ISBN; 978-92-807-3344-0Job Number: DEW/1686/NAGEO-5 for Business is written for business leaders who are responsible for e...
© 2013 United Nations Environment ProgrammeISBN: 978-92-807-3344-0DEW/1686/NADisclaimersThe content and views expressed in...
SUSTAINABILITYLOGOTYPE FOR PRINT ONLYGEO-5 for BusinessImpacts of a Changing Environment on the Corporate Sector
iiO R B U S I N E S SAcknowledgmentLead Author: Dave Grossman (Green Light Group)Contributing Authors: Jeff Erikson (Susta...
iiiTable of ContentsAcknowledgment...........................................................................................
ivG E O - 5 f o r B u s i n e s sForewordAchim SteinerUnited Nations Under-Secretary General and Executive DirectorUnited ...
1F O R E W O R D
2G E O - 5 f o r B u s i n e s sExecutive SummaryGlobal environmental trends are creating new risksand new opportunities f...
3E x e c u t i v e S u m m a r yEnvironmental Trend from GEO-5 Key Implications for BusinessGreenhouse gases – Greenhouse ...
4G E O - 5 f o r B u s i n e s sRisks OpportunitiesBuilding and Construction (section 3.1)•	 Constrained availability and ...
5E x e c u t i v e S u m m a r yRisks OpportunitiesFood and Beverage (section 3.6)•	 Changes in availability, quality, pri...
6G E O - 5 f o r B u s i n e s s1.	IntroductionThe currenteconomic system,built on the ideaof perpetualgrowth, sitsuneasil...
7i n t r o d u c t i o nUNEP’s Global EnvironmentOutlookSince 1997, the United Nations Environment Programme(UNEP) has pro...
G E O - 5 f o r B u s i n e s s82.	 Key Findings from GEO-5 Concerning the Stateand Trends of the EnvironmentAs humanpress...
K e y F i n d i n g s f r o m GEO - 5 C o n c e r n i n g t h e S tat e a n d T r e n d s o f t h e E n v i r o n m e n t9...
G E O - 5 f o r B u s i n e s s10Land•	 Potentially 100-200 million hectares of land are projectedto be converted for urba...
K e y F i n d i n g s f r o m GEO - 5 C o n c e r n i n g t h e S tat e a n d T r e n d s o f t h e E n v i r o n m e n t1...
G E O - 5 f o r B u s i n e s s12Biodiversity•	 The world lost 20 percent of its seagrass and mangrovehabitats since 1970 ...
K e y F i n d i n g s f r o m GEO - 5 C o n c e r n i n g t h e S tat e a n d T r e n d s o f t h e E n v i r o n m e n t1...
G E O - 5 f o r B u s i n e s s143.	 Sector-Specific ImplicationsSuccessful companies anticipate and adapt to changestakin...
15S e c t o r - s p e c i f i c i m p l i c at i o n s3.1	 Building and ConstructionThe building and constructionsector – ...
G E O - 5 f o r B u s i n e s s16Warmer temperatures and higher rainfall may lead toincreased maintenance costs due to cha...
17S e c t o r - s p e c i f i c i m p l i c at i o n sPolicy ImplicationsEnergy efficiency, renewable energy, andgreenhous...
G E O - 5 f o r B u s i n e s s183.2	ChemicalsThe chemicals sector – hereconsidered to encompasschemicals, mixtures ofchem...
19S e c t o r - s p e c i f i c i m p l i c at i o n sBusiness customer expectationsRising concerns about the environmenta...
G E O - 5 f o r B u s i n e s s20The electric power sector –here considered to encompassgeneration, transmission, anddistr...
21S e c t o r - s p e c i f i c i m p l i c at i o n sto unusually hot temperatures and low monsoon rains, lefthundreds of...
G E O - 5 f o r B u s i n e s s22Increased demand for intermittent renewables anddistributed generation in the electricity...
23S e c t o r - s p e c i f i c i m p l i c at i o n sExtractive companies – hereconsidered to encompass oiland gas produc...
L'impact du chagement climatique sur le secteur privé
L'impact du chagement climatique sur le secteur privé
L'impact du chagement climatique sur le secteur privé
L'impact du chagement climatique sur le secteur privé
L'impact du chagement climatique sur le secteur privé
L'impact du chagement climatique sur le secteur privé
L'impact du chagement climatique sur le secteur privé
L'impact du chagement climatique sur le secteur privé
L'impact du chagement climatique sur le secteur privé
L'impact du chagement climatique sur le secteur privé
L'impact du chagement climatique sur le secteur privé
L'impact du chagement climatique sur le secteur privé
L'impact du chagement climatique sur le secteur privé
L'impact du chagement climatique sur le secteur privé
L'impact du chagement climatique sur le secteur privé
L'impact du chagement climatique sur le secteur privé
L'impact du chagement climatique sur le secteur privé
L'impact du chagement climatique sur le secteur privé
L'impact du chagement climatique sur le secteur privé
L'impact du chagement climatique sur le secteur privé
L'impact du chagement climatique sur le secteur privé
L'impact du chagement climatique sur le secteur privé
L'impact du chagement climatique sur le secteur privé
L'impact du chagement climatique sur le secteur privé
L'impact du chagement climatique sur le secteur privé
L'impact du chagement climatique sur le secteur privé
L'impact du chagement climatique sur le secteur privé
L'impact du chagement climatique sur le secteur privé
L'impact du chagement climatique sur le secteur privé
L'impact du chagement climatique sur le secteur privé
L'impact du chagement climatique sur le secteur privé
L'impact du chagement climatique sur le secteur privé
L'impact du chagement climatique sur le secteur privé
L'impact du chagement climatique sur le secteur privé
L'impact du chagement climatique sur le secteur privé
L'impact du chagement climatique sur le secteur privé
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L'impact du chagement climatique sur le secteur privé

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Rapport du PNUE sur l'impact du réchauffement climatique sur les activités économiques.

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L'impact du chagement climatique sur le secteur privé

  1. 1. ISBN; 978-92-807-3344-0Job Number: DEW/1686/NAGEO-5 for Business is written for business leaders who are responsible for ensuringthat risks and opportunities are understood, addressed, and turned into long-termcompetitive advantage for their companies. The report assesses the operational,market, reputational, and policy implications of environmental trends on tenbusiness sectors. It is based on information derived from existing science, business,policy, and other literature. It also includes brief real-world examples that illustratethe nature of some of these risks and opportunities.Further resources:Global Environment Outlook-5:www.unep.org/geoGreen Economy:www.unep.org/greeneconomySustainable Consumption and Production:www.unep.fr/scpGEO-5 for BusinessImpacts of a Changing Environment on the Corporate Sector
  2. 2. © 2013 United Nations Environment ProgrammeISBN: 978-92-807-3344-0DEW/1686/NADisclaimersThe content and views expressed in this publication are those of the authors and do not necessarily reflectthe views or policies, or carry the endorsement of the contributory organisations or the United NationsEnvironment Programme (UNEP).The designations employed and the presentation of material in this publication do not imply the expressionof any opinion whatsoever on the part of UNEP concerning the legal status of any country, territory or cityor its authorities, or concerning the delimitation of its frontiers and boundaries.Reference to a commercial company or product in this publication does not imply the endorsement ofUNEP.This publication may be reproduced in whole or in part and in any form for educational or non-profitpurposes without special permission from the copyright holder, provided acknowledgement of the source ismade. UNEP would appreciate receiving a copy of any publication that uses this publication as a source.No use of this publication may be made for resale or any other commercial purpose whatsoever withoutprior permission in writing from UNEP. Applications for such permission, with a statement of purpose andintent of the reproduction, should be addressed to the Director, Division of Communications and PublicInformation (DCPI), UNEP, P.O. Box 30552, Nairobi 00100, Kenya.The use of information from this publication concerning proprietary products for publicity or advertising isnot permitted.This report has been produced by UNEP and SustainAbility Inc. with financial support from BP plc,Syngenta, The Walt Disney Company and Chevron Corporation (collectively “the supporters”). Thestatements and conclusions herein are those of SustainAbility Inc and/or UNEP and do not necessarilyreflect the views of the supporters. The supporters makes no representations, guarantees or warranties,express or implied, as to the accuracy, quality, fitness for purpose or completeness of the informationcontained herein. Use of this document and the information contained herein is at your sole risk and thesupporters have no duty of care or liability to you in connection with this document or its contents.Cover Design: Jinta Shah/UNONPrinting: UNON/Publishing Services Section, UNON, Nairobi, ISO 10041:2004-certified.UNEP promotesenvironmentally sound practicesglobally and in its own activities. Thisreport is printed on paper from sustainableforests including recycled fibre. The paper ischlorine free and the inks vegetable-based.Our distribution policy aims to reduceUNEP’s carbon footprint.
