Climate Change and Business:
A Climate SWOT Analysis Tool
for SME’s
Susanna Horn
School of Business and Economics
University of Jyväskylä, Finland
Contents of this
f hi presentation
i
Climate Change and Business – An overview
Climate SWOT as a tool
Results of the studies:
– Tool
– Content
Climate Change and Business: Strategies
How will climate change affect the business environment: Markets? Prices? Resources?
 What action is needed?  How will the markets
the markets in the future
in the future look like?
look like?
 What are the opportunities in the uncertainty?  What
at about co
competitors? pet to s
→ Strategic assessment for a market transition (present, near future, long‐term)
Climate change and business – the opinions
”Don’t think of climate change as an environmental
issue; think of it
issue; think
of it as a
as a market issue”,
issue” in the form
in the form of of
risks and opportunities > regulations, prices, energy
availability,… (Hoffmann, Woody, 2008)
The transition to a low
The
transition to a low‐carbon
carbon economy will bring challenges for competitiveness but also opportunities for growth.
Stern review, 2007
A correlation between higher stock market performance over time and representation on the CDP’ss Carbon Performance CDP
Carbon Performance
Leadership Index and the Carbon Disclosure Leadership Index has been established in the 2011 CDP Global 500 report. Companies with a strategic focus on climate change provided investors with approximately double the average total return of the
average total return of the Global 500 from January 2005 to May 2011.
www.CDP.net
”Businesses that ignore the debate over
climate change, do
change do so at their
at their peril” peril”
(Conference Board)
“The global threat from climate change is now clearer than ever The whole economy has to change.
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 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 transparent that just didn't exist before and these pressures are coming from unlikely places, such as the insurance industry, Jeffrey Hollender, co‐founder of Seventh Generation, Greenpeace US.
“In
In the future I expect a company
the future I expect a company’ss carbon statement to be as carbon statement to be as
prominent as its financial statement. That’s because investors are demanding reliable information about 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 same.””
Ian Pearson, former Minister of State for Climate Change and Environment at the Department for Environment, Food and Rural Affairs, UK
a business perspective you don
don’tt need to look at the to look at the
From a business perspective,
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
is changing, so
the companies should act on these
act on these
CLIMATE RISKS
Physical Risk:
Physical impact of climate change
(weather events, drought, floods,
sea level rise)
Change also in consumer habits
Regulatory Risk:
Increasing pressure (emission controls, carbon credits, clean‐ up costs, Kyoto
protocol…)
CLIMATE OPPORTUNITIES
Regulatory opportunities:
Less clean‐up and compliance costs, increased revenue by selling carbon
credits
Techn. Opportunities:
Increase profitability by developing
emission ‐reducing technologies or new products, ee strategies
Competitive/Reputational Opp
Opp’ss
Clean technologies maylead to
new markets/market share
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
• In present (SW) and in future (OT)
• Internal (SW) and external (OT)
• Strengths
St
th are those
th
resources which
hi h can be
b utilised, weaknesses
tili d
k
those which must be improved. Opportunities and threats must
be known approximately
2 Life cycle
2.
Lif
l perspective
i
• Consider all life cycle steps
LIFE CYCLE ASSESSMENT
LCA steps (ISO 14040):
Inventory analysis
Impact assessment
SWOT
Strengths
Global
Strong R&D
Specific competitive advantage
Highly qualified personnel
High re‐sale value
Efficient process
Location
S i l marketing
Special
k ti expertise
ti
Weaknesses
High cost structure
Too narrow focus
Absence of strong
marketing/accounting expertise
Poor access to distribution
Unreliable service
High wages
P
Poor
after
ft sales
l service
i
Poor quality product
Opportunities
Potential to diversify into related
markets
Changes in government actions
Change in population age
Alternative delivery models
Internet sales
Mergers, acquisitions etc.
Larger international markets
Threats
Low cost competitors
Economic slowdown
Changes in government actions
Change in population age
Competitor with a new subsitute
product
Competitor’s access to better
distribution channels
New taxes
Interpretation and Reporting
and Scope Definition
Goal and Scope
Climate Strategies Based on Climate SWOT
Based on Climate SWOT 1.
2.
Identification of Product Life Cycle Stages
Identification of Climate Impacts
a)
b)
3.
4.
5.
6.
Now
In the future year X
In the future, year X
Significance Assessment of the Climate Impacts
Compilation of the Climate SWOT
p
Climate Strategy Options
Strategy Formulation
Hanna-Leena Pesonen, 2011
1. Identification of Product Life Cycle Stages
Product Life Cycle Stages
Typical Model of a Product Life Cycle
Raw Materials
Production
Production
Transportation
Trade
Recycling and
Waste
Management
Use
Example: Life Cycle of a Car
Example: Life Cycle of a Car
Production of
Steel, Plastic,
and Other
Raw Materials
Component
Production
Car
Production
Car Use,
Driving
Car Sales
Recycling and
Waste
Management
Example: Life Cycle of a Newspaper
Forestry
Pulp
Production
Paper
Production
Printing
Distribution
Use, Reading
Newspaper
Example: Life Cycle of a Vacation in Ski Resort Travel
Reservation
Hanna-Leena Pesonen, 2011
T
Travelling
lli
to/from Ski
Resort
Accommodation
Slope
Maintenance
Paper
Recycling and
Waste
Management
Skii and
Skiing
d
Other Outdoor
Activities
2. Identification of Climate Impacts
Raw Materials
Production
Production
Transportation
Impact A +
Impact D -
Trade
Use
Recycling and
Waste
Management
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
stage on the climate, i.e. greenhouse gas emissions caused by use of energy, traffic, transportation, location and land Use GHG Inventories use, etc.
“Outside‐in”: how the changing climate may affect the activities of each life cycle stage
Use Climate Scenarios Impact E +
Hanna-Leena Pesonen, 2011
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 2
p
– 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
– Importance of the issue to your stakeholders (clients, employees I
t
f th i
t
t k h ld ( li t
l
etc.)
– Requirements of legislation concerning climate issues
Hanna-Leena Pesonen, 2011
4. Compilation of the Climate SWOT
Raw Materials
Production
Production
Transportation
Trade
Strengths

