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Blog Posts: business risk

  • Mounting Evidence: Climate Change Threatens America’s Energy Sector

    Extreme weather and climate events such as storms, floods, droughts and wildfires visibly impact not only our communities and livelihoods, but also our resources and related infrastructure. In its latest report, U.S. Energy Sector Vulnerabilities to Climate Change and Extreme Weather, the U.S. Department of Energy (DOE) warns that domestic energy supplies are likely to face more severe disruptions given rising temperatures that result in extreme weather events. The report accurately outlines the risks climate change poses to the energy sector in the United States and serves as a wake-up call on this critical issue, which I highlighted in my testimony before the Energy and Power Subcommittee of the House Energy and Commerce Committee earlier this year.

  • A Look at China's New Environmental Guidelines on Overseas Investments

    Few countries are unaffected by China’s overseas investments. The country’s outward foreign direct investments (OFDI) have grownfrom $29 billion in 2002 to more than $424 billion in 2011. While these investments can bring economic opportunities to recipient countries, they also have the potential to create negative economic, social, and environmental impacts and spur tension with local communities.

    To address these risks, China’s Ministry of Commerce (MOFCOM) and Ministry of Environment (MEP)—with support from several think tanks—recently issued Guidelines on Environmental Protection and Cooperation. These Guidelines are the first-ever to establish criteria for Chinese companies’ behaviors when doing business overseas—including their environmental impact. But what exactly do the Guidelines cover, and how effective will they be? Here, we’ll answer these questions and more.

  • 3 Signs of Progress in Curbing the Illegal Wood Trade

    The global market for wood and other forest products is changing quickly. The industry has long struggled to address the problem of illegal logging, which damages diverse and valuable forests and creates economic losses of up to $10 billion a year. In some wood-producing countries, illegal logging accounts for 50-90 percent of total production.

    But recent developments indicate that we may be turning a corner: Illegal logging rates worldwide have declined by about 20 percent since 2008.

    This was the topic on everyone’s minds at the recent Forest Legality Alliance meeting in Washington, D.C. This meeting brought together nearly 100 members and experts representing a wide array of companies, trade associations, NGOs, and governments involved in the harvest, manufacturing, and trade of legally produced forest products.

  • Step-by-Step Guidance on Corporate Water Disclosure

    Investors need to understand a wide variety of business and market risks facing the companies in which they invest. In the 21st century, that includes water risks.

    An increasing number of companies are experiencing detrimental water-related business impacts, including operational or supply chain disruptions and property damage from flooding, to name a few. These impacts can be costly--in 2011 they cost some companies up to $200 million--and have caught the attention of investors around the world.

    As a result, the movement toward increased Corporate Water Disclosure is gaining speed. The deadline for companies to respond to the CDP 2013 Water Disclosure Questionnaire is six weeks away. To make the reporting process easier, WRI has aligned our Aqueduct Water Risk Atlas with CDP’s water questionnaire. Together, we are providing step-by-step guidance on how to measure and report exposure to water-related risks.

  • Nearly Half of U.S. Fracking Sites Overlap with Water-Stressed Regions

    A new report from CERES draws a connection between water risk and hydraulic fracturing in the United States. The report adds an important dimension to the conversation about how energy use and water stress will play out in the years ahead.

    The report, Hydraulic Fracturing & Water Stress: Growing Competitive Pressures for Water, brings together Aqueduct’s high-resolution water stress maps with FracFocus.org data on the location and water use of U.S. shale oil and gas wells. The complete map (see below) shows where potentially water-intense hydraulic fracturing is happening in water-stressed areas.

    The results of the study are eye-opening: Almost half of the more than 25,000 oil and gas wells mapped by Ceres are in water basins with either high or extremely high water stress.

  • 4 Lessons on Environmental Sustainability that Every Corporation Should Learn

    This is the last of a five-part blog series, Aligning Profit and Environmental Sustainability. Each installment has explored key ingredients to help businesses overcome barriers that prevent them from integrating environmental sustainability into their everyday operations. Read the entire series.

    This post also appears on Greenbiz.com.

    Over the past month, we’ve discussed some of the key barriers that prevent companies from truly integrating sustainability considerations into their long-term strategies. Countless companies across the world struggle with these obstacles, such as: capital budgeting processes that fail to account for sustainability initiatives’ benefits; financial teams whose goals don’t align with those of the sustainability teams; and uncertainty about how to implement metrics that properly account for external environmental costs.

    A handful of companies, however, are starting to identify effective ways to break these barriers down. Johnson & Johnson now allocates $40 million a year to a special fund that directs capital to greenhouse gas reduction projects, helping to lighten its environmental footprint while proving these projects generate good returns. AkzoNobel and Alcoa have elevated the role of the Chief Sustainability Officer in capital budgeting decisions to ensure the company is spending money to achieve financial and environmental results. And Natura is accounting for the environmental impacts of its suppliers and including those costs in its supplier selection process.