  3. 3. SUSTAINABILITYLOGOTYPE FOR PRINT ONLYGEO-5 for BusinessImpacts of a Changing Environment on the Corporate Sector
  4. 4. iiO R B U S I N E S SAcknowledgmentLead Author: Dave Grossman (Green Light Group)Contributing Authors: Jeff Erikson (SustainAbility); Neeyati Patel (UNEP)Peer Reviewers:Clarissa Lins, Brazilian Foundation for Sustainable Development (FBDS); Diana Liverman, University of Arizona;Karen Wuestenfeld, BP; Juan Gonzalez-Valero, Syngenta; Beth Stevens, The Walt Disney Company; Kirsten Thorne,Chevron; Brian Sullivan, International Petroleum Industry Environmental Association (IPIECA); Sophie Depraz, IPIECA;Ros Taplin, Australian Centre for Sustainable Mining Practices (ACSMP); Maggie Comstock, US Green Building Council;Nigel Lucas, expert; Trevor Morgan, Menecon Consulting; Amos Bien, Rara Avis; Reinhard Joas, International Supportfor Sustainable Products and Production (ISSPPRO); Mary Otto-Chang, Sustainable Development and Climate ChangeConsultant; Graciela Metternicht, University of New South Wales Institute of Environmental Studies; Edward Cameron,Business for Social Responsibility (BSR); Sissel Waage, Business for Social Responsibility (BSR); France Bourgouin, Businessfor Social Responsibility (BSR); Dave Knight, DNV Two Tomorrows; Priti Nigam, DNV Two Tomorrows; Luigi Cabrini,UN World Tourism Organization (UNWTO); Norine Kennedy, United States Council for International Business (USCIB);Michael Allen, United States Council for International Business (USCIB); Birgit Engelhardt, International Council forChemical Associations; Adriano Basanini, Consultant; Mark Lee, SustainAbility.Project managers: Garrette Clark (DTIE); Neeyati Patel (DEWA)UNEP DTIE: Sylvie Lemmet, Kaveh Zahedi, Arab Hoballah, Elisa Tonda; Garrette Clark; Joni Pegram; Mark Radka,David Piper, Rob de Jong, Eric Usher, Nick Bertrand, Sonia Valdivia, Li Shaoyi, Tomas Marques, Curt Garrigan,Djaheezah Subratty, James Lomax, Helena Rey, Johanna Suikkanen, Pierre Quiblier, Yuki Yasui, Dean Cooper,Hilary French, Emily Werner, Seraphine Haeussling, Sophie Bonnard, Moira O’Brien-MaloneUNEP DEWA: Peter Gilruth, Fatoumata Keita-Ouane, Jason Jabbour, Andrea Salinas, Matthew Billot, Thierry de OliveiraUNEP DCPI: Nick Nuttall, Bryan Coll, Kelvin Muinami Memia, Waiganjo NjorogeDesign and layout: Catherine Kimeu, Neeyati PatelPhoto credits:p. 1: © vesilvio/Shutterstock p. 22: © Patrick Poendl/iStockp. 2: © Denise Kappa/Shutterstock p. 23: © Christopher Kolaczan/Shutterstockp. 6: © ruchos/iStock p. 26: © Robert Churchill/iStockp. 8: © ssguy/Shutterstock; © vintagerobot/iStock p. 29: © Aleph Studio/Shutterstockp. 9: © Volker Müther p. 32: © S. Kuelcue/Shutterstockp. 11: © Kibae Park/UN Photo p. 33: © sfam_photo/Shutterstockp. 12: © Mary Terriberry/Shutterstock p. 35: © Denise Kappa/Shutterstockp. 13: © Stephen Gibson/Shutterstock p. 36: © TebNad/Shutterstockp. 14 (l-r): © Josemoraes/iStock; © TebNad/Shutterstock; p. 38: © Oleksiy Mark/Shutterstock© Adisa /Shutterstock; © BanksPhotos/iStock; © Mark Wragg/iStock; p. 39: © Zxvisual/iStock© George Clerk/iStock p. 41: © Katie Dickinson/Shutterstockp. 15: © iurii/Shutterstock p. 42: © Ryan Lindsayp. 16: © Klaas Lingbeek-van Kranen p. 44: © iStock/code6dp. 17: © akiyoko/Shutterstock p. 45: © Andrey tiyk/Shutterstockp. 18: © Toa55/Shutterstock p. 46: © ssuaphotos/Shutterstockp. 20: © gyn9037/Shutterstock
  5. 5. iiiTable of ContentsAcknowledgment.................................................................................................................................................................................... iiForeword.................................................................................................................................................................................................. ivExecutive Summary................................................................................................................................................................................21. Introduction.....................................................................................................................................................................................62. Key Findings from GEO-5 Concerning the State and Trends of the Environment ........................................................8 2.1 Key Drivers ..........................................................................................................................................................................................................8 2.2 Environmental Trends....................................................................................................................................................................................93. Sector-Specific Implications.......................................................................................................................................................14 3.1 Building and Construction.......................................................................................................................................................................15 3.2 Chemicals...........................................................................................................................................................................................................18 3.3 Electric Power..................................................................................................................................................................................................20 3.4 Extractives..........................................................................................................................................................................................................23 3.5 Finance.................................................................................................................................................................................................................26 3.6 Food and Beverage.......................................................................................................................................................................................29 3.7 Healthcare..........................................................................................................................................................................................................33 3.8 Information and Communication Technology............................................................................................................................36 3.9 Tourism................................................................................................................................................................................................................39 3.10 Transportation................................................................................................................................................................................................424. Conclusion......................................................................................................................................................................................45Endnotes..................................................................................................................................................................................................47iiiTA B L E O F C O N T E N T S
  6. 6. ivG E O - 5 f o r B u s i n e s sForewordAchim SteinerUnited Nations Under-Secretary General and Executive DirectorUnited Nations Environment ProgrammeEnvironmental change, in large part driven byhumanity’s demand for resources, rising lifestylesand growing global population, is accelerating andgenerating new and emerging challenges but alsoopportunities for business.Companies that face up to these realities are likely tobe the ones that thrive and remain competitive in arapidly changing world where factors such as climatechange and dwindling availability of natural resourceslike water will shape future profit and loss and drivenew markets.This new report, GEO-5 for Business, is based onthe flagship assessment by the UN EnvironmentProgramme (UNEP), the Global EnvironmentOutlook 5, which was launched in advance of theRio+20 Summit.GEO-5 for Business outlines current and futureimpacts of environmental trends across a rangeof sectors from construction to food. It dovetailswith other assessments such as those by the UNEP-hosted International Resource Panel that estimateconsumption of natural resources will triple by 2050unless urgent action is taken to decouple economicgrowth from natural resource use.These trends are likely to not only impact and influencemarkets but also trigger technological innovationand change while stimulating regulatory and policydevelopments nationally and internationally, which inturn represent opportunities for business in respect tonew kinds of goods and services.Meanwhile as policy-makers, the public and investorsbecome ever more aware of environmental change,they are likely to demand increasing transparencyand more comprehensive corporate sustainabilityreporting – indeed this new push for sustainabilityreporting was among a range of outcomes fromRio+20.GEO-5 for Business notes that not all opportunitiesglimpsed today may be opportunities tomorrow– as the Arctic melts many oil and gas companiesare scrambling to exploit the opportunity, but mayexpose themselves to a range of other risks in a fragileenvironment.GEO-5 for Business recommends that businessesconduct a deeper, company-specific analysis, taking alife-cycle approach using this report as a frameworkand guide.Those who succeed may find that they not only canuse the trends to their advantage, but can generate realand ever more transformative solutions to challengesalready arising from a rapidly changing environment ina rapidly changing world.
  7. 7. 1F O R E W O R D
  8. 8. 2G E O - 5 f o r B u s i n e s sExecutive SummaryGlobal environmental trends are creating new risksand new opportunities for businesses in everyindustry. Indeed the transition to a green economy,now in its early stages, will open up great opportunities forcompanies that understand the implications of these trendsand account for them in their planning and business strategy.Conversely, companies that fail to understand the changes,or that act too slowly, will put value at risk.GEO-5 for Business is written for business leaders whoare responsible for ensuring that risks and opportunitiesare understood, addressed, and turned into long-termcompetitive advantage for their companies. The reportassesses the operational, market, reputational, and policyimplications of environmental trends on ten business sectors:• Building and construction• Chemicals• Electric power• Extractives• Finance• Food and beverage• Healthcare• Information and communication technology• Tourism• TransportationThe report describes business risks and opportunities basedon information derived from existing science, business,policy, and other literature. It also includes brief real-worldexamples that illustrate the nature of some of these risksand opportunities. The report contains extensive citationsthroughout, allowing readers to easily access sourcedocuments that provide further details on specific trendsand impacts.GEO-5 for Business builds on the findings of UNEP’s fifthGlobal Environment Outlook (GEO-5) report, released in June2012. GEO-5 assessed the current state and trends of theglobal environment, in which population growth, economicdevelopment, urbanization, and globalization are drivingdegradation across numerous environmental indicators. Outof 90 environmental goals and objectives assessed in GEO-5,significant progress could only be shown for four. Chapter2 of the report briefly summarizes the drivers and trendsdescribed in GEO-5. Both the specific trends in GEO-5 andthe broader picture of decline have significant implicationsfor companies around the world, regardless of size or sector,some of which are reflected in the following table.
