For a long time climate change has been approached politically, splitting people along lines defined by who has to pay and when. Developed world versus emerging markets; young versus old; left versus right – all postponing action in an epic tragedy-of-the-commons game of global chicken. This is wrong. I believe we can all win and here’s how.
World leaders in Paris should define a framework for budgeting global emissions and putting a price on carbon.
Carbon tax puts supply chain to work on the problem
I have argued before that a carbon tax, applied to manufacturing and distribution, would work. This is because supply chain practitioners, whose job it will be to track actual emissions that determine the tax bill, excel at managing trade-offs in pursuit of a goal.
They, more than scientists, politicians and even other business executives, live in a world where money and materials constantly bleed into each other and success is defined in both financial and engineering terms. The climate crisis is exactly this type of problem.
What gets measured gets managed
The engineering reality of climate change is all about stopping the greenhouse effect, which means emitting less carbon and/or finding ways to remove it from the atmosphere. The first half of this equation is in perfect alignment with every supply chain strategist’s natural hunger for efficiency.
SCM World research has shown that supply chain organisations are well aware of how to balance an energy portfolio, reduce fuel use and eliminate material waste. The big ones, like Google, Unilever and BASF, could certainly layer in carbon optimisation to their existing supply network modelling approaches. Most are already fostering the development of alternative power sources in anticipation of such disruptions to energy markets.
The second half of the equation is even more interesting. Reforestation, geo-engineering and technologies for atmospheric clean-up may sound far-fetched, but mission-driven research gave us the internet, nuclear power and plastics, so why not expect similar business rewards from the climate challenge? India’s request for aid to develop alternative energy could be more boom than burden to industry in Europe and the US. Perhaps this is our global man-on-the-moon moment.
The key is monetising carbon. Measuring it accurately will be very difficult, but it is certainly in line with supply chain leaders’ need to improve visibility and traceability for safety, IP protection and risk management purposes anyhow.
Dematerialise and thrive
Climate summits have a poor track record. The main problem is that economic growth and carbon emissions have traditionally moved together. China’s crazy growth over the past two decades, for instance, has brought horrible pollution and dramatically accelerated the crisis. Political voices on both sides of the issue invite disaster by presenting climate change as a choice between economic gains and environmental sustainability. This badly misses the most important disruptive force of the 21st century, which is digitisation.
Digitisation does not only mean faster computers and communication. It also means consumer products that don’t require shipping, packaging or even manufacturing to earn money for shareholders. This emerging content economy is all about intellectual property that consumers value, but which manifest with little or no energy required.
Market values of companies like Facebook, Uber and Disney have very little to do with burning hydrocarbons and a lot to do with developing and delivering ideas. The moment of consumer value for these companies is virtually carbon-free with most getting their money’s worth intangibly. In fact, intangible value (market capitalisation minus assets), which in 1975 comprised only 17% of the total value of the S&P 500 index, is now worth 84%.
Intellectual property is king now and digitisation is the reason why.
One world, one love
Bob Marley set the vision with this refrain from his 1976 song. It points to an idea that mankind can and should come together as one. Bringing developing nations into the consumer party need not mean destroying the planet. Look ahead to a time when ideas are worth more than coal.
Digitisation is happening and supply chain people need only a scorecard to drive towards a sustainable world that is less about carbon and more about silicon. Bring on the carbon tax.