When the Environment Becomes a Business Concern

Against a background of melting polar caps, rising sea levels and natural disasters, international experts are meeting in Montreal this week to discuss new targets for curbs on greenhouse gases.

The figures are daunting. According to the German Institute for Economic Research, natural disasters will incur around $200 billion worth of damage over the next few decades.

Insurance company Münchner Rück, meanwhile, has calculated that financial damages wrought by storms, floods and earthquakes have increased ten-fold in the last 50 years.

Mutual concerns

The business community is beginning to wake up to the broader repercussions of environmental devastation. Ecological concerns are business concerns -- but, as many have pointed out in Montreal, business concerns are also ecological concerns.

"Environmental protection has to begin with industry," said Axel Michaelowa, a climate researcher at the Hamburg World Economy Institute. "The main emitters of greenhouse gases are steel refineries and power companies, and it's time they started developing affordable ways of reducing emissions."

Some companies are already taking the initiative -- including the world's largest company, US giant General Electric.

"We've seen this threat coming and it's time to act," said CEO Jeffrey Immelt -- not least motivated by the fact that these days, global financial markets also keep a close eye on companies' environmental strategies.

Government targets

Michaelowa is quick to point out that these strategies need careful monitoring -- and shouldn't be left to individual companies to fine-tune at their own discretion.

"The state needs to set out clear frameworks," he said, pointing out that experience in Germany and Japan has showed that self-determining targets can have disappointing results. "Targets for curbing emissions need to be decided by governments," he stressed.

Otherwise, he explained, companies simply postpone the issue. "Environmental damage seems like a very distant concern to most companies," he said, emphasizing that long-term thinking is key to solving the problem.

"Ideally, we would have a 10 or 15-year plan," he said. "Most big companies' investments have a life-span of 10 to 30 years. The talks in Montreal have to spell out that climate protection goes beyond 2012, when the first phase of the Kyoto protocol runs out."

The benefits

The International Energy Agency, meanwhile, has calculated that the energy sector will require an investment of $16 billion over the next 25 years.

But the German economy may well end up enjoying a piece of the pie.

"There are a number of German companies in the field of renewables and energy efficient technology that could profit from the growing demand on the world market," said Michaelowa. "The Kyoto Protocol's 'Clean Development Mechanism' funds environmental protection projects in developing countries, so there's a vast export potential."

Ultimately, said Michaelowa, the environmental protection market is similar to the Internet boom of the early 1990s, and businesses with major growth potential are currently proliferating. Hopefully they'll have more staying power.