  9. 9. 3E x e c u t i v e S u m m a r yEnvironmental Trend from GEO-5 Key Implications for BusinessGreenhouse gases – Greenhouse gas emissions are projectedto double in the next 50 years. Such growth may lead to globalaverage surface temperature increases of 3°C to 6°C by the end ofthe century [GEO-5, pp.16, 20, 36, 429]Market shifts favoring lower-carbon products; operational andsupply chain disruptions; higher cost of energy, food, and othercommodities; shifting production and transportation patterns toadapt to local conditionsSevere Weather – There was a 230 percent rise in the number offlood disasters and a 38 percent rise in drought disasters occurringbetween the 1980s and the 2000s [GEO-5, pp.107-108]Operational and supply chain disruption; increased cost ofoperations and materials; damage to shared public infrastructure;increased demand for reconstruction servicesLand Conversion – There is a projected increase in landrequirements for urban uses by 100-200 million hectares over thenext 40 years [GEO-5, p.77]New and growing markets from urban expansion; restricted accessto land-based resources; loss of ecosystem services; competitionfor arable land; increasing pressure to protect critical naturalresourcesWater Availability – Global water withdrawals have tripled overthe last 50 years to meet agricultural, industrial, and domesticdemands [GEO-5, pp.102-104, 436]New markets for water-efficient products; constraints on growthdue to water scarcity; operational and supply chain disruptions;conflicts with other stakeholders over limited supply; increasingcost of waterWater Pollution – Persistent toxic chemical pollutants, now foundin 90 percent of water bodies, continue to accumulate in aquaticsystems [GEO-5, p.112]Increased demand for pollution control devices and systems;increased cost of water treatment; stricter water qualityregulations; increased demand for healthcare services to treathealth impactsBiodiversity – Critical habitat such as forests, wetlands, anddrylands continue to decline. 13 million hectares of forest werelost between 2000 and 2010. Species extinction is expected tocontinue at a high rate through the 21st century [GEO-5, pp.71-72,140, 158]Increased market, reputational, and regulatory pressure to reducebiodiversity impacts; increased cost and reduced availabilityof scarce resources; reduced opportunity for new productbreakthroughs; limitations on access to landChemical Exposure – More than 248,000 chemical productsare commercially available, but there is a lack of data on theirindividual and synergistic effects on health and the environment[GEO-5, pp.170, 172-173, 185]Market shifts toward “greener” products; product use restrictions;regulatory, customer, and public pressure for greater transparencyWaste – Materials are increasingly produced in one region, usedin another, and managed as waste in a third. The fastest growingwaste stream in the world, estimated at 20-50 million tonnesper year, is e-waste, which has hazardous substances as well asstrategic metals that can be recovered [GEO-5, pp.175, 184]Growing market opportunity to recover/re-use e-waste; increasingregulatory and customer pressure to reduce/manage waste;reputational damage resulting from uncontrolled wasteThis is the world that business must navigate, today and into the future. Withoutdramatic and unexpected shifts in the drivers of these trends, we can expect thatenvironmental pressures such as those noted above will increase throughout theforeseeable future, causing major changes not only in physical landscapes, but insocial, political, and business landscapes as well.The specific implications of these environmental trends for business are describedin greater detail in Chapter 3. The table below provides a brief summary of someof the major risks and opportunities for each of the sectors assessed in the report.Note that some of the identified business opportunities may have negative impactson the environment; the sole intent of the report is to identify them, not to assesstheir desirability.Environmental pressureswill increase throughoutthe foreseeable future,causing major changesnot only in physicallandscapes, but in social,political, and businesslandscapes as well.3
  10. 10. 4G E O - 5 f o r B u s i n e s sRisks OpportunitiesBuilding and Construction (section 3.1)• Constrained availability and increased cost of materials• Impacts of changing weather patterns on construction schedules/costs• Limits on development opportunities in water-scarce and high-biodiversity areas• Shifts in skills and knowledge required to meet the changingmarket• Stricter limits on waste and pollution• Increased market demand for sustainable infrastructure andbuildings, storm-damage repair/reconstruction, energy efficiencyretrofits and technologies, and climate-resilient structures• Increased demand for renewable, recycled, and resource-efficientmaterials and processes• Increased market value of green buildings• Increased demand for workforce skilled in sustainable design andconstruction• Reputational benefit associated with green design andconstruction certificationsChemicals (section 3.2)• Increased costs for fossil fuel-based energy and feedstocks• Higher water costs and constrained operations due to increasingwater scarcity• Business interruption related to extreme weather or water scarcity• Product use restrictions or phase-outs• Regulatory or market-driven reductions in demand for somechemical products• Stricter regulatory limits on air emissions and water discharges• Reputational damage due to conflicts with communities overresources or pollution• Increased pressure to disclose data on the health andenvironmental effects of chemicals• Increased demand for components of energy efficiency orrenewable energy technologies, water treatment technologies, andmore sustainable agricultural inputs• Increased demand for green chemistry products and chemicalleasing business models• New market opportunities for products that can substitute forrestricted or phased-out products• Reputational benefit associated with green chemistryElectric Power (section 3.3)• Constrained availability and increased cost of fossil fuel-basedstocks due to climate change policies• Reduced demand for carbon-intensive electricity• Reduced grid reliability due to increased peak demand• Infrastructure damage due to extreme weather• Limits on some electricity generation due to water scarcity andpotential conflicts with competing users for limited water supplies• Stricter regulatory limits on air emissions and water discharges• Threats to the current utility business model from regulatory andlegislative actions• Stricter legislation/regulations on greenhouse gas emissions, airquality, wastewater effluent discharges, and siting of power plants• Increased demand for electricity for building cooling andpowering electric vehicles• Increased demand for low-carbon and renewable electricity• Potential new business models opened up by regulatory actions• Increased demand for smart-grid technologies, energy storage, andenergy efficiency servicesExtractives (section 3.4)• Increased cost of fossil fuel-based energy for some miningoperations• Infrastructure damage and business interruption due to extremeweather• Business interruption due to water scarcity• Limits on access to resources in water-scarce or high-biodiversityareas• Stricter regulatory limits on air emissions and water discharges• Increased liability risks and costs of decommissioning due tochanging weather patterns• Stranded assets (e.g., oil and coal reserves) if strong carbonconstraints or costs are imposed• Reduced demand for virgin minerals in favor of recycled materials• Reputational damage and potential loss of social license tooperate for companies seen as major contributors to climatechange or major water users in water-scarce areas• Increased demand for certain minerals and materials used inrenewable energy, energy efficiency, air pollution control, andwater purification technologies• Increased market for cleaner fuels• Increased market for recycled and more sustainable minerals• Warmer temperatures opening previously inaccessible oruneconomical areas for exploration and extraction• Reputational advantage for companies seen as part of the solutionto climate change• New markets for carbon capture/storage and other technologiesto reduce carbon emissions from fossil fuel combustionFinance (section 3.5)• Increased uncertainty of underwriting by insurance companiesdue to changing weather patterns• Increased cost of insurance claims resulting from more severeweather events• Increased pressure on lenders and investors to improveconsideration and disclosure of client companies’ impacts on andfrom environmental trends• Potential long-term systemic risks to financial markets from“unburnable carbon” if strong carbon constraints or costs areimposed• Reduced ability of lenders’ clients with stranded assets (related toclimate change or water scarcity) to re-pay loans• Reputational damage for companies providing lending forenvironmentally damaging activities• Increased demand for property insurance coverage• New markets for financial mechanisms that reduce risks or createpositive returns/lower capital costs for more sustainable productsand services• Increased demand for capital financing for environmentalsolutions• Increased creation of attractive green economy investmentopportunities• New or expanded markets and investment in products thatincorporate environmental criteria and/or targeted solutions forissues such as climate change• Expanded markets for insurance products that encouragethe spread of more energy-efficient homes and buildings andrenewable energy technologies
  11. 11. 5E x e c u t i v e S u m m a r yRisks OpportunitiesFood and Beverage (section 3.6)• Changes in availability, quality, price, and sources of agriculturalproducts due to climate change and other environmental changes• Increased cost of fossil fuel-based energy• Reduced crop yields due to water scarcity• Conflicts among different users of limited water resources• Increased competition for arable land• Depletion of seafood stocks• Increased consumer and regulatory pressure to reduceenvironmental impacts of meat production and of chemicals andfertilizers• New markets for alternative supplies or more climate-resilientfood varieties• Opportunities for businesses in new agricultural growing zones• Expanded markets for organic foods and sustainable foodproduction• Reputational benefits from sustainable food product certificationsHealthcare (section 3.7)• Increased cost of fossil fuel-based energy for healthcare facilities• Increased pressure to improve sustainability, including keepingmedicines out of the waste stream, reducing energy use, andreducing use of toxic substances in cleaning products• Increased loss of natural compounds that are traditional remediesand active ingredients in pharmaceuticals• Increased demand for treatment of illnesses resulting fromenvironmental changes and exposure to pollution (e.g., respiratoryand cardiovascular illness, water-borne and vector-borne diseases)• New markets for medicines that do not require clean water orcontrolled temperature storageInformation and Communication Technology (section 3.8)• Increased cost of fossil fuel-based energy (e.g., for datacenters)• Production interruption or limitations due to limited wateravailability• Supply chain disruption due to extreme weather and otherenvironmental factors• Increased costs due to regulatory or customer pressure to reducee-waste• Regulatory limitations on releases of greenhouse gases duringproduct manufacture, use, and end-of-life• Reputational damage due to uncontrolled e-waste orenvironmental impacts of suppliers• New and expanded markets for products that enableenvironmental improvements in other industries (e.g. smartbuildings, integrated transportation, automated manufacturing)• Expanded markets to displace traditional goods and services withvirtual ones• Expanded markets for collecting and processing environmentaldata• Reputational benefit to companies recognized as contributing tosolving environmental challenges such as climate change, waterquality/availability, and deforestationTourism (section 3.9)• Increased cost of fossil fuel-based energy• Increased operating costs due to warmer average temperaturesand declining availability of local resources• Business interruption, property damage, and travel delays due toextreme weather events• Limits on available activities due to water scarcity, ecosystemchanges, and concerns for biodiversity• Reduced desirability of some destinations due to environmentalchanges• Stricter regulations on some practices (e.g., fishing on coral reefs,development in coastal mangroves)• Increasing conflicts with local communities related to scarceresources• Improved desirability of some destinations due to environmentalchanges• Increased demand for nature-based tourism, ecotourism, andagro-tourism• Reputational benefits and increased demand for companies/destinations perceived as environmentally responsibleTransportation (section 3.10)• Increased cost of fuel for operation of vehicles• Infrastructure damage and supply chain disruption due toextreme weather and other environmental factors• Increased cost or limited production due to water scarcity in somemanufacturing locations• Increased regulations to limit greenhouse gas emissions andcontrol waste streams• Increased demand by business customers to reduce logisticalfootprint and costs• New and expanded markets for low-carbon and cleanertransportation options (e.g., vehicles, fuels)• New freight routes resulting from declining sea iceIn Chapter 4, the report concludes by suggesting a path forward for business leaders seeking to understand and address therisks and opportunities posed by environmental trends. That path includes:• Conducting a deeper, company-specific analysis, taking a life-cycle approach and using the report as a framework and guide• Continuing to mitigate the impacts of the business on the environment• Thinking strategically about how the business must change to reflect changes in the global and local environment• Reporting to stakeholders (investors, employees, customers, communities, NGOs, and others) on the company’s impactson the environment, the risks and opportunities posed by environmental trends, and the strategies to address them• Working with policy-makers to craft public policies that encourage sustainable business practices• Collaborating with others to create powerful solutions to challenges created by changes in the environment.GEO-5 for Business makes clear that business value is at stake due to changes in the state of the world’s environment. Therisks are high, but the opportunities are abundant. Assessing the implications of environmental trends across the life cycleand accounting for them in planning and business models will improve companies’ competitiveness, reduce environmentaldegradation, and enhance human well-being.5
  12. 12. 6G E O - 5 f o r B u s i n e s s1. IntroductionThe currenteconomic system,built on the ideaof perpetualgrowth, sitsuneasily within anecological systemthat is bound bybiophysical limits.UNEP’s GEO-5Understanding environmental trends is of criticalimportance to business leaders. Just as social,economic, market, and technological trends – andcompany responses to those trends – influence the successof businesses, so too do environmental trends. Currentand future environmental conditions affect operating costs,raw material availability, regulations, consumer preferences,reputational considerations, and demand for products.The need to understand environmental trends is not new.Indeed, the availability of fertile soil, clean water, wildlifeand its habitat, and a stable climate has influenced humansettlement and development for millennia. Since theIndustrial Revolution, however, pressure on the environmentand natural resources – and the services they provide – hasaccelerated dramatically. The pressure has been drivenprimarily by the combination of human population growth,rapidly increasing levels of prosperity and consumption, andthe intensification of industrial activity. Over the last 50years in particular, environmental degradation has expandedfrom a local scale to a global scale. The consequences ofthis acceleration are clear: while economic growth andprosperity have improved the quality of life for billions ofpeople, they are also destabilizing the climate and degradingthe world’s natural resources – the foundations on whichfuture prosperity depends.The ramifications of these changes on business aresweeping. For instance, damage from climate changeimpacts (particularly over the long term) could haveenormous effects on the global economy and theenvironmental support systems on which all businesses(and human societies) rely, especially if average globalsurface temperatures warm more than 2°C, as seems likelywithout major policy shifts and transformative actionfrom governments, businesses, and others.1Similarly,climate impacts, resource scarcity, and resulting changesin population migration may have broader systems-leveleffects, destabilizing countries and thus the political andsocioeconomic contexts in which businesses operate.2Perpetual growth is the operating principle, reinforced by ourcurrent economic and political systems, on which many of theworld’s business leaders, policy-makers, and investors makedecisions every day. As a result, the gap between our currentlevel of consumption and what the global environment cansupport on a sustained basis continues to grow.The science is clear: we are approaching, and in some casessurpassing, the limits of our planet’s resources and carryingcapacity. Scientific experts warn that many of these impactsmay become permanent in human timescales if action toalleviate pressures does not occur immediately.3The business need isalso clear: assessingenvironmental trendsacross the life cycle andunderstanding theirimpacts on operations,markets, policy, andreputation is essentialfor companies toeffectively manage risk,capture opportunities,and create long-termcompetitive advantage.The science is clear: weare approaching, and insome cases surpassing,the limits of our planet’sresources and carryingcapacity.