I
Impact
tA

Impact C
Weaknesses

O
Opportunities
t iti

Impact E
Hanna-Leena Pesonen, 2011
Use
I
Impact
tB
Th t
Threats

Impact D
Recycling and
Waste
Management
5.‐6. Climate Strategy Options and Strategy formulation
Strengths
Weaknesses
STRENGTHEN
sources of competitive advantage
MITIGATE
your climate impacts by improving your operations and/or
ti
d/
product portfolio
Opportunities
Threats
BUILD
new sources of competitive advantage
FOLLOW
the development of issues, which could harm your business and
BE PREPARED
to adapt
Hanna‐Leena Pesonen, 2011
According to the climate According to the climate
strategy options, a strategic plan should be formulated for each climate impact identified in the Climate SWOT. For each strategy, define:
t t i t
t
•strategic target
•measures (procedures, activities, improvements)
•responsibilities,
resources and budget,
•resources
and budget
•schedule, and
•indicators.
Two studies are made about the Climate
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
impacts, data sources)
Second: The results of the Climate SWOT’s
Climate Strategy Options for SME’s in Agriculture and Forestry in the Baltic Region:
Agriculture
y
and Forestry
Refining and
Industrial
Operations
Transport
Retail
Strengths



Production of bioenergy, often as byproduct
Production of bioenergy, often as byproduct
Production of bioenergy, often as byproduct
Recyclable materials








Two harvests per season, more yield on agriculture
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
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
climate effects in other regions
Recycling
and Waste
Management
Weaknesses



Opportunities

Use
Energy intensive industries
T
Transportation based on fossil fuels
t ti b d
f il f l
Currently retail not strongly supporting local food
Threats







Logging more complicated in winter
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
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
•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
Climate Strategy Options for SME’s in Bioenergy in the Baltic Region:
Raw Material
Production
Transportation
to Refining
Refining
Strengths




Renewable raw materials
Availability of wood, agribiomass and biowaste as raw
material
Decreasing transportation, if local materials used
GHG neutral fuel or energy source



