Asian Companies Are Working To Protect Against Climate Change, But Will It Be Enough?
TOPSHOT – An Indian farmer walks with his cow on a dried paddy field at Srilankabasti village, on the outskirts of Agartala, the capital of northeastern state of Tripura on February 24, 2018. / AFP PHOTO / Arindam DEY (Photo credit should read ARINDAM DEY/AFP/Getty Images)
Asia’s success over the last quarter-century in export-oriented manufacturing has powered extraordinary growth and made Asia a key player in the world economy.
When there is a supply chain disruption, be it with Apple iPhones or Toyota automobiles, it impacts the world.
Yet Asian companies and their extended supply chains are particularly susceptible to climate risk and resource constraints, notably from water.
Without an increased focus on building resilience, Asia, the world’s largest greenhouse gas emitter, could be sowing the seeds of its own destruction.
In “Building Resilience in Businesses and Supply Chains in Asia,” a report I co-authored for the Asia Business Council, we discuss what Asian companies can do to build resilience in their supply chains in greater detail.
Asia’s Climate Vulnerability
Without serious reductions in world carbon emissions, Asia’s average temperature will rise more than the world’s average by century’s end (by six degrees Celsius, vs 4 degrees for the world, and vs the two-degree goal of the Paris climate agreement), according to a report from the Asian Development Bank (ADB).
Higher ocean temperatures will mean severe typhoons–like Haiyan in 2013, one of the strongest ever to hit the Philippines–will be more common, as will flooding.
The World Bank names Guangzhou and Shenzhen in the top ten cities most at-risk to the rising cost of flood damage (New York and New Orleans are also on that list).
The Pearl River Delta region, home to corporate titans like Huawei Technologies Co. Ltd., Ping An, and Hon Hai Precision Industry (known as Foxconn Technology Group), accounted for over 9% of China’s GDP in 2015.
The inconvenient truth is that the PRD is at serious risk from sea-level rise.
Farmers from Tamil Nadu gather in New Delhi, India to protest the government’s apathy in the face of a massive drought and mass suicides by farmers, July 27, 2017. (Photo by Burhaan Kinu/Hindustan Times via Getty Images)
Michael Kimmelman in the New York Times, writes, “A generation ago, this was mostly farmland.
Three vital rivers leading to the South China Sea, along with a spider’s web of crisscrossing tributaries, made the low-lying delta a fertile plain, famous for rice.”
Now the region has been paved over.
Extensive landfill at the sea’s edge, as with Manhattan during Hurricane Sandy, cannot guard against storm surge.
With natural flood barriers eliminated (almost three quarters of Shenzhen’s mangrove swamps are gone, writes Kimmelman), it is subject to flooding, tidal surges and outbreaks of mosquito-borne disease.
In July 2014, a severe outbreak of dengue fever occurred in Guangzhou.
An article in a medical journal noted that the outbreak “developed with an amazing rate of growth in the number of cases, which rose to 1000 per week.
The total number of cases finally exceeded 37 000, seven times the historical record, confirming the epidemic as the most serious dengue outbreak in history.”
The ADB report also says Asia will experience a potentially lethal combination of heat and humidity, decreased agricultural productivity, erratic monsoons, and more drought.
Asia has a water problem
Asia’s per capita availability of fresh water is about half the world average, a threat often masked by government underpricing, notably in China, where The World Economic Forum (WEF) reckons the price is less than 50 cents per cubic meter, vs over $2 per cubic meter globally.
CDP, (formerly the Carbon Disclosure Project) a non-profit that facilitates corporate environmental reporting, notes that Chinese companies on average see water insecurity as far less of a business risk than their global peers do; and far fewer Chinese companies report measuring their water use.
The WEF projects water deficiencies could cost China $35 billion by 2030.
Singapore is hands-down the best water manager in Asia, with companies like Hyflux working in tandem with the government. Though it lacks natural fresh water sources, Singapore views water security as a matter of national defense.
Seeking to reduce the current 40% imported from Malaysia, 30% of Singapore’s water is recycled wastewater, and the remainder is from rainfall collected in reservoirs and water catchment areas and from desalination.
Overall, Asia ranks worse than both Africa and Latin America in terms of severe water pollution – approximately 80-90% of its wastewater is released without treatment, infiltrating ground and surface water.
The availability of adequate clean water supply is crucial for many industrial processes, from brewing, to textiles, to semi-conductor manufacturing and the generation of electricity.
Water scarcity is exacerbated by drought.
In India, where a large percentage of the population are farmers, a 2016 drought and failed crops, brought on by inadequate monsoon rains, drove many to suicide or forced migration. The economic cost was $100 billion.
Foreign companies with water-intensive products were pitted against farmers fighting for water.
In both 2016 and 2017, Coca-Cola and PepsiCo were the subjects of high-profile campaigns to boycott their products.
The two American behemoths are the largest and third-largest consumers of sugar-cane, a thirsty crop that competes for water with traditional rice farming. An Indian High Court in November 2016 ordered that water from Tamil Nadu’s Tamirabarani river not be diverted to the drinks manufacturers’ bottling plants for two months. In 2017 PepsiCo shut a plant in Kerala, due to government-imposed water rationing.
The Energy Water Nexus
Asia’s electricity comes largely from coal.
Coal-fired power and nuclear power, which China is beginning to ramp up, are water intensive.
In 2016’s drought, India lost enough electricity to power Sri Lanka for a year, due to a lack of coolant water for its thermal plants.
India’s hydropower plants also suffered, in May 2016, the reservoir behind the Tehri hydroelectric dam, its tallest, ran dry of stored usable water.
The Governor of the Bank of England, Mark Carney, in London on September 29, 2015. Carney spoke of risks to financial stability posed by climate change in a speech to business leaders hosted by insurers Lloyds of London. (Photo by Dominic Lipinski/AFP/Getty Images)
The Task Force on Climate-related Financial Disclosures (TCFD), headed by Mark Carney and former New York City Mayor Michael Bloomberg, and the Sustainability Accounting Standards Board (SASB), as well as CDP, are independent private sector organizations developing voluntary climate-related risk disclosures for gauging a company’s preparedness for the longer-term effects of climate change.
As the old saying goes, “you can’t manage what you don’t measure,” and many companies are discovering money-saving process efficiencies from implementing climate goals set by the C-Suite.
Three hundred and sixty-two companies, including many Asian champions, are setting their carbon emissions goals in line with climate science.
To date, 119 of the world’s most influential companies have joined the RE100 buyers’ consortium and are committed to using 100% renewable energy.
The transition to a lower-carbon world requires as much as $1 trillion of investment annually, for the foreseeable future, according to TCFD.
It is a staggering sum, but that number should be considered against the value of assets at risk, which could be as high as $43 trillion.
Corporate investment in resilience is in part an insurance policy against the worst effects of climate change, and it may be the best recipe for long-term corporate survival.
Press link for more: Forbes.com