  13. 13. 7i n t r o d u c t i o nUNEP’s Global EnvironmentOutlookSince 1997, the United Nations Environment Programme(UNEP) has produced five Global Environment Outlook(GEO) assessment reports. The main goal of the GEO seriesis to keep governments and other stakeholders informed ofthe state, trends, and outlook of the global environment,in light of the continuing need for up-to-date, scientificallycredible, policy-relevant information on environmentalchange worldwide.The fifth Global Environment Outlook – GEO-5 – waslaunched in June 2012 on the eve of the second UnitedNations Conference on Sustainable Development (orRio+20) in Rio de Janeiro. It integrates inputs from hundredsof scientists and policy experts and is organized in threeparts: (1) state and trends of the global environment,including drivers of change; (2) policy options fromall regions of the world that have proven successful inadvancing internationally agreed goals, and (3) opportunitiesfor a global response.UNEP has also published several supplements to GEO-5,including the GEO-5 Summary for Policy Makers, GEO-5for Local Government, Keeping Track of our Environment,Measuring Progress, and GEO-5 for Youth – available athttp://www.unep.org/geo.GEO-5 for BusinessThis report – GEO-5 for Business – adds animportant contribution to the suite of GEO-5 supplements. It is written especially forbusiness leaders. By addressing the needs ofbusiness, UNEP hopes to begin a dialogue thatwill span future GEO assessment cycles andprovide opportunities for partnership.GEO-5 for Business pulls the most importantconclusions from the comprehensive GEO-5report and maps their relevance to specificbusiness sectors. The report includes two maincomponents:• A summary of environmental trends anddrivers. Chapter 2 provides a brief snapshotof some of the key messages from GEO-5. While it is recognized that there are numerous othersources of scientific information on environmental trends,this chapter is limited to the content of GEO-5. Variousother sources are referenced throughout subsequentchapters.• Sector-specific implications of environmental trends anddrivers. Chapter 3 describes the impacts of environmentaltrends and drivers on ten business sectors, focusing onimplications related to (a) operations (including supplychains), (b) markets, (c) public policy, and (d) reputation/brand value. Brief real-world examples are provided toillustrate the implications of environmental trends forbusinesses.While many of the examples cited in this report refer tolarge multinational companies, GEO-5 for Business is just asrelevant to small and medium-size companies that operatedirectly in the ten sectors analyzed, as well as in the broadervalue chains of those sectors. In addition, the report isequally relevant to companies in both developed anddeveloping countries.GEO-5 for Business focuses on the impacts of environmentaltrends on business, rather than the impacts of business onenvironmental trends. This focus is not meant to imply thatbusinesses should not continue efforts to mitigate theirenvironmental impacts; rather, it is intended to highlight thatbusinesses also need to assess their risks and opportunities –and adapt for a different future.This report describes how environmental trends will likelyimpact specific industries. While it provides valuableguidance, it is not a substitute for a robust, company-specificanalysis of risks and opportunities facing any individualcompany. Product mix, geography, size, customer base, andother factors vary from company to company, and all affectthe materiality of individual trends and the appropriateresponses to those trends.Physical, social, political,and business landscapesare changing rapidly. Howcompanies assess the risks andopportunities and respond tothe changing landscapes willshape how successful they willbe in the future.While many of theexamples refer to largemultinational companies,GEO-5 for Business is justas relevant to small andmedium-size companies.The report is equallyrelevant to companiesin both developed anddeveloping countries.
  14. 14. G E O - 5 f o r B u s i n e s s82. Key Findings from GEO-5 Concerning the Stateand Trends of the EnvironmentAs humanpressures withinthe Earth Systemincrease, severalThe fifth edition of the Global Environment Outlook(GEO-5) provides a comprehensive update of the stateand trends of the global environment in five domains(atmosphere, land, water, biodiversity, and chemicals andwaste), describes the drivers behind them, and assessesprogress towards achieving select internationally agreed goals.2.1 Key DriversThe environmental trends described in GEO-5 are largely aresult of two key linked drivers:• Population Growth – Over the last 100 years, theEarth’s population has quadrupled to 7 billion people.Population is expected to reach 10 billion by 2100, withmost of the world’s net population growth by 2050projected to occur in the world’s poorest cities.4• Economic Development –Global economic output hasincreased roughly 20-fold over the last 100 years andis expected to continue to increase throughout thiscentury. While consumption trends appear to havestabilized in developed countries, emerging economiesare seeing rising per-person resource use and associatedenvironmental impacts, and the less developed countriesare just beginning the transition towards higherconsumption levels.5These drivers are manifested in four fundamental ways:• Energy Consumption – Global energy consumption isexpected to increase by a factor of three over the 21stcentury. The global rate of growth in primary energyconsumption is expected to decrease in the future,however, due to an assumed leveling of populationgrowth and improved energy efficiency.6• Urbanization – Urban areas now house half the world’spopulation, use two-thirds of global energy, and produce70 percent of global carbon emissions.7• Globalization – International trade has grown 12 percentper year since 1990.8• Demand for Transport – The number of motor vehiclesin the world is growing much faster than the number ofpeople and is expected to grow even further as incomesincrease.9The scale, spread, and rate of change of global drivers arewithout precedent and are pushing environmental systemsto destabilizing limits.10critical thresholds areapproaching or havebeen exceeded, beyondwhich abrupt and non-linear changes to thelife-support functions ofthe planet could occurUNEP’s GEO-5
  15. 15. K e y F i n d i n g s f r o m GEO - 5 C o n c e r n i n g t h e S tat e a n d T r e n d s o f t h e E n v i r o n m e n t92.2 Environmental TrendsGEO-5 assessed the state and trends of the globalenvironment in relation to achieving internationally agreedgoals. Out of 90 environmental goals and objectives assessedin GEO-5, significant progress could only be shown for four,while progress could not even be determined for 14 othersbecause data were lacking.11Atmosphere• Atmospheric concentrations of greenhouse gasescontinue to increase. Without major policy shifts,greenhouse gas emissions are projected to roughly doublein the next 50 years, with emissions growth comingprimarily from developing countries. Such growth maylead to global average surface temperature increases of3°C to 6°C by the end of the century. Taking action toreduce short-lived climate pollutants such as methane,black carbon, tropospheric ozone precursors, and somehydrofluorocarbons (HFCs) – which remain in theatmosphere for much less time than carbon dioxide –could help slow the rate of warming within the first half ofthis century.12• The manifestations of climate change are becomingclearer. The years 2000–2009 were the warmest decadeon record; the greatest warming occurred at highlatitudes. Arctic sea ice cover has decreased dramatically.The Greenland and Antarctic ice sheets show rapidlyincreasing melt rates. The probability of extreme summerheat, including heat waves, will likely increase by a factorof 5-10 within the next 40 years. Climate impacts areexpected to expand arid regions in the sub-tropics,increase damage to low-lying areas from sea-level rise, andincrease the frequency and intensity of extreme weatherevents around the globe.13• Much of the developed world has successfully reducedconcentrations of particulate matter (PM) and sulfurand nitrogen compounds, but concern remains highelsewhere.14Sulfur dioxide, nitrogen oxides, and PMemissions are expected to decline further in Europe andNorth America by mid-century but increase in Asia andother developing regions.15• Concentrations of surface ozone, which harms humanhealth and vegetation, have similarly been declining inEurope and North America but increasing in Asia.16• Ozone-depleting substances in the stratosphere havedeclined 31 percent at mid-latitudes and 17 percent in theAntarctic from a 1994 peak. Recovery of the ozone layeris expected by mid-century.17• Most countries have phased out lead in fuel since 2002,and studies worldwide show a strong correlation betweendecreased use of lead in fuel and reductions of lead inblood. The complete global elimination of lead in fuel isexpected within a few years.18Growth in population, GDP, trade and CO2emissions, 1990–2008Change, %2003003502501505010002000 2005 20081990 1995PopulationGlobal fossil fuel CO2emissionsGDPEmissions embeddedin tradeInternational tradeNet emission transfersfrom developed todeveloping countriesSource: Peters, G.P., Minx, J.C., Weber, C.L. and Edenhofer, O. (2011). Growth in emission transfers via international trade from 1990 to 2008.Proceedings of the National Academy of Sciences of the United States of America 108(21), 8903–8908 (GEO-5 p.19)
