Climate Change

As Temperatures Rise, Business Adapts


As politicians struggle to reduce the risk of global warming, corporations are preparing for changes to the climate. Some companies are devising products to help the world adapt to higher temperatures and sea levels, a potential $135 billion-a-year market by 2030, while others aim to minimize the impact of warming on their operations. "Climate change presents a direct threat to our business," says Jim Hanna, director of environmental impact for Starbucks (SBUX). To ensure continued availability of coffee beans, his company has started rewarding farmers who take steps to prevent soil erosion. "Adaptation is becoming part of our strategy."

The companies are driven in part by the failure of international efforts to cut the greenhouse gases that scientists say contribute to global warming. Discussions last year in Copenhagen yielded little progress, and officials from more than 190 countries, meeting in Cancún, Mexico, until Dec. 10, say they don't expect a binding agreement on measures to slow the growth of emissions. "Adaptation needs more attention," says Andrew Steer, the World Bank's climate-change chief. "I'm not saying adaptation is better than mitigation. It's not. But unfortunately, it's unlikely we will be able to prevent temperatures from rising."

Damages from climate-related disasters are mounting. Insured losses from storms and floods have risen more than fivefold, to $27 billion annually, in the past four decades, Swiss Re says. By 2030, the world may spend $135 billion a year on flood protection, buildings that can withstand hurricanes, and drought-resistant crops, Swiss Re says, citing UN data. "Sooner or later all businesses will have to climate-proof their operations," Christiana Figueres, the UN's climate chief, said in a September speech in New York.

Levi Strauss says it's worried higher temperatures and sea levels will cause cotton prices to rise. The apparel-maker is mapping out its operations and supply chain to see where water scarcity may cause damage.

General Electric (GE) is working with Goldman Sachs (GS) to map water-related risks for investors. GE also views the database as a tool to identify areas where a shifting climate means water scarcity, says Jeff Fulgham, sustainability chief for GE Water. "We want to make sure we are on the ground in those high-stress areas," Fulgham says. He expects revenue from GE's business of recycling water for use in power plants, agriculture, and manufacturing to grow more than 10 percent a year through at least 2016.

Dupont expects increased demand for drought-resistant crops to expand its $8.2 billion agriculture business. "Opportunity comes from using science to help improve productivity for farmers, and they will have to do that to deal with climate change," says James C. Borel, Dupont's vice-president in charge of seed operations.

Zurich Financial Services is offering policies that let businesses and homeowners replace storm-damaged property with structures better able to withstand extreme weather. "When governments are not acting," says Lindene Patton, Zurich's chief climate-products officer, "people fill gaps with whatever tools are available."

The bottom line: Scant progress on an agreement to cut greenhouse gases means companies are taking steps to profit from global warming.

Efstathiou is a reporter for Bloomberg News.
Chipman is a reporter for Bloomberg News.

Steve Ballmer, Power Forward
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