Competitive Survival in a Post-Kyoto World

Specific Programs Moving from Environmental Management to Environmental Strategy Competitive Survival in a Post-Kyoto World Are Your Manufacturing Capabilities Geared for the Challenge of Sustainability What You Don't Know About Sustainability Can Hurt You

Global climate change is an issue of growing importance in today's global markets. In early 2005, the Kyoto Protocol went into force in much of the developed world. Although the United States government has decided to withdraw its involvement in this treaty, initiatives in Congress as well as many state governments are looming.

How should a company respond?

While many within the business community dislike the Kyoto Protocol, viewing it as a sub-optimal mechanism for bringing about a business solution to this problem, policy-makers have created what businesses dislike even more - regulatory uncertainty. Companies need a clear picture of future legal and market environments in order to make strategic decisions; and the decision not to ratify the Kyoto Treaty has only made the future environment cloudier. However, some U.S. companies also see an opportunity in the present situation. They are taking advantage of the lack of a mandatory U.S. greenhouse gas (GHG) emission reduction program to set targets at their own pace and in their own way, a way that fits with their own strategic objectives.

To date, as many as sixty corporations, with net revenues of roughly $1.5 trillion, have set reduction targets. And hundreds more are considering such steps. Many of these companies are agnostic about the science of climate change or their social responsibility for protecting the global climate. The reasons they are making these emission reductions are decidedly strategic. They are searching for ways to be prepared for the long term should GHG emission reductions become mandatory, while at the same time attempting to reap near-term economic and strategic benefits should that future not emerge or be delayed.

At a time when even some industry groups are pushing for corporate action on climate change - notably, the Conference Board warned that "businesses that ignore the debate over climate change do so at their peril" - many forward-thinking U.S. companies have decided that it is in their best interests to hedge their strategic bets, preparing for either scenario. Scholars within the Erb Institute can help business managers navigate these turbulent issues and assess how they intersect with business strategy.