A Strategic Approach to Climate Change

HARVARD BUISNESS ONLINE—What are companies to make of the news in late September that two environmental groups, along with state and city financial officers, had petitioned the US Securities and Exchange Commission to require companies to reveal their financial exposure to climate change risks? On the one hand, it’s doubtful the petition will be adopted (writing in the New York Times, Joe Nocera put the chance in the ballpark of “Zero. Zilch. None.”); on the other, you’d have to be living under a rock not to appreciate that investors, regulators, and the public are getting aggressively curious about companies’ carbon footprints. In Europe, companies’ greenhouse gas emissions are already capped; whatever becomes of this petition, it’s surely just a matter of time before all companies’ emissions will be measured, regulated, and priced.

That fact alone is a good reason for companies to be getting ahead of the curve on measuring and mitigating their own emissions; and many companies have shrewdly undertaken green initiatives as part of their overall corporate social responsibility (CSR) activities. But risk management and CSR shouldn’t be the main events when it comes to carbon. As Harvard Business School’s Michael Porter and Forest Reinhardt argue in Harvard Business Review this month, many companies that think strategically about their carbon exposure will find sources of sustainable competitive advantage. Read article.