Climate Change and Business: for SME s. Susanna Horn School of Business and Economics University of Jyväskylä, Finland

Full text

(1)

Climate Change and Business:

A Climate SWOT Analysis Tool

A Climate SWOT Analysis Tool

for SME’s

Susanna Horn

School of Business and Economics

University of Jyväskylä, Finland

(2)

f hi

i

Contents of

 

this presentation

Climate Change and

 

Business

 

– An

 

overview

Climate SWOT

 

as

 

a

 

tool

Results of

 

the

 

studies:

– Tool

Content

– Content

(3)

Climate Change and

 

Business:

 

Strategies

How will climate change affect the

 

business

 

environment:

 

Markets?

 

Prices?

 

Resources?

What action

 

is

 

needed?

 

How will the markets in the future look like?

How will the

 

markets in

 

the

 

future look

 

like?

What are the

 

opportunities in

 

the

 

uncertainty?

 

What about competitors?

at about co pet to s

 

→ 

Strategic assessment for

 

a

 

market transition (present,

 

(4)

”Don’t think of climate change as an environmental issue; think of it as amarket issue in the form of

”Businesses that ignore the debate over climate change do so at their peril

Climate change and

 

business

 

– the

 

opinions

issue; think of it as amarket issue”,in the form of  risks and opportunities > regulations, prices, energy

availability,… (Hoffmann, Woody, 2008)

climate change, do so at their peril” 

(Conference Board)

“The global threat from climate change is now clearer  thanever Thewhole economyhas to change

The transition to a low‐carbon than ever. The whole economy has to change.

Sir Terry Leahy, Tesco Chief Executive

“Climate change and the impact that it will have on key industries such as agriculture, tourism, energy, transport and insurance, is as  The transition to a low carbon 

economy will bring challenges for  competitiveness but also 

opportunities for growth.

Stern review, 2007

important as interest rate risk and exchange risk.”

Henri de Castries, Chairman of the Management Board and Chief 

Executive of AXA

There are pressures to be transparentthat just didn't exist before and  A correlation between higher 

stock market performance over  time and representation on the  CDP’s Carbon Performance

“In the future I expect a company’s carbon statement to be as

these pressures are coming from unlikely places, such as the insurance  industry, 

Jeffrey Hollender, co‐founder of Seventh Generation, Greenpeace US.

CDP s Carbon Performance  Leadership Index and the  Carbon Disclosure Leadership  Index has been established in 

the  2011 CDP Global 500  In the future I expect a company s carbon statement to be as 

prominent as its financial statement. That’s because investors are 

demanding reliable informationabout a company’s global carbon  footprint, as well what it’s doing to reduce its CO2 emissions. Proper  financial reporting is a no‐brainer. Carbon reporting must be the 

” report. Companies with a 

strategic focus on climate 

change provided investors with 

approximately double the 

average total returnof the same.”

Ian Pearson, former Minister of State for Climate Change and 

Environment at the Department for Environment, Food and Rural Affairs, 

UK

average total return of the  Global 500 from January 2005  to May 2011.

(5)

From a business perspective you don’t need to look at the

From a

 

business

 

perspective, you don t need to

 

look

 

at

 

the

 

science

 

of

 

climate change and

 

make up your mind whether

to

 

believe it or not:

The

framework (regulations),

 

markets (e.g.

 

prices,

 

investment community’s interests),

 

competitors,

 

demand

is changing so the companies should act on these

(6)

CLIMATE

 

RISKS

CLIMATE

 

OPPORTUNITIES

Physical Risk:

Physical impact of

 

climate change

(weather events,

 

drought,

 

floods,

sea level rise)

Regulatory opportunities

:

Less clean

up and

 

compliance costs,

 

increased revenue by selling carbon

credits

sea level rise)

Change also in

 

consumer habits

Regulatory Risk:

credits

Techn.

 

Opportunities:

Increase profitability by developing

Increasing pressure (emission

 

controls,

 

carbon credits,

 

clean

up costs,

 

Kyoto

protocol…)

emission

 ‐

reducing technologies or new

 

products,

 

ee strategies

Competitive/Reputational Opp’s

Competitive/Reputational Opp s

Clean technologies maylead to

new

 

markets/market share

(7)

Climate

 

SWOT

 

Two basic ideas combined

1. SWOT

 

analysis

• Quadrivial analysis is

 

a

 

common

 

and

 

simple method to

 

assess e.g.

