OPPORTUNITIES FOR EMERGING BUSINESSES AND INDUSTRIES MOVING FORWARD
U.S. businesses face a challenging albeit exciting opportunity to step into the void left by the nation’s withdrawal from the Paris Accord, says Tensie Whelan, director of the Center for Sustainable Business at New York University’s Stern School of Business.
“As an American, I think first and foremost, I feel sad that the United States is abrogating our moral responsibility — and also, frankly, the business opportunity — to be a leader in solving the greatest problem of our time,” Whelan says. “The role of business is always one of both solving problems and creating opportunities.”
The transition to and growth of renewable energy remains promising, Whelan says. Indeed, the cost of solar continues to drop, explaining solar’s increasing popularity. Still, as word of Trump’s announcement spread, investors pulled from solar in droves.
“Whenever you have uncertainty and volatility and a lack of government support, it makes it more difficult for business to move forward. That said, we have cities and states,” Whelan points out. New York, California, and Washington, which combine for nearly $4 trillion of the U.S.’s $18 trillion in GDP, already have agreed to adhere to Paris standards. Some 80 cities have vowed the same. But without leadership from the very top of the country, Whelan says, American companies might be more vulnerable to international competition.
“What creates more of a challenge is, as a nation, we’ve stepped out,” Whelan says. “China and India, I believe, are going to step in and take more leadership and drive things the way they want to, which will provide them with a more competitive advantage.”
INTERNATIONAL COMPANIES & COUNTRIES READY TO POUNCE?
Joe Arvai, director of the Erb Institute at the University of Michigan’s Ross School of Business, says international competitors might take advantage of real or perceived U.S. weakness. “It’s hard to say now, but it’s not inconceivable that some international companies see it as an opportunity to get tough with the U.S.,” Arvai says.
He points to two similar situations. The first was a trade war between Canada and the European Union over oil-sand crude, which was found to have a 12% higher emissions rate than regular crude. “The social costs of producing that oil were too high and EU countries were more willing to pursue agreements in other countries,” says Arvai, who also serves on the U.S. Environmental Protection Agency’s Chartered Science Advisory Board.
The second example: Twice in recent history, China has cut off coal trade to two countries. The first time, Arvai points out, was when China suddenly stopped importing coal from Australia. “Almost overnight, China decided they were going to get out of the coal business and in turn destroy the Australian coal industry,” Arvai says. The second occasion happened this past April, when China refused to import coal from North Korea. In a similar tack, some countries could create “carbon penalties” on U.S. companies, Whelan says, adding that for now such a move is just speculation.
Columbia Business School’s Geoffrey Heal, a professor of social enterprise, painted similar potential scenarios in an article published on the school’s website. “Other countries will put policies in place that will dramatically affect U.S. industries,” Heal wrote. “General Motors, for example, is a major exporter of vehicles to China, and, should China decide to push heavily on electric cars, that could have an impact across the industry. Paris is the forum in which these policies are discussed and established. For business, it’s vital to stay in the conversation.”
‘THE MARKETS ARE FAR MORE THAN DONALD TRUMP’S STATEMENTS ON A TREATY WITH THE U.N.’
Market experts have some good news for environmentalists: Markets transcend Trump.
“The markets are far more than Donald Trump’s statements on a treaty with the U.N.,” Andrew Hoffman insists.
And the markets have been trending toward renewable forms of energy and mobility for a while now, he explains. “Industries are moving in a direction they see markets going,” and that direction is energy efficiency. “I like to say there is an industry renaissance going on in energy generation and mobility.”
Hoffman points to China’s turbocharged commitment to solar. That country has more than doubled its solar capability in 2016. Meanwhile, Germany recently pledged to get 1 million electric cars on the road by 2020.
“Trump is going down the same path that Reagan went down of attacking environmental regulations under the false assumption that environmental regulations hurt jobs,” Hoffman says. “Reagan, it took him two years, but he had to back up. I think it’s going to happen quicker with Trump because he’s gone so fast. But, also, when Reagan took on environmental regulations, the big bogeyman was Superfund. And industry is pretty lockstep — they all hated Superfund. This time, a lot of industry is not lockstep and they’re trying to be the blowback, which is very different from Reagan.”
BUSINESS STUDENTS MORE CONCERNED ABOUT SOCIAL, ENVIRONMENTAL ISSUES THAN EVER BEFORE
Whelan says where climate work is concerned, MBAs today face an unprecedented landscape in which the corporate sector is married with the work of state-level and municipal government.
“For MBAs, it’s about understanding what this means and understanding where the rest of the governments are going and then figuring out how, as a corporate sector with states and municipalities, we can try to claw back some of our reputation so that we can have better relationships with companies and governments overseas,” she says.
Hoffman tells his students to keep an eye on government regulations at local, state, and federal levels — and also, he says, to take a look at market signals. An example of something he teaches his students to watch: Insurance and investors are beginning to play a big role in climate change policy.
“It really speaks to a growing role and the importance of business in dealing with the great issues our society faces,” Hoffman says. “I see a lot of students coming into business schools because they want to make the world a better place, and they see business as a place to do it. Twenty years ago, they would’ve gone to schools of government or nonprofit management. Today, they’re going to schools of business.”