Does Climate Change Impact Business Strategy?

Bio-regional economics and business strategyOur third blog on global challenges in business strategy looks at changing models of capitalism.

With a 1980’s MBA and 30 years’ experience successfully developing my own and client businesses, you’d expect me to be used to applying SWOT and PESTLE analyses and Porter’s Five Forces.

But today with the start of COP 24 in Poland, you might be more surprised by my belief in the importance of bio-regional economics to develop robust business strategies.

The Established Business Models

No analysis of a business and therefore the creation of an effective strategy can be complete without the understanding and deployment of Porter, SWOT and PESTLE. Porter analyses the competitive position of a business by determining the intensity of threats of new entries and of substitution; and the powers of buyers and of suppliers with competitive rivalry.

Porter’s focus is on the micro-environment. It was his response to the Strength, Weaknesses, Opportunities and Threats model, which looks at the macro-environment. The other macro tool PESTLE is often mistakenly abbreviated to PEST. A PEST analysis considers the Political, Economic, Social and Technological aspects. But it should always include Legal and Environmental as these wider challenges can derail any strategy. To see the impact consider COP 24, which is focused on the technical rules needed to implement the Paris Climate Agreement; or the current Brexit arguments on legal advice.

COP 24

After 4 years of decline, CO2 it is now rising again. In the words of the UN Secretary General Antonio Guterres, the world is “nowhere near where it needs to be” on the transition to a low-carbon economy.

Any business now leaving Environment off its analysis will fail. Without Environment, it will miss both significant threats and opportunities. For example countries reliant on fossil fuels need to justify their continued use; or the World Bank putting in $200B over the next five years to assist countries taking action on climate change.

Bio-regional economics

Over the last 20 years corporate social responsibility has gained strength as a business given. Work-life balance is now desirable. Technology has advanced rapidly in ways that could not be foreseen. Moreover the rate of that change is increasing. In the 10 years since the last global economic crisis, politics has become increasingly convulsed. Communication is now real-time and individual rather than by considered discussion and collective.

Against this background are the developing theories of bio-regional economics. These question the basic premise of the first three industrial revolutions, which were based on the need for accelerating growth. Scarcity of resource meant an opportunity to increase the value asked for the product. But this didn’t understand the impacts of removal of resource or of on the wider environment. What originally started as the desire for self-sufficiency and an easier life became driven by a need for growth of consumption of wider ranges of products and false choices.

The bio-regional economics approach challenges most aspects of the traditional value system. It seeks a new approach to consumption that prioritises:

  • locality,
  • accountability and
  • conviviality

in the place of expansion and profit. This shifts the focus of the economy away from profit size and assumes a significant reorientation of work from employment towards livelihood.

Rethinking Business Strategy

Bio-regional economics gives back control to individual businesspeople. They can now decide why they are in business and what they see as success. It puts Resources and Environment at the forefront of the business planning process to enable scale and importantly control. It does not turn its back upon the world. Here the model assumes an inter-connection between multiple bio-regions where all can thrive equitably.

It is that balance and control for the individual business and its workers, which is the important message of bio-regional economics. It sets business size and understands the business impact on the wider global environment. This makes the social activity of work enjoyable in a world we can still live in.