 

your business

 

(or parts of

 

it)

  ‐

risk assessment

• Strength – Weakness – Opportunity – Threat

Strength Weakness Opportunity Threat

• In

 

present (SW)

 

and

 

in

 

future (OT)

• Internal (SW)

 

and

 

external (OT)

St

th

th

hi h

b

tili d

k

• Strengths are those resources which can be utilised,

 

weaknesses

those which must be improved.

 

Opportunities and

 

threats must

be known approximately

2 Lif

l

i

2. Life

 

cycle perspective

(8)

Goal and Scope Definition

LCA

 

steps (ISO

 

14040):

LIFE CYCLE ASSESSMENT

Goal and Scope Definition

Inventory analysis ion and   Impact assessment In te rpr et at Re p o rt in g Strengths Strengths Global Weaknesses Weaknesses

High cost structure

SWOT

Strong R&D

Specific competitive advantage Highly qualified personnel High re‐sale value

Efficient process Location

S i l k ti ti

Too narrow focus Absence of strong

marketing/accounting expertise Poor access to distribution Unreliable service

High wages

P ft l i

Special marketing expertise Poor after sales service

Poor quality product Opportunities

Opportunities

Potential to diversify into related markets

Changes in government actions

Threats Threats

Low cost competitors Economic slowdown

Changes in government actions Change in population age

Alternative delivery models Internet sales

Mergers, acquisitions etc. Larger international markets

Change in population age Competitor with a new subsitute product

Competitor’s access to better distribution channels

(9)

Climate

 

Strategies

 

Based on Climate SWOT

Based

 

on

 

Climate

 

SWOT

 

1.

Identification

 

of

 

Product

 

Life

 

Cycle

 

Stages

2.

Identification

 

of

 

Climate

 

Impacts

a)

Now

b)

In the future year X

b)

In

 

the

 

future,

 

year

 

X

3.

Significance

 

Assessment

 

of

 

the

 

Climate

 

Impacts

4.

Compilation

p

 

of

 

the

 

Climate

 

SWOT

5.

Climate

 

Strategy

 

Options

6.

Strategy

 

Formulation

(10)

1.

 

Identification

 

of

 

Product Life Cycle Stages

Product

 

Life

 

Cycle

 

Stages

Typical

 

Model

 

of

 

a

 

Product

 

Life

 

Cycle

Raw Materials

Production Production Transportation Trade Use

Recycling and Waste Management

Example: Life Cycle of a Car

Production of Steel, Plastic, and Other Raw Materials Component Production Car

Production Car Sales

Car Use, Driving

Recycling and Waste Management

Example:

 

Life

 

Cycle

 

of

 

a

 

Car

Example:

 

Life

 

Cycle

 

of

 

a

 

Newspaper

Forestry Pulp

Production

Paper

Production Printing Distribution

Use, Reading Newspaper Paper Recycling and Waste Management T lli Skii d

Example:

 

Life

 

Cycle

 

of

 

a

 

Vacation

 

in

 

Ski

 

Resort

 

Travel Reservation

Travelling to/from Ski

Resort

Accommodation MaintenanceSlope

Skiing and Other Outdoor

Activities

(11)

2.

 

Identification

 

of

 

Climate

 

Impacts

Raw Materials

Production Production Transportation Trade Use

Recycling and Waste Management

Impact A +

Impact B

-Impact C +

Consider

 

climate

 

impacts

 

for

 

all

 

life

 

cycle

 

stages

 

a)

 

in

 

the

 

current

 

situation

 

and

 

b)

 

in

 

the

 

future:

Both

 

positive

 

and

 

negative

 

aspects

“Inside

out”:

 

impacts

 

of

 

the

 

activities

 

of

 

each

 

life

 

cycle

 

stage on the climate i e greenhouse gas emissions caused

Impact D

-stage

 

on

 

the

 

climate,

 

i.e.

 

greenhouse

 

gas

 

emissions

 

caused

 

by

 

use

 

of

 

energy,

 

traffic,

 

transportation,

 

location

 

and

 

land

 

use,

 

etc.

“Outside

in”:

 

how

 

the

 

changing

 

climate

 

may

 

affect

 

the

 

activities

 

of

 

each

 

life

 

cycle

 

stage

Use

 

GHG

 

Inventories

 

Impact E +

Use

 

Climate

 

Scenarios

 

(12)

3.