  16. 16. G E O - 5 f o r B u s i n e s s10Land• Potentially 100-200 million hectares of land are projectedto be converted for urban uses over the next 40 years.19• Global annual forest loss decreased from 16 millionhectares in the 1990s to approximately 13 millionhectares between 2000 and 2010. Some countries thatsuffered extensive deforestation in the 1990s, includingBrazil and Indonesia, have significantly reduced theirrates of forest loss, while less developed nations in LatinAmerica and Africa continue to experience high rates ofloss.20• Globally, coastal wetlands continue to decline by morethan 100,000 hectares (over 0.7 percent) per year, thoughthat rate of loss has slowed relative to the 1 percentper year of the 1980s.21Pressure on wetlands is likely tocontinue or increase due to demand for agricultural landand urban expansion.22• Agricultural productivity in drylands is continuing todecrease due to desertification and drought – about4-10% of dryland productivity is lost each year because ofdegradation.23• Arctic permafrost temperatures have already risen byup to 2°C over the past two to three decades, and upto 90 percent of near-surface permafrost is expected todisappear due to thawing by 2100.24HadCRUNOAANASAJMATemperature change, °C CO2, parts per million2802603003203403603804001850 1870 1890 1910 1930 1950 1970 1990 20100.60.40.20.0-0.2-0.4-0.61850 1870 1890 1910 1930 1950 1970 1990 2010Trends in temperature change and atmospheric CO2concentrations, 1850–2010Change in forest area by region, 1990–2010-5 -4 -3 -2 -1 0 1 2 31990–20002000–20052005–2015 North AmericaEuropeAsia and the PacificAfricaLatin America and the CaribbeanNet change, million hectares per yearSource: Scripps Institute of Oceanography, NOAA (GEO-5 p. 37)Note: 0 = 1961–1990 global meanSource: NOAA NCDC; NASA GISS; Hadley Climatic Research Unit at the University of EastAnglia (HadCRU); Japan Meteorological Agency (JMA) (GEO-5 p. 37)Sources: Keeping Track of our Changing Environment: from Rio to Rio+20 (1992–2012). United Nations Environment Programme, Nairobi; GlobalForest Resources Assessment 2010. FAO Forestry Paper No. 163. Food and Agriculture Organization of the United Nations, Rome. (GEO-5 p. 72)
  17. 17. K e y F i n d i n g s f r o m GEO - 5 C o n c e r n i n g t h e S tat e a n d T r e n d s o f t h e E n v i r o n m e n t11Water• More than 2 billion people currently live in water-stressedareas (mostly in Asia), and that figure is expected torise substantially (e.g., fourfold growth in Africa) dueto population growth, increased water use, and climatechange.25• Global water withdrawals (from groundwater and surfacewater) have tripled over the last 50 years. Agricultural,industrial, and domestic water withdrawals have allsteadily increased. Most projections of water demand andwater withdrawals through 2050 indicate a large globalnet increase (with significant regional variations).26• Between the 1980s and the 2000s, the number of flooddisasters and drought disasters increased 230 percentand 38 percent respectively, causing economic losses ofbillions of dollars.27• Higher precipitation intensity is forecast for the northernhemisphere and equatorial areas, while many already aridand semi-arid areas are expected to get drier. Globally,heavy precipitation is projected to increase by about 7percent per degree (Celsius) of temperature rise in the21st century.28• Freshwater and marine water quality are compromised.Groundwater around the world is threatened bypollution from agricultural, industrial, extractive, andurban areas. Microbial pathogens are often the mostpressing water quality issue in many developing countries.Eutrophication (from excessive nutrient pollution) isalso pervasive, and at least 169 coastal areas around theworld are considered hypoxic. Persistent toxic chemicalpollutants are now found in 90 percent of water bodiesand continue to accumulate. Pharmaceuticals andpersonal care products often enter water systems afteruse, with largely unknown long-term biological risks toaquatic organisms and humans.29People affected by and damages associated with floods and droughts, 1980–2010• Sea level rise, caused by ocean thermal expansionand melting glaciers and ice sheets, is increasing.Measurements from 1993 to 2008 indicate that sea levelsare already rising twice as fast as in previous decades andare exceeding the rise predicted by climate models.30• The rapid growth of atmospheric CO2concentrationsis associated with similarly rapid increases in oceanacidification, which affects marine organisms, particularlythose with carbonate shells and skeletons.311980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 20101002003004005006000 0153045People affected, million Damages, US$ billionFlood DroughtDamagesPeople affectedNote: The costs of the large floods in Thailand and Pakistan in 2011 are not included here. Source: EM-DAT: The OFDA/CRED International Disaster Database.Université Catholique de Louvain, Brussels. (GEO-5 p. 107)
  18. 18. G E O - 5 f o r B u s i n e s s12Biodiversity• The world lost 20 percent of its seagrass and mangrovehabitats since 1970 and 1980, respectively.32• In the 20th century, wetlands suffered a 50 percent globalloss – and 95 percent in some regions.33• Coral reefs globally have declined by 38 percent since1980, and tropical coral reefs may experience rapidcontraction by 2050.34• Two-thirds of the world’s largest rivers are nowmoderately to severely fragmented by dams andreservoirs.35• The proportion of marine fish stocks that areoverexploited, depleted, or recovering from depletion rosefrom 10 percent in 1974 to 32 percent in 2008.36• IUCN Red List Indices for mammals, birds, amphibians,and corals show that over recent decades considerablyhigher numbers of species have become more threatenedwith extinction than have become less threatened.37Mostfuture scenarios of biodiversity change project continuinghigh levels of population and species extinctions, loss ofhabitats, and changes in the distribution and abundanceof species and biomes over the 21st century.38• Protected areas have expanded over the past 20 yearsin both number and area. Currently almost 13 percentof the planet’s terrestrial area and about 1.5 percent ofmarine areas are under some degree of protection, thoughmany important sites for biodiversity are not protected.39Red List Indices of species survival for all species of birds, mammals, amphibians and corals, 1980–20101980 1990 2000 20100.750.800.850.900.951.00IndexBirdsMammalsCoralsAmphibiansNote: Shaded areas show 95 per cent confidence intervals. The numbers of data-sufficient extant species in year of first assessment were: 9 785 birds, 4 555 mammals, 4 416amphibians and 704 corals (warm water reef-building species only). An index of 1 equates to all species being classified as Least Concern while an index of 0 equates to all speciesbeing classified as ExtinctSource: Adapted from Vié et al. 2009 (GEO-5 p. 145)Vié, J.-C., Hilton-Taylor, C. and Stuart, S.N. (eds.) (2009). Wildlife in a Changing World. An Analysis ofthe 2008 IUCN Red List of Threatened Species. International Union for Conservation of Nature, Gland
  19. 19. K e y F i n d i n g s f r o m GEO - 5 C o n c e r n i n g t h e S tat e a n d T r e n d s o f t h e E n v i r o n m e n t13Chemicals and Waste• More than 248,000 chemical products are commerciallyavailable. Humans and ecosystems are exposed tochemicals throughout the chemical life-cycle, includingchemical production, use, and disposal, but scarce datamakes it difficult to document the extent of the riskposed to human health and the environment fromindividual chemicals and chemical “cocktails”. A variety ofinitiatives and regulations are working to fill some of theseknowledge gaps.40• Chemical consumption is growing much faster indeveloping countries than in developed countries. Somedata show that developed countries are reducing sometypes of chemical use (e.g., pesticides, ozone-depletingsubstances).41• Due to globalization, materials may be produced inone region, used in another, and managed as waste in athird. The fastest growing waste stream in the world ise-waste (i.e., obsolete electrical and electronic products),estimated at 20-50 million tonnes per year.42Life-cycle analysis of chemicalsWater and foodsafetyNaturally occurringcontaminantse.g. arsenic and fluoridein water, natural toxinsRaw materialse.g. fossil fuels,raw chemicalsManufactureand transportUse anddisposalCombustionCombustion productse.g. indoor and outdoorair pollutantsWaste and by-productse.g. e-waste, POPsManufactured productse.g. industrial andagricultural chemicals,petroleum productsHuman andenvironmentalexposureChemical safetyOccupational,transport andchemical safelyOccupational,chemical, food andwater safetyChemical andproduct safetyWaste management,chemical, food andwater safetyTransport andhealth, air qualityNote: Dashed lines are management options; solid lines correspond to the life cycle. Source: Adapted from Prüss-Ustün et al. 2011 (GEO-5- p. 176)Prüss-Ustün, A., Vickers, C., Haefliger, P. and Bertollini, R. (2011). Knowns and unknowns onburden of disease due to chemicals: a systematic review. Environmental Health 10, 9–24
  20. 20. G E O - 5 f o r B u s i n e s s143. Sector-Specific ImplicationsSuccessful companies anticipate and adapt to changestaking place in the physical environment in whichthey operate. Since the environmental trends anddrivers identified in GEO-5 are likely to impact all sectors inimportant yet diverse ways, recognizing and determiningthe strategic relevance of these trends and drivers – andembedding such analyses into core strategic planning – is abusiness imperative. GEO-5 makes clear the need to applycredible science to business decision-making – and to do sourgently.Some of the specific environmental trends and underlyingdrivers identified in GEO-5 are already on the radar ofmany companies. Indeed, leading companies are takingmeaningful actions to address biodiversity, water scarcity,climate change vulnerability, chemicals and wastes, and otherspecific issues. The aggregate portrait painted by GEO-5,however, presents a new and troubling image of the state andtrends of our environment, with important implications forhuman well-being and the business community.This section describes the business risks and opportunitiesthat flow from GEO-5 trends and drivers across fourdimensions – operations, markets, public policy, andreputation – for the following ten sectors:• Building and construction• Chemicals• Electric power• Extractives• Finance• Food and beverage• Healthcare• Information and communication technology• Tourism• TransportationNote that some of the identified business opportunities mayhave negative impacts on the environment; the sole intent ofthis report is to identify them, not to assess their desirability.While this report cannot predict how environmental trendsand drivers may impact individual companies, it doesprovide critical data and insights that can help businessleaders develop strategies to anticipate environmentalchanges and guide long-term success. There is, of course,overlap among the ten sectors. The interdependence amongsectors means that impacts on one may very well triggerimpacts on others.Theinterdependenceamong sectorsmeans thatimpacts on onemay very welltrigger impactson others.
