Hoffman: GE Gets Climate Change. Do You?

As a member of the general public, you can hardly open the newspaper, watch the news or go to the movie theater without running into some mention of what has become the most notable environmental issue of the decade: climate change. But as a business person, you must move beyond the public debate and think about how climate change will affect your business environment.

In fact, you should not think of climate change as an environmental issue at all.

Instead, you should think of it as a market transition.

Controls on the emission of greenhouse gases will affect the price of energy and the products, services and sectors that rely on that energy. In other words, it will affect virtually all sectors of the economy to varying degrees. Some will be disadvantaged, but others will be advantaged. As in any market transition, there will be winners and losers, and some of those winners, such as DuPont (DD) and GE (GE), have already set themselves apart by forging best practices in their respective industries.

In the face of this emerging reality, the questions for you are numerous: What kind of climate-related action is prudent for my company? Are there opportunities in the uncertainty of this market transition? What do my competitors see? Gaining share in unsaturated markets, such as the markets for carbon and energy-efficient equipment, can give your company a competitive advantage.

What some call "constraints," others see as opportunities in new worldwide markets in carbon, capital, advanced technologies and products, and services that emit lower amounts of greenhouse gases (GHGs). Revenues from GE's "ecomagination" strategy -- a cross-company business initiative offering energy-efficient products -- crossed $14 billion in 2007 and are targeted for $25 billion in 2010.

All businesses have a managerial and fiduciary obligation to assess their business strategy to determine whether such opportunities exist for them. As John Woody and I outline in our book from Harvard Business Press, Climate Change: What's Your Business Strategy?, you need to look closely at how your company will be affected by a market price for carbon in the present, near future, and long-term; and you need to decide how to position it to take full advantage of those developments.

Three Key Steps

It is important to understand three key steps in preparing for and capitalizing on the issue of climate change. The most basic step involves understanding your company's level of exposure to the issue.