Opportunities




Larger scale, more efficient production=> increasing eco‐
efficiency of biofuels life cycle environmental impacts
Support for increasing use of biofuels/bioenergy in
(
(European) legislation
)l
l
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
efficient raw material production=> increasing price raw material production=> increasing price
competitiveness
Changes in fuel & energy taxation favoring biofuels/‐energy
Use
Weaknesses


Distribution
Inefficient production technologies and supply chain management=> life cycle energy balance of biofuels/
bioenergy in some cases negative
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
Threats




Biodiversity concerns related to growing raw materials
for bioenergy and biofuels
Availability of raw materials
No interest from car owners to switch to alternative f
h
l
fuels or from car industry to develop biofuel vehicles
=> no demand for biofuels
No policy framework to support change
•Invest in developing local raw material production
•Participate
P ti i t in developing
i d l i distribution
di t ib ti network
t
k and infrastructure
di f t t
t
to accommodate
d t use of new biofuels/bioenergy
f
bi f l /bi
•Follow changes in legislation and political support for bioenergy and be prepared to develop your business accordingly
•Be active in promoting the use of bioenergy
Climate Strategy Options for SME’s in Housing in the Baltic Region:
Raw Material
Extraction and
Processing
Transport
Use and
Maintenance
Building
Strengths




Availability of wood as renewable and energy efficient
building material
building material
Long tradition in energy efficient building in some
areas of the Baltic region
Wooden building material as carbon sink
Recyclability of wood
Weaknesses



High climate impacts of many raw materials, such
t d t l
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
building material
Wood building material as carbon sink
Recycling and
Waste
Management
Threats




Increasing price of energy
Increasing price of energy
Increasing price of energy
More
harsh climate conditions (more rains storms
More harsh climate conditions (more rains, storms
forest fires) will be an increasing challenge to building maintenance
•Increase use of wood
of wood as a building
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
Climate Strategy Options for SME’s in Tourism in the Baltic Region:
Marketing
Travelling to/
from Resort
Infrastructure
and Facilities
Strengths



Pristine nature in many areas of the Baltic region,clean
air and water
air and water
Shorter distance for local travelers compared to foreign
resorts, cheaper transport
Traditions in relatively energy efficient building (insula‐
tions etc.)

Changing tourism culture bringing more opportunities
for local tourism
Longer season for summer tourism through rising
temperatures
Winter
Activities
Weaknesses



Opportunities

Summer
Activities
Long distance from foreign market areas, expensive transport
expensive transport
Energy intensity in accommodation and other facilities (heating, lighting etc.)
Energy intensity in winter sports maintenance (snow making, skiing lifts, lighting, etc.)
Threats





Increasing fuel prices decreasing travelling
Increasing costs of accommodation because of increasing heating, cooling, electricity costs => price competitiveness suffers
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
Climate Strategy Options for SME’s in Transportation and Mobility in the Baltic Region:
Road Transport
Rail Transport
Ship
Transportation
and Port
Operations
Strengths




Relatively good railroad network in the Baltic Region
Tradition of using waterways for 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
Weaknesses








Use of fossil fuels and high fuel prices
High replacement cost for alternative fuel vehicles
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 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 rises
 Increasing attractiveness and demand on public transport, when increasing fuel prices make private car ownership expensive
Public
Transportation
Threats





Increasing problems in road construction and maintenance:
temperature fluctuation around 0
temperature
fluctuation around 0°C
C degrade roads
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
•Local cooperation between different transportation modes and actors
•Prepare for rising
for rising fossil fuel prices by compensating the current
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
•In areas with good inland waterways, develop new year‐round water transportation services
Summary
I
i il across the region:
h
i
Impacts
similar
– Rising temperatures
– Increasingg p
precipitation
p
– Decreasing snow cover
Challenges
– N
New species, pests, diseases
i
t di
( i lt &f
(agriculture&forestry)
t )
– Development of alternative RE sources, energy efficiency (energy
and transportation)
– New needs of maintenance due to changing climate (housing)
– Shortening of winter season (tourism)
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
More cooperation needed between all stakeholders
Contact information:
Susanna Horn
susanna.horn@jyu.fi
Thanks!
School of Business and Economics
University of Jyväskylä
P O Box 35
P.O. Box 35 40014
Finland