Tom Macagno: Sustainable business
Embracing uncertainty – what's your excuse for not acting on climate change? Recently, I visited a council and was surprised to learn the member responsible for climate change was a climate sceptic. It begs the question: How could a person responsible for their community's environmental future have such an attitude?
While being uncertain without conclusive proof may be natural, in reality there are two motivations for acting on climate change. You may believe fossil fuels have accelerated climate change and this could have an adverse affect on society or you may believe society is dependent on non-renewable energy and needs new secure and affordable sources. Either stance leads to the same conclusion – the UK must develop and move to a low carbon economy.
Once the need to act is clear the next hurdle of uncertainty surrounds 'what to do.' How can you manage uncertainty around what to do regarding climate change? Research on choice-making strategies shows management decision making falls into two camps – maximisers and satisfiers. Maximisers seek 'the best' or maximum return after searching all possibilities. Satisfiers look for ''good enough,'' or the best available solution that passes a threshold of practical acceptability.
Maximisers look to avoid uncertainty. Conversely, satisfiers work to an internal standard (e.g. gut feeling or vision) and are comfortable with uncertainty and accept it.
The challenge with adopting a satisfier's decision-making style is managing risk. A few years ago I worked with a UK bank tackling climate change. Like most companies it had target ROI rates and minimum payback periods. The bank's goal was to maximise return. However, the management realised they would reject all potential climate / energy investment projects using their standard criterion. The bank responded by setting different investment targets for climate and energy related projects.
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The bank managed risk by applying good portfolio management. It decided how much of its investment portfolio to place in new 'riskier', i.e. unproven, projects. The remainder of its capital followed standard stricter investment criteria. We can all apply similar methods to budgets and portfolios to manage risk and maximise opportunities.
Climate change and renewable energy are game changers and bring risk and opportunity. You can manage both by taking calculated risk – investing in renewable technology and climate change projects without absolute proof that global warming is a man-made phenomena. By doing so you can gain wider benefits, through reduced energy costs, enhanced public perception for your organisation and improved staff moral. Hence, there is no excuse for not adopting environmentally friendly behaviour, even if you are sceptical about climate change.
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Tom Macagno is head of sustainability at May Gurney.