CLIMATE CHANGE - A THREAT TO INTERNATIONAL BUSINESS - Alice Ippinaiye

The world is becoming increasingly global not only culturally and socially but also in the economic and business context. Countries seek to attract foreign direct investment in a bid to achieve international competitiveness. Businesses pursue foreign direct investment in search of larger market shares and competitive costs to achieve global competitiveness.

Businesses can now access funds both from domestic financial markets as well as the international financial markets. Components manufactured in different countries are shipped for final assembly or production in a different country and the final products are then shipped to several countries. With many different countries manufacturing different parts of a given item, there is a growing interdependence among world economies which is aiding the global expansion of business.

The process of internationalisation has been aided by reduced transportation and communication costs brought about by innovation in technology. Before the advent of technology, travel was dangerous, uncertain, time-consuming and expensive. This hindered the expansion of business outside the boundaries of a country. In modern times, travel is safer, faster and cheaper providing a good atmosphere for the international expansion of business.

There is however a threat to the global expansion of business; global warming. From politicians to business leaders, it is now fashionable to be concerned about climate change, carbon footprints, and carbon emissions. There is a rising call for reduction in air travel and the use of automobiles to reduce carbon emissions in a bid to slow down the process of global warming. Is global warming an abstract threat or a pressing reality? What are the implications for business?

In the race to outdo themselves in a bid to be seen as environmentally-friendly, businesses may end up incurring extra costs that may be detrimental to their continued existence. Airlines and associated industries like tourism and hospitality may be affected if calls for reduced air travel are heeded. Automobile manufacturers may also witness reduced demand if cars are jettisoned in favour of more environmentally-friendly modes of transport.

If air travel is taxed, increasing its costs, travelling for business meetings may become not so cost-effective. Will business meetings be conducted remotely via teleconferencing and videoconferencing? What will be the effect of the extra costs incurred on businesses?

As pressure mounts on businesses to use less energy and develop more energy-efficient processes and products, production costs may skyrocket from increased R&D spending as well as the use of energy-efficient, but not so cost-effective production materials. This could translate into higher prices for consumers and may result in reduced demand which could result in declining output. Climate change, thus, raises concerns not only for planet earth but also for world business.

Global warming is not all about losses, there are some winners. These include researchers with the task of developing alternative energy sources and more efficient processes and products, environmental researchers with their dire predictions environmental lobby groups and of course the advertising agencies with the responsibility of helping businesses repackage as being eco-friendly.

As the earth warms up, the fate of economies built on international business hangs in the balance. Will climate change slow down or hinder the globalisation process? This is a question that can only be answered in the course of time when someone is willing and able to take up Richard Branson’s $25 million challenge to save the earth from climate change.