 

Significance

 

Assessment

 

of the Climate Impacts

of

 

the

 

Climate

 

Impacts

Assess the significance of each identified impact on scale

Assess

 

the

 

significance

 

of

 

each

 

identified

 

impact

 

on

 

scale

 

1

3

– Minor

 

impact

 

1

– Medium

 

impact

p

 

2

– Major

 

impact

 

3

In

 

assessing

 

the

 

significance

 

consider

 

the

 

nature

 

of

 

your

 

impacts

 

against

 

your

 

competitors’

 

impacts:

– Environmental

 

impacts

 

(fragility

 

of

 

the

 

environment,

 

size

 

and

 

frequency

 

of

 

the

 

aspect)

– Financial

 

impacts

I

t

f th i

t

t k h ld

( li

t

l

– Importance

 

of

 

the

 

issue

 

to

 

your

 

stakeholders

 

(clients,

 

employees

 

etc.)

– Requirements

 

of

 

legislation

 

concerning

 

climate

 

issues

(13)

4.

 

Compilation

 

of

 

the

 

Climate

 

SWOT

Raw Materials

Production Production Transportation Trade Use

Recycling and Waste Management

Strengths

I

t A

Weaknesses

I

t B



Impact A

Impact

 

C

Impact B

O

t

iti

Th

t





Opportunities

Impact

 

E

Threats

Impact

 

D



 Hanna-Leena Pesonen, 2011

(14)

5.

6.

 

Climate

 

Strategy

 

Options

 

and

 

Strategy

 

formulation

formulation

Strengths

Weaknesses

According to the climate

STRENGTHEN

sources

 

of

 

competitive

 

advantage

MITIGATE

your

 

climate

 

impacts

 

by

 

improving your

 

ti

d/

According

 

to

 

the

 

climate

 

strategy

 

options,

 

a

 

strategic

 

plan

 

should

 

be

 

formulated

 

for

 

each

 

operations

 

and/or

product portfolio

climate

 

impact

 

identified

 

in

 

the

 

Climate

 

SWOT.

 

For

 

each

 

strategy,

 

define:

t t i t

t

Opportunities

BUILD

new sources

 

of

 

Threats

FOLLOW

the

 

development

 

of

 

strategic

 

target

measures

 

(procedures,

 

activities,

 

improvements)

responsibilities,

resources and budget

competitive

 

advantage

issues,

 

which

 

could

 

harm

 

your

 

business

 

and

BE

 

PREPARED

to

 

adapt

resources

 

and

 

budget,

schedule,

 

and

indicators.

(15)

Two studies are made

 

about the

 

Climate

SWOT

SWOT

First:

 

Methodological scope,

 

developing the

 

tool

Two target groups:

 

student group (24

 

students)

 

and

 

Baltic

Climate’s commissioners

Students prepared the

 

Climate SWOT’s for

 

the

 

given product

systems in

 

the

 

Baltic area

The

 

results were communicated to

 

the

 

Commissioners in

 

the

 

spring

Two surveys:

 

one to

 

the

 

students (how easy/logical the

 

tool was

to

 

use)

 

and

 

one to

 

the

 

Commissioners (if the

 

results had

generated any changes)

Results:

 

encouraging in

 

terms of

 

usability,

 

some minor changes

were implemented (product system,

 

time scope,

 

policy

level

(16)
(17)

Agriculture and Forestry

Refining and Industrial Operations

Transport Retail Use

Recycling and Waste Management

Climate Strategy Options for

 

SME’s in

 

Agriculture and

 

Forestry in

 

the

 

Baltic Region:

Strengths

Production of bioenergy, often as byproduct Production of bioenergy, often as byproduct

Weaknesses

Energy intensive industries

T t ti b d f il f l y Operations Management       Production of bioenergy, often as byproduct

Recyclable materials CurrentlyTransportation retail  basednot strongly on fossil supporting fuels   local food

Opportunities

Two harvests per season, more yield on agriculture

Threats

Logging more complicated in winter

      p , y g

Longer growing season for forests, which can    

increase forestry yield

Increasing freshwater resources due to precipitation New plant species or new races for animal husbandry Increasing wind creates opportunities for wind energy

