| The Stern Review, published in October 2006, helped to couch some environmental concerns in more concrete economic terms and to attract more interest from business leaders and policymakers, but while few now question the science of climate change, there continues to be debate about the economics at both macro and micro levels. Eighteen months on from the Stern report there is no significant change in the way business leaders take climate change – or indeed other key social and environmental challenges – into account in their investment decisions.
Traditional analytical techniques used by business to make investment decisions make it quite possible for a company to make significant financial returns while being in conflict with the interests of society as whole.
A traditional oil and gas company, for example, that has historically maximised financial capital by depleting natural capital will (ironically) generate weather-related risk to its infrastructure, as well as conflict, as resources become scarce. Likewise, a supermarket which decides to reduce the products bought from developing countries (in order to reduce air miles and therefore carbon emissions) will reduce employment and increase poverty in the developing countries, which may affect its reputation and brand.
Successful as we seem, human society has not been able to create systems that work in favour of our long-term survival. Carbon emissions are one example of this failure, but they are just a symptom of the wider problem that, as a global society, we are living beyond our means. 18 months after Stern, the carbon markets may be edging forward but we have not turned our attention to this more fundamental problem. Business leaders know that their company’s activities have an impact on ‘five capitals’–natural, social, human, manufactured and financial. These impacts matter, not only in terms of corporate responsibility but also from a strategic point of view.
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