to the report, for each degree of increased temperature that occurs as a result of delaying effective mitigation action (e.g., temperatures increase by 3 degrees Celsius vs 2 degrees Celsius) we will bear annual incremental costs estimated at 0.9% of global output. To put this in perspective, the authors warn us that 0.9% of U.S. output in 2014 is estimated to be approximately $150B. In addition, the report continues, research suggests that net mitigation costs will increase by 40% for each decade of delay in taking effective mitigation action.

The authors of the CEA report liken taking action now to taking out insurance. We’ll pay less today to insure against the possibility of incurring larger costs in the future. Most of us make that choice both personally and professionally, but it continues to be a hard sell politically, especially when it comes to climate change.

Sustainable Business

Sustainability’s Strategic Worth

The CEA report comes on the heels of the business community’s growing awareness that taking action to mitigate climate change is good for business. A recent survey of global business leaders by McKinsey, Sustainability’s Strategic Worth (also released in July), confirms this.

There was overwhelming agreement among the 2000+ business executives who participated that sustainability is important for their business. Of the CEOs surveyed, 36% reported that sustainability is one of their three top priorities, with 13% reporting it is their number one priority, up from 3% in 2010.

The survey also revealed a significant increase in the number of respondents who reported that sustainability is aligned with their overall business goals, up from 21% in 2010 to 43% this year.

Nonetheless, respondents still struggle with execution. Executives reported numerous challenges with reaping the value creation potential of sustainability initiatives and programs. The absence of performance incentives, short-term earnings pressure and a lack of accountability were most often cited as getting in the way of achieving results.

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