Logging more complicated in winter

Flooding because of increasing precipitation, 

increasing soil moisture and weakening soil quality, 

erosion

More winter kills in both agriculture and forestry 

due to no snow      

 Increasing wind creates opportunities for wind energy

Use of bioenergy increasing Use of biofuels increasing

Changes in diet favoring local or organic food

New markets for agricultural products  due to negative 

climate effects in other regions

due to no snow

More and new species of pest and plant diseases Health problems for farmers and livestock

More forest fires  when summers are hotter More expensive fuel , more expensive transport

        

climate effects  in other regions

•Invest in developing options for bioenergy (as a producer and user)

•Invest in energy efficiency to avoid impact of increasing fuel prices

•Be prepared to react promptly on changes in traditional timing of agricultural and forestry

( )

operations (e.g. two harvests) 

•Promote the ongoing change in diets towards local and organic food

•Follow the development of the natural threats caused by climate change and be prepared to act by e.g. introducing new, more resistant species

(18)

Raw Material

Production Refining

Transportation

to Refining Distribution Use

Climate Strategy Options for

 

SME’s in

 

Bioenergy in

 

the

 

Baltic Region:

Strengths

Renewable raw materials

Availability of wood, agribiomass and biowaste as raw material

Weaknesses

Inefficient production technologies and supply chain          management=> life cycle energy balance of biofuels/ bioenergy in some cases negative

     material Decreasing transportation, if local materials used GHG neutral fuel or energy source bioenergy in some cases negative Currently often higher production prices compared to  fossil fuels Lack of distribution network for biofuels Lack of infrastructure to accommodate use of new    biofuels or bioenergy, e.g. biogas as vehicle fuel          gy, g g

Opportunities

Larger scale, more efficient production=> increasing eco‐ efficiency of biofuels life cycle environmental impacts Support for increasing use of biofuels/bioenergy in ( ) l l

Threats

Biodiversity concerns related to growing raw materials for bioenergy and biofuels Availability of raw materials f h l     (European) legislation Decreasing production prices with economies of scale and learning => increasing price competitiveness Improved technologies enabling new raw materials (eg wood based raw materials in F‐T technologies)=> more efficient raw material production=> increasing price

No interest from car owners to switch to alternative  fuels or from car industry to develop biofuel vehicles => no demand for biofuels No policy framework to support change     efficient raw material production=> increasing price    competitiveness Changes in fuel & energy taxation favoring biofuels/‐energy 

•Invest in developing local raw material production

P ti i t i d l i di t ib ti t k d i f t t t d t f bi f l /bi

•Participate in developing distribution network and infrastructure to accommodate use of new biofuels/bioenergy

•Follow changes in legislation and political support for bioenergy and be prepared to develop your business  accordingly

(19)

Raw Material Extraction and

Processing

Transport Building MaintenanceUse and

Recycling and Waste Management

Climate Strategy Options for

 

SME’s in

 

Housing in

 

the

 

Baltic Region:

Strengths

Availability of wood as renewable and energy efficient building material

Weaknesses

High climate impacts of many raw materials, such

t d t l

Processing Management





building material

Long tradition in energy efficient building in some areas of the Baltic region

Wooden building material as carbon sink Recyclability of wood

as cement and steel

Poor energy efficiency of existing housing in some 

Poor recyclability of non‐separated bulky 

construction waste       

Opportunities

Longer growing season for forests, which can increase the yield of forestry and increase price c

competitiveness of the local raw material wood as 

building material

Threats

Increasing price of energy Increasing price of energy Increasing price of energy

More harsh climate conditions (more rains storms

     building material

Wood building material as carbon sink

More harsh climate conditions (more rains, storms forest fires) will be an increasing challenge to 

building maintenance



•Increase use of wood as a building material



•Increase use of wood as a building material

•Develop new technologies for wood processing as construction material

•Invest both in energy efficiency and energy efficiency expertise in housing

•Develop new technologies to control heat and moisture and other more harsh climate conditions affecting housing

(20)

Marketing Travelling to/ from Resort Summer Activities Winter Activities Infrastructure and Facilities

Climate Strategy Options for

 

SME’s in

 

Tourism in

 

the

 

Baltic Region:

Strengths

Pristine nature in many areas of the Baltic region,clean air and water

Weaknesses

Long distance from foreign market areas, 

expensive transport

from Resort and Facilities Activities Activities

 

air and water

Shorter distance for local travelers compared to foreign resorts, cheaper transport

Traditions in relatively energy efficient building (insula‐

tions etc.)

expensive transport

Energy intensity in accommodation and other 

facilities (heating, lighting etc.)