  21. 21. 15S e c t o r - s p e c i f i c i m p l i c at i o n s3.1 Building and ConstructionThe building and constructionsector – here considered toencompass construction,operation, and renovation ofbuildings (including residential)and civil infrastructure –faces some risks but alsoclear opportunities fromenvironmental trends andunderlying drivers. This sectorhas obvious ties to every otherbusiness sector, all of whichown or use buildings, facilities,and infrastructure, as well asties to the sectors upon which building and construction rely(e.g., electric power).Operational ImplicationsAvailability and cost of construction materialsBuilding materials such as concrete, steel, and aluminumare very energy-intensive to produce and to transport, somaterial costs for the building and construction sector arevulnerable to volatility in energy markets and increases inprice (e.g., from climate-related constraints or costs on fossilfuels). Higher supply costs lead to increases in constructionoverheads and higher construction costs (which could erodeprofit margins and affect development decisions).43Concerns about biodiversity and habitat loss, diminishedcarbon sinks, and declining water quality may lead toincreased protection of forests and restrictions on logging,which in turn can result in declining production, constrainedavailability, and higher prices for timber. For example, in1998 China imposed restrictions on logging due to concernsabout droughts, flooding, and siltation of waterways. Thisled to a two-thirds decline in timber removals over the nextfive years – and a 20-30 percent increase in timber pricesat the Beijing wood market.44Similarly, the expanding barkbeetle epidemic causing massive tree die-offs in NorthAmerica – likely due in part to climate-related increases intemperatures and droughts – may have serious impacts ontimber supply and costs.45Construction schedules and costsExtreme weather events and changing climatic conditionswill affect project completion timelines and costs. Waterand wind damage, power outages, and work stoppages onhigh-heat days are likely to occur more frequently.46On theother hand, higher temperatures during winter months incolder climates may improve conditions for constructionprojects and reduce frost damage to buildings and roads.47Construction practicesThe construction industry is responsible for more than athird of global resource consumption (including 12 percentof all freshwater use) and generates about 40 percent of thetotal volume of solid waste, while manufacturing buildingmaterials uses about 10 percent of the global energy supply.48As concerns about climate change, waste, and resourcescarcity increase, the sector is likely to come under increasingconsumer and societal pressure to address its environmentalimpacts and to hasten the proliferation of sustainable,affordable construction practices.49Location and designConsideration of long- and short-term climate impacts (e.g.,sea-level rise, high winds, precipitation changes, extremeweather events) will influence selection of sites, designs,construction techniques, and materials for buildings andinfrastructure.50Rising sea levels and storm surges may also drive therelocation of essential vulnerable equipment andinfrastructure to higher ground (i.e., above flood levels). Forexample, in 2012, Hurricane Sandy caused extensive damageto transformers, circuit panels, and other basement-levelelectrical equipment in about 250 skyscrapers in Manhattan,knocking the power out for weeks and spurring buildingowners to begin relocating electrical infrastructure to higher,formerly rentable floors.51Operations and maintenanceFloods, storms, fires, and extreme weather events willlikely lead to more power outages and physical damages tobuildings and infrastructure.52Precipitation changes, flooding, warmer temperatures,and other impacts of climate change may lead to saturatedground conditions and thawing permafrost, affecting theintegrity of foundations, pipelines, and other subsurfacestructures.53Rising average temperatures will likely increase buildingcooling requirements and reduce heating requirements(though impacts will be location-dependent). In addition,longer and more intense heat waves may reduce theefficiency of passive techniques for cooling buildings (e.g.,evaporative cooling or night ventilation).54Climate-related increases in humidity levels may increaseinterior mold and condensation and decrease buildingthermal performance.55
  22. 22. G E O - 5 f o r B u s i n e s s16Warmer temperatures and higher rainfall may lead toincreased maintenance costs due to changes in corrosion ofbuilding facades.56Market ImplicationsGlobal demandPopulation growth, rapid urbanization, and economicdevelopment in emerging economies will translate tosubstantial demand for housing, new buildings, and newinfrastructure.57By some estimates, US$40 trillion will needto be invested in urban infrastructure globally by 2030.58Sustainable materialsAs multiple environmental pressures grow, there may beincreased customer demand for building materials anddesigns that incorporate renewable resources, recycledmaterials, and energy- and water-efficient technologies andprocesses.59For instance, the concrete and cement industrieswill likely continue to face pressure to reduce their electricityand water consumption, recycle concrete, and reduce theirproduction of greenhouse gas emissions.60New markets will likely be created for more sustainableproducts throughout the building and construction supplychains. In South Africa in 2009, paint manufacturer DuluxTrade accelerated the local development and productionof its low VOC paints (which had previously been locallyunavailable) to support a Nedbank building that was aimingto receive the first-ever 4-Star rating from the Green BuildingCouncil of South Africa, thus gaining first-mover advantageas a market for a new product emerged.61Sustainable buildingsIncreasing concerns about climate change, waste, andresource scarcity suggest that the market for greenerbuildings as a whole is likely to expand, driving into themainstream a range of regionally-appropriate practices andtechnologies that promote on-site renewable energy andenergy-, water-, and resource-efficiency.62LEED (Leadershipin Energy and Environmental Design), for example, is alreadycertifying 1.5 millionsquare feet (morethan 139,000 squaremeters) of buildingspace every day in morethan 130 countries,63and it is only one ofseveral green buildingstandards aroundthe world. Buildingowners can see reducedoperating costs,increased buildingvalues, greater returnon investment, and higher occupancy from new andretrofitted green buildings.64As the shape of this market changes, there will be greaterdemand (and thus competitive advantages) for contractorsand engineering consultants with sustainable design andconstruction skills and training.65Developers, designers,and construction companies that do not fully understandthe detailed requirements for attaining and maintaininggreen-building certifications risk loss of market share andreputational damage.66Disaster-resilient structuresThere will likely be increasing demand to retrofit existingbuildings and construct new buildings and infrastructurewith enhanced resilience to climate impacts (e.g., buildingsthat can withstand hurricane-force winds, roads that areelevated above potential flood levels). Demand for coastaland flood defenses (e.g., seawalls) may also increase.67Repair and reconstructionBuildings and infrastructure damaged by climate impactsare generally repaired or rebuilt, which means there will likelybe increasing regional surges in demand to clean up, fix, andreplace structures that are lost or damaged due to floods,storms, wildfires, heat waves, and other climate-relatedextreme events.68Limits on development opportunitiesConcerns about water availability may limit potentialdevelopment opportunities for builders in water-scarceregions, whether because market forces and physical wateravailability make development impractical or becauseregulators restrict or suspend developments due toinsufficient projected water resource availability over the lifeof the project.69Concerns about water quality impacts may limit potentialdevelopment opportunities in particularly vulnerablefreshwater ecosystems (e.g., wetlands).70Building owners cansee reduced operatingcosts, increased buildingvalues, greater return oninvestment, and higheroccupancy from newand retrofitted greenbuildings.
  23. 23. 17S e c t o r - s p e c i f i c i m p l i c at i o n sPolicy ImplicationsEnergy efficiency, renewable energy, andgreenhouse gas emissionsBuildings are the largest contributor to global greenhousegas emissions, with approximately one-third of globalenergy end use taking place within buildings.71As climatechange impacts increase, regulatory measures in variousregions of the world will likely continue to drive greenbuilding practices and technologies that reduce energyuse and greenhouse gas emissions into the mainstream.Governments may utilize building energy efficiency codes,appliance standards, commissioning and audit programs,policies to encourage on-site renewable energy technologies,public procurement sustainability policies, and broadermeasures designed to reduce greenhouse gas emissions.72Where such policies are lacking, companies in the sectormay still find it beneficial to act as if they are present, both inanticipation of the evolution of the regulatory environmentand in recognition of the other economic benefits that comefrom green buildings.Tax incentives, streamlined permit requirements, and otherpublic policy measures to promote weatherization and otherupgrades of existing energy-inefficient homes and buildingsmay help increase demand for, and enable implementationof, energy efficiency retrofit services and technologies.73Beyond carbon dioxide, the building and construction sectoris also responsible for significant levels of emissions of avariety of other greenhouse gases, including halocarbons,CFCs, HCFCs, and HFCs, due to their use in cooling,refrigeration, and insulation. Brick production may also bea locally significant source of black carbon in some regions.Rising concerns about climate change may lead to increasedregulation of these sources of emissions as well.74Water qualityIncreasing concerns about water quality may lead togreater regulatory restrictions on stormwater run-off fromconstruction sites, to ensure that soil and sediment runoffdo not pollute waterways and aquifers. Companies mayface considerable additional costs to implement erosionand sediment control and pollution prevention measures,discharge monitoring and sampling, and other compliancerequirements.75WasteGiven the large volumes of solid waste generated by theconstruction industry, increasing concerns about wastematerials and the environmental impacts of landfills maylead to increasing regulations that restrict the quantity andtypes of waste allowed in landfills, particularly in developedcountries. Taxes on the use of virgin materials (or subsidiesfor use of recycled materials) may also be applied, furtherspurring efforts to recycle and reuse waste from demolitionand construction.76Reputational ImplicationsBiodiversity and natural resourcesA company’s reputation with respect to protecting andrestoring biodiversity and natural resources can affectits ability to have access to new sites. Likewise, restoringconstruction sites for the benefit of biodiversity can enhancecompanies’ reputations among clients, funders, and others.77Sustainable building certificationsCompanies and their facilities may receive reputationalbenefits from achieving green building certifications. A 2011survey of U.S. adults, for instance, found that 64% wouldprefer to patronize a business whose facility is certified asgreen, while 48% indicated that green certification of afacility improves their image of a company.78
  24. 24. G E O - 5 f o r B u s i n e s s183.2 ChemicalsThe chemicals sector – hereconsidered to encompasschemicals, mixtures ofchemicals (formulations),and plastics – relies heavilyon fossil fuels and water andfaces constant consumer andregulatory concern aboutemissions to air and water,waste streams, and humanhealth effects. At the sametime, the sector can play a keyrole in advancing protection ofthe environment and humanhealth. The chemicals sector also underlies and supportsvirtually every other sector, so as businesses feel the effects ofand respond to environmental trends and underlying drivers,the chemicals sector will face both risks and opportunities.Operational ImplicationsFossil fuel costsOil and natural gas are the primary feedstocks for thechemical sector, though there is a new trend (led by China)towards coal-to-chemicals processes. Chemical productionis also sometimes energy-intensive. Accordingly, thechemicals sector is exposed to fossil fuel price and supplyfluctuations (e.g., from constraints or costs on fossil fuelsimposed by climate-related policies).79Rising energy prices may threaten the profitability ofparticularly energy-intensive chemical processes and mayspur the sector to continue its efforts to improve energyefficiency.80Higher energy prices and climate changeconcerns may also drive chemical companies to diversifytheir feedstock base away from fossil fuels.81Water availabilityChemical production is often water-intensive, using largeamounts of water as a feedstock and for processes such ascooling, cleaning, dissolving, and diluting;at least as of 1995, the chemicals sectorin both developed and developingcountries used more water than anyother manufacturing industry (42percent of industry water use globally).Chemical production has been shiftingover the last decade from developedcountries to emerging economies suchas China and India, which are expectedto experience increasing water scarcity.As a result, the chemicals sector mayexperience markedly higher water costs orconstrained operations due to increasingwater scarcity.82In addition, the sectormay face increasing pressure not only to re-design itsprocesses to be more water-efficient but also to take greatercare not to cause negative impacts to community waterresources.83Business continuityExtreme weather events linked to climate change cancause raw material shortfalls and supply chain and businesscontinuity risks for the chemicals sector, negatively affectingoperating margins.84More directly, extreme weather eventscan damage or destroy chemical plants and infrastructure;while this potential exists across all manufacturing sectors, theassociated risk is higher at chemical plants due to the potentialfor hazardous chemical releases to air, land, and water.85Forexample, when typhoon Meihua hit Dalian in China in 2011and broke the dyke protecting the Fujia Dahua petro-chemicalplant, the city government ordered the plant to close andrelocate away from the city to safeguard residents.86Market ImplicationsEnergy efficient/renewable energy products andtechnologiesIncreasing efforts to address climate change will create largermarkets for many specialized chemicals sector products andtechnologies, including those used in high-performanceinsulation, advanced lighting, renewable energy technologiesand lightweight materials (e.g., for automobiles).87Water treatment technologiesAs water quality and scarcity challenges increase, inconjunction with population and urbanization, demand forchemical sector products that sterilize, purify, and desalinatewater will rise correspondingly.88Agricultural inputsConcerns about climate impacts (e.g., droughts, increasedrange for pests), coupled with rising concerns about waterscarcity, water quality, food security, and populationgrowth, may create larger markets for life sciences chemicalcompanies developing agriculturalinputs designed to address suchconcerns (e.g., drought-resistant seeds,crop protection products).89On the other hand, consumerand community concerns aboutenvironmental and health impactsfrom agricultural chemicals (e.g.,fertilizer run-off, pesticide exposure)may lead to increased demand forsustainably grown and/or organicfoods, which may reduce marketdemand for such chemicals.90(Seesection 3.6 below for more on impactsto the food and beverage sectors.)The chemical sectormay face increasingpressure not only tore-design its processesto be more water –efficient but also totake greater care not tocause negative impactson community waterresources.
