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Climate change means businesses have to evolve – Yvo de Boer

Yvo de Boer, former head of the UN’s Framework Convention on Climate Change.
Yvo de Boer, former head of the UN’s Framework Convention on Climate Change.

French winemakers are looking at buying potential future vineyards in Scotland - it’s one example of how companies need to use climate services to help them adapt to climate change, according to Yvo de Boer, former head of the UN’s Framework Convention on Climate Change, who now works as global chairman of Climate Change and Sustainability Services at advisory firm KPMG.

How do climate services need to change to better serve companies, policymakers and citizens?

‘I think that the first requirement is for climate information to become much more granular. We tend to look at climate-related information at a reasonably high level of abstraction, and for information to be relevant to decision-makers, whether it’s the mayor of a city or the CEO of a company, that information needs to be granular, localised. Secondly, I think that the challenge is not so much producing more information, the challenge above all is understanding the information needs of the user and showing the user how to gain access to the information that is already out there.’

What’s the role of research in this?

‘I think important research is happening on climate across the board to understand how different sectors of the economy, how different countries are likely to be impacted by different aspects of climate change, whether it’s temperature increase or tropical diseases occurring where they haven’t occurred before, agricultural patterns and practices that need to change. So there is important research at the moment in helping us to understand how climate change is likely to impact Europe in different ways geographically. The challenge, I think, is to make that information available to different sectors of the economy in a more targeted way.’

Can you give an example?

‘There are relatively few places in the world where you can grow cocoa, the areas where you can grow cocoa are likely to be affected by climate change so it is very important for chocolate manufacturers to understand exactly how the areas in which cocoa is grown are likely to be affected, and how they can change production methods to become more resilient to the impact of climate change. So there it’s a matter of very specifically understanding the needs of this particular information user.’

‘We have a global bank account in terms of the global commons on climate and we are very rapidly overdrawing that bank account.’

Yvo de Boer, former head of the UN’s Framework Convention on Climate Change

Why aren’t more people using climate data at the moment?

‘Very often people don’t know the information is available, or they don’t understand how the information is relevant to them. I’ll give you an example. At KPMG we produced a report about two years ago which we called Expect the Unexpected, Building business value in a changing world, where we looked at what we called a number of global megatrends on climate, on energy, on water, food, biodiversity loss, deforestation, ecosystems decline, materials scarcity in the light of population growth, wealth increase and urbanisation, and then asked ourselves the question, how are these global trends likely to affect different sectors of the economy and what would happen if companies increasingly had to internalise the environmental costs associated with their operations in one way or another.

‘One of the conclusions that we came to was if food producers had to fully internalise their environmental costs, then their profits would be wiped out twice over because their environmental footprint is so massive, and this is not something that is generally understood in the food and beverage industry. We found that, on average, companies would lose about 40 cents in every dollar or euro earned if they had to internalise their environmental costs. In other words, you see vast portions of the global economy using resources as though they were free and limitless, when in fact they are neither.’

Surely no economy could operate if companies had to pay their environmental costs in this way?

‘What you would see is prices would rise significantly and people would become much more careful in the choices that they make. At the moment, for example, the carbon dioxide emissions associated with manufacturing a car are largely not included in the price of that car. If they were, then you would see cars become significantly more expensive, and small cars become significantly more attractive from multiple perspectives.’

Should that happen, in your opinion?

‘I think so. I mean, in a sense we have a global bank account in terms of the global commons on climate, etcetera, and we are very rapidly overdrawing that bank account. We are already significantly into the red, and a time will come when the bank manager is going to call and say “enough is enough”. And when I talked about companies that are looking at climate change as an opportunity for growth through innovation, those really are the front runners that are positioning themselves to be ahead of the game when that begins to happen.’

As for the need to internalise climate costs, when will that start to change the way that business is done?

‘I think it’s already beginning to do that. We’re seeing very serious debate in Europe about energy pricing. Europe has a climate policy in place, Europe has a goal to reduce emissions by 80 % to 90 % by the middle of the century, so clearly there is a political intent to take the European economy in a completely different direction. The old economy does not fit with that future direction and what climate services can do is to help companies and to help policymakers understand how we can live within the limit of our bank balance and avoid the manager calling.’

When the bank manager comes to call, what does that mean in practical terms?

‘What that means in practical terms is that your economy, that your society is unable to survive. Either because the impact of climate change will be very severe, or because action on climate change is taken and the price of energy becomes very high, or the cost of coping with the impact of climate change becomes very high.’

When might that happen?

‘I think it’s already beginning to happen. I mean, this perhaps sounds rather banal or frivolous, but there are French winemakers checking out potential property in Scotland because they know what’s coming their way. And if you take, for example, rice. Rice production is incredibly sensitive to temperature increase, just 1 or 2 degrees Celsius temperature increase can have a massive impact on where you can grow rice or where you can’t, so those kinds of issues are actually quite close to us. The bank manager is already calling, and there are only so many times you can not answer the phone.’

In April you will become the head of the non-governmental organisation the Global Green Growth Institute. What will be your objectives?

‘It’s to help developing countries and emerging economies green their economic growth. In other words, to create an economic future which is more sustainable. What that means is focusing your economic growth in sectors that are future fit, so in other words creating growth through innovation in a way that recognises the external pressure that we are under, so growing differently. And, secondly, it means taking inefficiencies out of the economy: using less energy, less water, producing less waste, managing supply chains better. At this moment in time in the developing world almost half of food is lost between the field and the consumer because of poor transportation and storage, so in other words what can you do to enhance the efficiency of an economy, and thirdly what can you do to prepare countries for the inevitable impact of climate change.’

Anything to add?

‘I’d like to add that the wisdom of the decision that you take is dependent on the information that you have at your disposal, so probably the most important function of research is to ensure that wise decisions are taken.’

Climate services

Climate change affects all industries, from agriculture where farmers have to change their crops as the temperature increases, to healthcare as tropical diseases spread northwards, and manufacturing as energy becomes more and more expensive.

Businesses, politicians and citizens need to know how climate change will affect their region or their sector in the future, and that’s where climate services come in.

Climate service providers take climate data and repackage it into forecasts and recommendations that are tailored to the needs of different industries or regions. For example, energy firms use climate services to work out where to build power plants so that they won’t be flooded as sea levels rise.

More info