Energy intensity in winter sports maintenance 

(snow making, skiing lifts, lighting, etc.)

  

 

Opportunities

Changing tourism culture bringing more opportunities for local tourism

Longer season for summer tourism through rising temperatures

Threats

Increasing fuel prices decreasing travelling Increasing costs of accommodation because of 

increasing heating, cooling, electricity costs => 

price competitiveness suffers





 

temperatures price competitiveness suffers

Increasing precipitation, i.e. more rain, might cause problems for summer tourism

Rising sea level threat for seaside hotels and 

infrastructure

Lack of snow and rising temperatures causing

 

Lack of snow and rising temperatures causing shorter winter season



•Stress the pristine nature, clean air and water in communication

•Strengthen marketing efforts to local travelers

•In winter travel study options for renewable energy

•Winter resorts might have to start looking for new innovations how to enable traditional winter sports and activities (cooperation with technological partners, create alternative,  non‐winter (or year‐round) activities

(21)

Road Transport

Ship

Transportation

and Port

Public

Transportation

Rail Transport

Climate Strategy Options for

 

SME’s in

 

Transportation and

 

Mobility in

 

the

 

Baltic Region:

Strengths

Relatively good railroad network in the Baltic Region Tradition of using waterways for transportation

Weaknesses

Use of fossil fuels and high fuel prices

High replacement cost for alternative fuel vehicles

and Port

Operations

Transportation

       

Tradition of using waterways for transportation High energy efficiency of public transportation

Relatively good public transportation network in some

areas of the Baltic region, in bigger cities and densely populated areas

Use of fossil fuels and high fuel prices Use of fossil fuels and high fuel prices

Limited infrastructure for public transportation, eg limited biking routes

Poor quality and image of public transportation High prices of public transportation

                 

Accessibility of public transportation (especially for handi‐

capped and the elderly

Opportunities

More energy efficient vehicles using alternative fuels Tax support or other forms of subsidies for alternative fuel

Threats

Increasing problems in road construction and maintenance: temperature fluctuation around 0°C degrade roads





 

Tax support or other forms of subsidies for alternative fuel 

consuming vehicles

If winters get milder, no spikes are needed in tires, which would decrease the stress on road surface

Increasing attractiveness of rail transport with rising fuel prices Increasing opportunities to use waterways for transportation as

t t i

temperature fluctuation around 0 C degrade roads Increasing problems in railroad construction and 

maintenance because of temperature fluctuations

More storms and floods causing problems for ship transports Failure to attract travelers to shift to public transport modes

      temperature rises

Increasing attractiveness and demand on public transport, when 

increasing fuel prices make private car ownership expensive



•Local cooperation between different transportation modes and actors

•Prepare for rising fossil fuel prices by compensating the current fleet with models using alternative renewable fuels

•Prepare for rising fossil fuel prices by compensating the current fleet with models using alternative renewable fuels

•Investments for infrastructure, e.g. biking routes and public transportation infrastructure would offer new  opportunities for SME’s in construction sector

(22)

Summary

I

i il

h

i

Impacts similar across the

 

region:

– Rising temperatures

– Increasing precipitation

g p

p

– Decreasing snow cover

Challenges

N

i

t di

(

i lt

&f

t )

– New

 

species,

 

pests,

 

diseases (agriculture&forestry)

– Development of

 

alternative RE

 

sources,

 

energy efficiency (energy

and

 

transportation)

– New

 

needs of

 

maintenance due to

 

changing climate (housing)

(23)

Opportunities:

– New

 

markets for

 

green tech (indoor skiing,

 

nanotechnology,

 

new

 

mobility services)

– New

 

species in

 

agriculture and

 

forestry

– Energy

 

efficiency,

 

RE

– Wood

 

construction

Common features:

Common

 

features:

– Locality

– Significance of

 

wood

– Importance of

 

energy saving and

 

efficiency

(24)

Contact information:

Thanks!

Susanna

 

Horn

susanna.horn@jyu.fi

School of

 

Business

 

and

 

Economics

University

 

of

 

Jyväskylä

P O Box 35

P.O.

 

Box

 

35

  

40014

Finland

Figure

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References

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