  • Accounting for Environmental Externalities Is Good for Business and the Planet

    This post also appears on Greenbiz.com.

    This is Part Four of a five-part blog series, Aligning Profit and Environmental Sustainability. Each installment explores solutions to help businesses overcome barriers that prevent them from integrating environmental sustainability into their everyday operations. Look for these posts every Thursday.

    David Roberts at Grist, the online environmental news organization, commented on Twitter last week that “people talk about ‘externalities’ like they are just bad vibes or something. But that money is real money. Those costs are real costs.” How real is that money? Dr. Pavan Sukhdev, author of The Economics of Ecosystems and Biodiversity and Corporation 2020, claims that these “externalities”—or costs to society from carbon emissions, water use, pollutants, and other byproducts of business activities—are more than $2 trillion.

    Putting a financial value on these environmental costs can help businesses make better informed decisions about how they manage their environmental risk. Not all companies recognize this—and even fewer actually know how to value these externalities correctly. But a few corporations are starting to show us the way.

  • Navigating the "Vast Sea of Unknowns" of Water Risk

    This piece was co-written with Dr. Larry Brilliant, president of the Skoll Global Threats Fund.

    This piece also appeared in McClatchy News and the Huffington Post.

    We know less about one of world's most pressing challenges today than we did 10 years ago. It's no secret that water - or the lack thereof - will be one of the defining issues of the 21st century. And yet, the United Nations World Water Report, in 2009, stated that when it comes to water, "less is known with each passing decade."

    The World Economic Forum recently named the water supply crises as one of the top risks facing the planet - edging out issues like terrorism and systemic financial failure. Water risks permeate almost every aspect of global society. We got a taste last year with crops scorched by drought, shipping lanes threatened and energy plants shut down by low water levels, and coastlines devastated by flooding. Exacerbated by climate change and population growth, such crises will become more common and costly. Yet, the world largely lacks the data we need to monitor, understand, and respond to these water challenges. We are flying blind when it comes to global water issues.

  • In the Face of Growing Risks, Every Day Is a World Water Day

    Today marks the 20th anniversary of the first World Water Day, an international celebration designed to draw attention to the importance of freshwater resources. However, for a large and growing proportion of the world’s population, every day is a World Water Day. Difficult, complex water challenges including drought, groundwater depletion, pollution, and clean drinking water availability are growing in urgency and seriousness all around the world. Some even argue that we should boycott World Water Day – that our water problems are too serious to try and confine to a single day.

    Although it’s true that we must keep water in mind during the other 364 days of the year, World Water Day can be useful. It helps raise awareness and serves as an annual reminder of the water problems we must collectively solve. Plus, picking a single theme – this year’s is cooperation – helps break down a very complex topic into more accessible, comprehensible pieces.

    In keeping with the theme of helping make complex issues more approachable and understandable, WRI is marking this year’s World Water Day by launching the first in a new series of videos we’re calling “What’s the Big Idea?” These brief videos will feature WRI staff members explaining some of the complex, global challenges we are working to understand and solve. Our first “What’s the Big Idea?” video explains the concept of water risk and the array of challenges it poses. We also highlight a potential solution: WRI’s Aqueduct mapping tool, which helps companies, investors, governments, and others better understand and manage their water risks.

    [youtube I80-UpaCsT8]

  • Factoring Sustainability into Financial Decision-Making

    This is Part Three of a five-part blog series, Aligning Profit and Environmental Sustainability. Each installment explores solutions to help businesses overcome barriers that prevent them from integrating environmental sustainability into their everyday operations. Look for these posts every Thursday.

    This post also appears on Greenbiz.com.

    A large, multi-national company likely spends hundreds of millions of dollars every year on new projects. How these projects are designed, constructed, and operated clearly impacts costs in the short-term, but also poses huge implications for a company’s “sustainability footprint” in the long-term.

    A major challenge is that most corporate sustainability experts within a business are not involved in capital budget requests at the outset. A company’s financial leaders make investment decisions with upfront costs and projected revenues in the front of their minds. They are far less likely to take into account a project’s potential environmental risks and benefits. Not coordinating financial and sustainability decisions can lead to projects that are cost-efficient to build today, but may not hold up to sustainability pressures over their lifetime. For example, a company might invest in a factory that is inexpensive to build, but then realize that it’s in a location that locks them into buying only fossil fuel-based energy sources.

    The lack of integration between financial and sustainability-related decision-making is a main barrier to scaling truly impactful corporate environmental sustainability. But as WRI found in its new working paper, Aligning Profit and Environmental Sustainability: Stories from Industry, there are companies who are starting to show us ways of overcoming this challenge.

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