  25. 25. 19S e c t o r - s p e c i f i c i m p l i c at i o n sBusiness customer expectationsRising concerns about the environmental and health effectsof chemicals and the amounts of hazardous chemicals invarious waste streams are leading more companies to requirehigher standards and quality from their suppliers. Theserequirements, in turn, may affect chemical demand andmanagement. For instance, companies such as Nike continueto pursue aggressive supply chain management programs witha focus on eliminating discharge of hazardous chemicals.91Walmart helped develop GreenWERCS, a software tool thathelps retailers identify products with hazardous chemicals.92Green chemistry and chemical leasingConcerns about the proliferation of chemicals, inefficientuse of chemicals, the environmental and health effects ofchemicals, and the amounts of chemicals in various wastestreams may increase market and regulatory pressure on thesector to alter its business models and products. This mayinclude advancing “green chemistry” and “green plastics”efforts to create less hazardous and more sustainable(though often more expensive) chemicals and plastics, asBrazilian company Braskem has done.93It may also includeproviding chemical leasing services that decouple paymentfrom chemical consumption volumes, thereby promotingbetter management of chemicals.94Policy ImplicationsProduct use restrictions and phase-outsIn response to concerns about the impacts of chemicalson human health, wildlife, water, and the atmosphere,regulatory measures may restrict usage of some chemicalsector products, as well as sector emissions. Developedcountries are already reducing certain types of chemical use.For example, total releases and transfers of the 152 pesticidesthat are common to the United States and Canada droppedby 18 percent, and the production of ozone-depletingsubstances almost stopped, while emissions of acid rainprecursors dropped by 48 percent, ozone precursors by 38percent, and non-methane volatile organic compounds by26 percent.95Regulatory measures such as the Clean Air Actin the United States, as well as the Montreal Protocol, werekey drivers of these reductions. In the EU, regulations suchas the Water Framework Directive and, most notably, theregulation on Registration, Evaluation, Authorisation andRestriction of Chemical substances (REACH) are driving thephase-out of those chemicals that are judged to pose seriousdangers to human health and the environment.96Such regulations may also open up market opportunitiesto provide products that can substitute for the regulatedproducts, as occurred with ozone depleting substances.97Pollutant emissions and dischargesAs chemical production continues to shift to emergingeconomies, those countries may face increasing pressureto enact chemical regulations that are more protective ofenvironmental quality; for instance, a 2005 chemical spillinto the Songhua River spurred revisions in China’s WaterPollution Control Law.98As concern grows over the cumulative effects of micro-pollutants in surface water on aquatic life and human health,discharge requirements for chemical plants may tighten.99Greenhouse gas emissionsGiven the energy-intensive nature of the chemicalproduction process, climate change legislation and carbontaxes could impact the sector’s costs and profitability,particularly given the shift in chemical production andconsumption to emerging economies that tend to be lessenergy-efficient and more reliant on coal.100TransparencyIn many markets, in both developed and developingcountries, the call for increased transparency is growing. Thelack of publicly available data and rising concerns about thepotential health and environmental risks posed by chemicalsin products may increase regulatory pressure on chemicalcompanies to generate, assess, and make publicly availablebaseline data on the health and environmental effects ofchemicals in commerce (potentially including synergisticeffects of chemical mixtures).101Regulation of other industriesRegulations addressing environmental trends that directlyaffect other sectors may reduce or change markets forthe chemicals sector. For instance, the European Unionhas enacted a two-year ban on widely-used pesticidescontaining neonicotinoids out of increasing concern abouttheir potential contribution to declines in bee colonies,with resulting effects on pollination and crop production.102(See section 3.6 below for more on impacts to the food andbeverage sector.)Reputational ImplicationsCommunity conflictsIncreasing concern about water quality, air quality andother environmental conditions, particularly in the contextof increasing population growth and urbanization, maylead to increased community sensitivity to the potentialfor chemical plants to impact the local environment (e.g.,due to chemical releases). This heightened sensitivity canimpact existing plants’ operations and relationships withthe community and can result in forced relocations ornew plants being prevented from being built. Given thewater-intensive nature of some chemical processing andmanufacturing operations, the chemical sector faces similarreputational risks from conflicts with communities in water-scarce regions.103Green chemistryGreater use by chemical companies (and their businesscustomers) of “green chemicals” or more sustainablyproduced conventional chemicals can enhance thereputation and brand value of those companies and theirproducts, creating competitive advantages.104
  26. 26. G E O - 5 f o r B u s i n e s s20The electric power sector –here considered to encompassgeneration, transmission, anddistribution of electricity, butneither fuel source extraction(e.g., coal or uranium mining)nor any other utilities (e.g.,district heating, watersupply) – is highly exposedto environmental trends andtheir underlying drivers. Thesector generally has intensiveresource needs and impacts, aswell as extensive infrastructure.It also has a major role in contributing and responding toclimate change. In addition, the sector is closely intertwinedwith every other sector, and its product – electricity – is afundamental necessity to most of modern society.Operational ImplicationsWater availabilityElectricity generation is water-intensive, accounting in 2010for about 15 percent of global freshwater withdrawals andas much as 40 percent in developed countries (althoughmuch of this water is eventually returned to surface waterbodies).105Water scarcity and a range of climate changeimpacts (e.g., droughts, changing precipitation levels andpatterns) thus have operational implications for powergeneration. Hydroelectric generation is sensitive to changesin water volumes, timing, and geographical distribution, soclimate-related changes in water resources and precipitationpatterns may result in inadequate water for hydropower insome regions and more favorable water supply conditions inothers.106Concentrated solar power systems also consumelarge amounts of water, often in water-scarce areas, and couldthus face operational restrictions and higher costs as well.107Water scarcity may also limit generation from nuclear andfossil fuel power plants, which may require large amountsof water for cooling.108In India, for instance, low waterlevels at the Erai dam in 2010 and the Mun River in 2012forced the Maharashtra State Power Generation Company(MahaGenco) to shut down thermal power stations atChandrapur and Paras.109Thermal power plants may need topursue alternatives such as air cooling or treating and usingwastewater, which may lead to higher capital expenditures.110Potential conflicts with competing users for limited watersupplies in water-scarce areas may affect operations,particularly with respect to newly planned power plants.111New plants built without regard for potential regional waterconstraints run the risk of becoming stranded assets.112Forexample, plans for many dams in the Amazon, such as theBelo Monte project, do not account for the effects thatdeforestation and climate change may have on long-termregional water availability and energy production.113Efforts to address climate change may increase the electricpower sector’s water requirements in some cases. Carboncapture and storage for coal-fired power plants, for example,can increase water consumption by 45 to 90 percentcompared to conventional plants.114Water temperatureWarmer temperatures in water bodies resulting from moresevere and more frequent heat waves can limit their use assources of cooling water and can restrict water dischargespermitted from power plants (limiting power output ineither case).115For instance, a serious heat wave in Europein 2003 forced Électricité de France to limit or suspendoperation of several nuclear plants due to elevated rivertemperatures. This led to a loss of €335 million after thecompany had to instead purchase higher-cost power on theopen market.116Temperatures experienced during the 2003heat wave are expected to be common during the Europeansummer by mid-century.117Power demandIncreasing average air temperatures and more frequent andsevere heat waves associated with climate change will likelyincrease power demand (particularly peak power demand)for air conditioning in summer and reduce power demandin winter.118For instance, a record heat wave in the U.S. stateof Texas in 2011 contributed to unprecedented electricitydemand and price spikes, forcing Constellation Energy, thelocal utility, to purchase incremental power in the real-timemarket at peak prices and leading to an after-tax quarterlyreduction of about US$0.16 per share.119By the end of thecentury, electricity demand in the U.S. state of California onalmost all summer days is expected to be greater than thecurrent 90th percentile per-capita peak load.120The changes in demand, particularly due to extremelyhot days, may result in decreased grid reliability and morepower outages.121For example, the 2012 blackouts inNorthern India, likely caused in part by higher demand due3.3 Electric PowerThe 2012 blackoutsin Northern India,likely caused in partby higher demanddue to unusually hottemperatures and lowmonsoon rains, lefthundreds of millions ofpeople without powerfor several hours.
