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Using 4 Lenses to Address Micro & Macro Climate Goals

Posted September 21, 2022 | Sustainability |
Using 4 Lenses to Address Micro & Macro Climate Goals

Businesses are being forced to respond simultaneously to climate change at the macro (external) level and the micro (internal) level. At the macro level, we have global discourse, including international treaties like the 2015 Paris Agreement. The macro level also includes changes to the overall business environment as the effects of climate change become more apparent. In the near future, businesses not acting on climate are likely to face legitimacy issues and competitive challenges. Businesses can address these concerns with operational efficiencies and transparent disclosures, by investing in and adopting climate-friendly technologies and processes, and by developing and offering green products.

The micro level revolves around a business’s location, supply chain, natural resources, practices, and proc­esses. Companies may experience process disruptions, issues stemming from extreme weather events, resource conflicts with the local community, and the need to implement macro-level targets. Possible actions include adapting to future climate changes, building more resilient supply chains, creating local solutions, solving communities’ climate-related problems, and helping to prevent the local ecosystem from collapsing.

There are four main lenses through which businesses should view their macro and micro climate-related goals: climate science, climate governance, business stakeholders, and community stakeholders (see Figure 1).

Figure 1. How the four lenses play out in macro and micro environments
Figure 1. How the four lenses play out in macro and micro environments
 

1. Climate Science

Climate science provides our current understanding of climate change and its potential impact on our existential resource assumptions. It’s also our basis for acting to minimize such changes. Planetary boundaries identify global natural resource cycles and their limits, but a complete understanding of those limits and their interdependence is still developing. The climate change phenomenon is complex and interdependent on other physical and biological systems. The current science has good models for predicting global-scale climate-related phenomena (macro), but local projections (micro) must be further developed if we are to generate effective local area interventions.

2. Climate Governance

Climate governance provides a way to better under­stand limited resource allocation and management among various stakeholders. At a macro level, climate governance targets businesses to reduce their impact on resources and cut emissions. International agreements and national governments’ regulatory and institutional regimes set guidelines for business operations to limit externalities. Since the challenge is global and inter­dependent, international agreements are critical to overarching governance and response. At a national level, governments must balance the needs of their economy with the collective good.

The 2015 Paris Agreement was a testament to the potential for global action to be converted into national goals. Climate activists and nongovernmental organiz­ations (NGOs) also push governments to regulate businesses strictly. These regulations may evolve to become mandatory with greater inputs from climate science, adversely impacting noncompliant companies.

At the local level, regulation implementation and natural resources constraints become very important. In some cases, natural resource conflicts within the community impact business sustainability and require better local governance.

3. Business Stakeholders

A firm’s operations, resource requirements, associated emissions, and available technologies to reduce climate impact are a product of its industry and location. At a macro level, the role of a company’s industry peers in driving emission reduction is critical. Customers who demand greener products are also key.

Suppliers and neighboring businesses comprise the firm’s micro environment. They understand the local impact and share the local responsibility. Supply chain partners are crucial in making businesses more resilient to climate impact, as we saw when automakers had to stop manufacturing certain models during the pandemic due to a shortage of chips and other electronic parts.

4. Community Stakeholders

These stakeholders care about, or are impacted by, the natural environment; they may or may not be transactionally related to the business. They ask ques­tions about the business’s impact on climate change and planetary boundaries and (sometimes) on themselves. At a micro level, these stakeholders are concerned with the area’s shared natural resources and any local customs that help sustain them.

[For more from the author on this topic, see: “Sustainable Growth Pathway: Aligning with Macro, Accomplishing in Micro.”]

About The Author
Himanshu Shekhar
Himanshu Shekhar is a PhD candidate at Indian Institute of Management Bangalore, India. His research interests focus on understanding corporate decision making on sustainability and climate change. Prior to academia, Mr. Shekhar spent about 10 years working in software, sustainable finance, carbon management, and public policy. Over the years, he has developed corporate strategies on renewable energy, energy efficiency, sustainability, and… Read More