It's no longer news that "green" products and practices are good for the bottom line. But the days when "green" is only a garnish on the business plate might be ending.
With the integration of greenhouse gas emissions controls into our national economy seemingly inevitable, we may soon take our longest stride toward an inherently green and sustainable economy in American history. As a result, "green" increasingly is business, not just good for it.
It begins with the recent Supreme Court decision that confirmed the U.S. government can regulate greenhouse gases as soon as the country is led by a president favorable to the idea. Whether through the administrative route, or through preempting Congressional action, regulation of some form appears certain.
The story continues with this month's release of the Intergovernmental Panel on Climate Control's 2007 report, which makes it clear that we must act now to mitigate climate change and adapt. While some business leaders are content to wait on the sideline and watch the debate unfold, many others are already developing business strategies even as the rules continue to change.
As the IPCC report illustrates, climate change is rightly perceived as a major risk to human health, ecosystems and communities, and to the economies that are built upon them.
But climate change is also an opportunity. New markets will develop to meet the needs of communities affected by climate change. Without policy, these markets will be a search for painkillers -- treating symptoms, not the cause. With comprehensive policy, we'll create a healthy set of risks and opportunities for businesses to develop and deploy low-carbon solutions faster than their competitors. That's where the patents are going to be, and that's where the markets are headed worldwide.
We've already seen many real-world examples of this phenomenon. In the auto industry, Toyota and Honda anticipated consumer interest for more efficient vehicles and are now at least six years ahead of U.S. automakers in getting those products on the road.
Businesses that deal in the long term, like the insurance industry, are re-thinking their policies, such as where they will provide coverage for storm and flood damage. That industry began being alarmed earlier in this decade, when they began to see "100-year events" happening every five years or so.
And businesses more connected to the changing environment, such as agriculture, timber, maple sugaring, skiing and others, are finding themselves having to shift their planning, work and profit expectations year-by-year as the climate changes.
So what should we do to ensure that U.S. firms are at the vanguard of climate activity? Even major companies cannot go it alone with a business strategy that Wall Street does not recognize; with the quarterly profit focus and without the efficiencies gained through massive participation, it's too great a risk for an individual business to take. To harness the profit motive of business while mitigating climate change, we need the federal government to send a signal to the market. In particular, government's greatest role would be to say, "Carbon pollution reduction is now a tradable commodity. Go."
In the wake of the Supreme Court's ruling, EPA clearly has the authority to create this market signal on its own. But for EPA to act under the Clean Air Act, it must use a legal infrastructure ill-suited for the task of a global problem such as climate change. A far superior approach would to enact a national market-based program that would control greenhouse gases from within the market. A cap-and-trade program, for instance, would set overall authorized caps on emissions and then allow the buying and selling of those emissions credits.
If this were to occur, it would be the first time a market solution is brought to an environmental problem on such a major scale. And its scale is exactly what will help businesses drive the solutions and profit from them -- once the expectations are clarified.
This is not a pie-in-the-sky idea. It is a concept whose time has come. The business community has seen this and is speculating on its upside. Capital is flooding to "climate-friendly" investment, and messaging and marketing by American firms seek to grab the "green mantle" from companies that have gotten the jump on them.
These business leaders aren't waiting for the starting gun to sound. They're leaping out of the starting gate now to position themselves to compete in an environment that will likely be very different from what we see today. They realize that all business ultimately has to be green.