  27. 27. 21S e c t o r - s p e c i f i c i m p l i c at i o n sto unusually hot temperatures and low monsoon rains, lefthundreds of millions of people without power for severalhours.122Electricity infrastructureExtreme weather events, flooding, storm surges, andrising sea levels can cause extensive damage to generation,transmission, and distribution facilities and relatedinfrastructure, particularly over the long lifetimes of thesector’s fixed assets.123For instance, Hurricanes Katrinaand Rita, which hit the U.S. Gulf Coast in 2005, forced onelocal utility, Entergy, to incur approximately $1.5 billionin restoration costs, repair more than 75,000 miles oftransmission lines and distribution circuits, and relocate itsheadquarters from New Orleans.124Increasing damage from extreme weather events will likelycontinue to add consumer and regulatory pressure forelectric power companies to make their infrastructureand services more resilient.125Companies may need toharden, adapt, or relocate vulnerable infrastructure, expandredundancy in transmission capacity, and better prepare forsupply interruptions (e.g., byinvesting in and maintainingmore backup systems).126Severe flooding and changes inprecipitation and temperaturemay increase erosion andsediment loads, leading toincreased silting of reservoirs,turbine blade damage, andreduced performance ofhydropower dams.127Inaddition, rising sea levels mayaffect the assessment of long-term decommissioning liabilitiesfor coastal nuclear powerplants.128Concerns about biodiversityloss and food security couldderail, or at least create pressure to reassess, plannedhydropower dams, given the potentially significant ecologicalimpacts of hydropower development.129Increasing temperatures in cold regions may negativelyimpact the integrity of electric power infrastructure built onpermafrost.130Fuel supply reliabilityThe range of impacts from environmental trends and driverson fossil fuel extraction (see section 3.4 below for more onimpacts to the extractive sector) may disrupt fuel suppliesfor power plants reliant on coal, natural gas, or oil forelectricity generation. At the same time, rapidly increasingdemand for biomass (e.g., spurred by climate change policiesand renewable energy incentives) may lead to fuel supplyshortages and higher fuel prices for biomass power plants.131Operational efficiencyClimate change may lead to changes in cloud cover (which isinfluenced by temperature, precipitation, and other factors),causing changes in the operational performance of solarpowered electricity generation systems. Climate change maysimilarly alter wind speeds, affecting the operations of windturbines.132Warmer average air temperatures will likely lead to decreasedgas turbine efficiency and greater losses in transmission anddistribution systems.133Market ImplicationsElectricity demandPopulation growth, urbanization, and economicdevelopment in developing countries will lead to greaterdemand for electricity.134The IEA estimates that the powersector will need almost $17 trillion in investment by 2035in order to meet worldwide electricity demand that maybe over 70 percent higher than it was in 2009; most ofthis growth and required investment will be in developingcountries.135Meeting this increased demandsustainably and efficiently, while remainingprofitable, will be a systemic challenge for thesector, particularly as many urban areas haveinadequate energy infrastructure capacity tomeet such higher demand.136Some solutions to other environmentalpressures – such as desalinization ofseawater in developing countries (inresponse to concerns about water scarcity)and electrification of vehicles in developedcountries (in response to concerns aboutclimate change and air pollution) – mayfurther increase electricity demand.137In theUnited States, for instance, electricity demandattributable to electric vehicles is projectedto rise more than 1700% by the end of thedecade, from 146,000 megawatt hours (MWh)in 2010 to 2.6 million MWh in 2020.138Fuel source mixConcerns about climate change, air quality, waterquality, and other environmental matters, coupled withregulatory mandates and incentives, are driving a generaldecarbonization of electricity. Coal’s global share of totalgeneration is expected to decrease from two-fifths to one-third by 2035, while renewables increase from 20% to 31%.Natural gas is expected to nearly overtake coal in the primaryenergy supply mix by 2035. Nuclear energy is expected toremain at about 12%, as interest in nuclear as a bulwarkagainst climate change is offset by concerns about safety.139The 2010 Fukushima Daiichi nuclear power plant accident, forinstance, drove Germany to announce a phase-out of nuclearenergy by 2022.140If governments make robust commitmentsto limit global warming, the decarbonization of electricitywill occur faster and go further than currently anticipated.Hurricanes Katrina andRita, which hit the U.S.Gulf Coast in 2005,forced one local utilityto incur approximately$1.5 billion inrestoration costs, repairmore than 75,000 milesof transmission lines anddistribution circuits, andrelocate its headquartersfrom New Orleans.
  28. 28. G E O - 5 f o r B u s i n e s s22Increased demand for intermittent renewables anddistributed generation in the electricity supply will likelyincrease demand for new electricity storage technologiesand better and “smarter” power grids to manage the loads,which can create opportunities for non-traditional actors inthe power sector.141Increased generation from intermittentrenewables may also create opportunities for natural gas as apotential backup supply of power.142In addition, concerns about climate change and energysecurity will spur greater efforts to rely on energy efficiency(i.e., “nega-watts”) to meet increased electricity demand indeveloping and developed countries.143Policy ImplicationsGreenhouse gas emissions, energy efficiency, andrenewable energyLegislation designed to reduce greenhouse gas emissionscan have significant impacts on the electric power sector, astwo-thirds of global electricity generation comes from fossilfuels. 144The sector is already subject to carbon reductionregulations, carbon taxes, and fossil fuel subsidy reductions insome countries, and these will likely grow more widespreadand restrictive over time, creating potentially significantcosts and complex compliance challenges.145There will likelyalso be more regulations promoting energy efficiency andincentivizing customers to conserve energy, which couldlead to changes in utility business models (which typically tieprofits to electricity sales).146At the same time, there will beincreasing opportunities for the sector to advance renewableenergy technologies, particularly in places with mandates orincentives for renewable energy production.147The Canadianprovince of Ontario, for instance, will completely phase outcoal-fired power plants by 2014 to address climate changeand reduce air pollution, instead relying on new natural gasplants and a range of conservation and renewable energyinitiatives, including feed-in tariffs that create businessopportunities for renewable energy projects.148Airborne pollutantsElectric power generation can produce significant amountsof sulfur dioxide, nitrogen oxides, mercury, and otherairborne pollutants, depending on the fuel and technologyused. As concerns about air quality grow in developedand especially in developing countries, regulations on airpollution may become more restrictive and costly for thesector.149For example, record levels of air pollution inChina in early 2013 spurred the Ministry of EnvironmentalProtection to impose stringent new emission limits on sixsectors, including coal-fired power plants.150Water use and qualityIn areas increasingly concerned about water scarcity, theelectric power sector may see more regulatory scrutiny, andin some cases rejection, of construction permits for newpower plants that would require significant water inputs.New power plants may see greater restrictions on wateruse and efficiency, while existing plants may face increasingrestrictions on the volume of allowed water withdrawals.For new plants, this may result in longer permitting anddevelopment periods and more difficult and expensivefinancing.151Increasing concerns about water quality may result instricter regulations of power plants’ wastewater effluentdischarges, particularly for coal-fired power plants, which canrelease arsenic, mercury, lead, and other pollutants in theirwastewater streams. Similarly, the sector may see increasedregulation of coal combustion waste to prevent coal ashspills and contamination of waterways.152BiodiversityIncreasing concerns about impacts on biodiversity andhabitat may lead to regulatory restrictions on siting ofelectric power development, including for renewables.153Demand managementEnergy price volatility and increasing incorporation ofintermittent renewables into the electricity supply may spurregulators to expand time-of-use pricing and other programsdesigned to encourage time-shifting of energy use.154Reputational ImplicationsReliabilityElectric power companies’ service and reliability failures dueto inadequate preparation for extreme weather events maycause adverse media, consumer, and investor reactions.155Climate changeElectric power companies that remain reliant on coal or oiland incorporate inadequate levels of renewable energy andenergy efficiency face reputational risks from being seen asmajor contributors to climate change.156
  29. 29. 23S e c t o r - s p e c i f i c i m p l i c at i o n sExtractive companies – hereconsidered to encompass oiland gas production and miningfor all materials (e.g., metals,coal, gravel, clays) – mustoperate where the resources arefound, thereby exposing them tohighly localized environmentalconditions. These industriesalso have strong links to othersectors, including providingmaterials for construction andfuels for the transportation andelectric power sectors.Operational ImplicationsInfrastructure damage and business continuityExtreme weather events, increased wildfires, rising sealevels, and other impacts associated with climate changecan damage extractive industries’ infrastructure andequipment, disrupt operations and production schedules,disrupt transportation routes, and pose risks to the safetyof employees.157For instance, in early 2011, Rio Tinto’soperations in Australia experienced cyclones, heavy rains,widespread flooding, and a related train derailment, leadingto a 5% decline in iron ore shipments from some operations,restricted production at a diamond mine, and a half-yearshutdown of a processing plant at auranium mine, all of which ultimatelyreduced the company’s earnings by$245 million.158(See section 3.10below for more on disruptions totransportation routes.)Oil and gas companies oftenoperate in extreme conditions (e.g.,deepwater) and in locations prone toextreme climates and severe weather(e.g., the Arctic and the U.S. GulfCoast). The operational damageto the industry from HurricanesKatrina and Rita in 2005 – includingthe destruction of more than 100production platforms, damage tomore than 50 others, and damageto more than 450 sub-surface oiland gas pipelines in the Gulf ofMexico – illustrates the operationalvulnerability of the industry toextreme weather events.159Thawing permafrost can destabilizeinfrastructure like pipelinesand airstrips in cold regions.160Furthermore, wandering “ice islands”calved from Greenland’s glaciers, which may increase innumber in a warming world, could potentially collide withdrilling rigs or other infrastructure before eventually breakingup.161Physical access to resourcesWarmer temperatures in the Arctic due to climate changecan affect extractive industries’ access to resources. Seasonalice roads, on which extractive industries rely for winteroperations, may be available for less time;162for instance, awarm winter in 2006 forced early closure of the ice roadsthat enabled fuel and supplies to reach Canadian diamondmines, leading to operational disruption, much higheroperational costs (e.g., to use cargo airlifts instead), and in atleast one instance the closing of a mine and bankruptcy ofa company. 163Thawing permafrost can also disrupt oil andgas operations in the Arctic that rely on a winter explorationseason on the tundra.164On the other hand, the warmer temperatures in the Arcticand decreasing seasonal Arctic Ocean sea ice cover will openpreviously inaccessible or uneconomical areas to explorationand extraction, as well as allow longer shipping seasons andnew shipping routes in northern sea channels.165Water availabilityMining and oil and gas operations are vulnerable todrought and changes in local water availability.166Miningtypically relies on large amountsof water – for both open pit andunderground extraction, as well asprocessing and refining – particularlyfor precious metals, diamonds, copper,and nickel. This water demand is likelyto increase in coming years as manymajor commodities face declining oregrades. Reduced water availability in aregion can constrain or stop production,increase competition with localcommunities and other industry sectorsfor water supplies, increase costs for pre-use and post-use water treatment, andspur regulators to either charge more forwater or require mining operations toprovide their own water supplies.167Similarly, water scarcity and/or theneed to create new freshwater suppliescan increase the operational costsof and significantly constrain oil andgas exploration, oil refining, oil sandsextraction and refining, natural gasextraction, and potential oil shaleproduction.1683.4 ExtractivesIn early 2011, Rio Tinto’soperations in Australiaexperienced cyclones,heavy rains, widespreadflooding, and a relatedtrain derailment,leading to a 5% declinein iron ore shipmentsfrom some operations,restricted productionat a diamond mine, anda half-year shutdownof a processing plantat a uranium mine, allof which ultimatelyreduced the company’searnings by $245 million.

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