The Rationale For Combining Carbon and Entrepreneurship
Analysing the global environmental challenge in front of us and examining the prospect of how we must face it, Dr Steve Priddy sets down the argument for why we must learn to connect the terms ‘carbon’ and ‘entrepreneur’.
Economists conventionally think in terms of macro and micro economics. Extending that analogy to low carbon, sustainable futures we can think of macro and micro environmental levels of analysis. As economists frequently do, we can also think about carbon at the level of the household, the firm and the state.
Reflecting first on the macro environmental, we see unprecedented threats to the survivability of the species. The 2007 International Panel on Climate Change update on our understanding of climate change represented a tipping point whereby scientific consensus settled not only on the evidence of global warming, but also that this is primarily being driven by the relentless pumping of carbon dioxide and other greenhouse gases into the atmosphere as a consequence of burning fossil fuels.
However, notwithstanding the vocal minority of climate change ‘sceptics’, any reasonable audit of the planet’s environment should be a cause for concern on other counts, for example:
- Above all, population growth at a rate we have not witnessed before – current projections peaking at 9.2 billion in 2075, thereafter decreasing;
- World reliance on 50 oil fields and the growing power of the national oil corporation;
- Rare earth metals – those metals that are at the base of much of our renewable technologies – are indeed rare, and appear clustered in a limited geographical region;
- Increasing evidence of water stress and of frequency and intensity of extreme weather events.
Alongside these factors are some ‘wicked problems’ emerging. For example, while a debate has simmered for over half a century about ‘Peak oil’- the belief that oil reserves will run out after a peak of production- an emerging idea is that we collectively sit on ‘unburnable reserves’, primarily reserves of coal. The organisation Carbon Tracker have estimated that, if we were to burn all the existing proven reserves of fossil fuels, we would very quickly push the parts per million (ppm) of carbon and other GHG gases in the atmosphere to dangerous levels. Is this message getting anywhere near mining investors? We doubt it.
The view from the micro environmental perspective opens up the prospect of winners and losers in the low carbon future, and governments around the world are beginning to see the opportunities. For example:
- China invests more as a percentage of GDP in clean technologies, even more than Germany;
- Brazil not only generates most of its electricity from hydroelectric sources but also hosts the largest terrestrial carbon sink in the world. In addition it has a leading position in the production of ethanol fuel. If carbon trading markets develop as planned these two factors lead to significant ‘proven renewable reserves’;
- The USA is once again set to become the largest oil producer in the world as a result of technological innovation opening up new reserves;
- If the UK can develop a coherent policy approach, wind power will move from being a negligible contributor to the energy mix to providing a third of supply by 2030, according to the CEO of National Grid, speaking to the Royal Academy of Engineering in March 2011;
- Denmark is well on the way to becoming a wind energy leader;
- And if Nigeria is not careful, it too will suffer the ‘resource curse’ – the scenario where citizens of those countries endowed with abundant natural resources are plundered by corrupt elites and bureaucracies. With oil production coming rapidly on line, it is surely a scandal that only a quarter of Nigerian households have access to electricity.
At the household level, we see a remarkable mix of winners and losers in the road to a low carbon future. For many households in the developed world, a bigger crisis – the almost complete meltdown of the banking system – has placed considerable stress via increasing taxes and other levies to support loans, guarantees, share purchases, liquidity injections and other measures to keep failing banking institutions afloat. In the UK alone, it is estimated that some £850 billion of funds have been diverted from the public finances to fund these actions. This economic crunch is having a two-fold effect. Non-banking businesses are finding access to finance increasingly costly, and the demise of securitisation results in a permanent reduction in GDP, jobs and growth in those countries more heavily reliant on banking as a business sector. Alongside this, is a rising tide of fuel poverty, increasing energy prices, and the first public utterances that, if action is not taken now on building the new generation of energy infrastructure, we can expect power outages in the next decade. Here comes in the need for carbon entrepreneurship.
Entrepreneurship is not the same as management. Once we move on from the sterile debate about whether entrepreneurs are born that way or may be nurtured into it, there are several key attributes to the role:
- Entrepreneurs are fundamentally optimistic about the future of business and society. Their world view is to see opportunity where others see only constraint and closure;
- An entrepreneurial mind-set flourishes as easily in the multinational corporation or the public sector, but it is most readily associated with the small and medium sized enterprise (SME), and particularly the fast moving, fast growing ‘gazelle’ businesses beloved of governments and business schools. This is not to overlook the growing recognition of the importance of the social entrepreneur;
- The successful entrepreneur is steeped in commercial acumen – understanding at a glance where financial benefit resides. They make mistakes because they take risks, but understand that every mistake is a lost opportunity.
In the carbon-centric universe, these attributes will become more relevant, more in demand. In the corporate sector, we begin to see the first glimmerings of response to the low carbon challenge at product, project and corporate levels. Three isolated examples are offered of this ‘creative destruction’ that is at the heart of entrepreneurship:-
- At product level, Sir James Dyson’s Airblade cold-air hand dryer is an innovative intervention in a sector where technology has largely stayed the same for decades. The 1,600W Airblade can dry one pair of hands in 10 seconds – much faster than 2,400W warm-air dryers – using 80% less energy than comparable products. Over a five-year cycle in a washroom, if used 200 times per day, it will lead to a saving of 730,000 paper towels;
- At a project level the ‘London Array’ is under construction and represents a step change in the building of offshore wind energy capacity. As part of the Government’s offshore wind development programme, London Array is seen as a forerunner which, eventually, will deliver up to 25 GW of power. London Array’s turbines will generate enough electricity for up to 750,000 homes– equivalent to a quarter of households in Greater London;
- At corporate level a good example is Marks & Spencer’s Plan A, with its claim of having realised £50m in additional profits over the course of 12 months. In the context of the company’s total annual pre-tax profit of £706m for 2009/10, this figure is a considerable achievement. The positive effect of the M&S plan, not to mention the resultant favourable publicity, has surely been reflected in improved market capital value. That figure will be of great interest to M&S management and the investment community
In summary, the carbon native is coming, just as the digital native arrived over the last two decades. We must all do what we can to support that figure.
For those keen on looking to address one of the biggest challenges in today’s world, the environment, we offer an advanced certificate programme in ‘Global Oil & Gas Industry: Strategy, Management & Consultancy‘, as well as our ‘Global MBA‘ with a specialisation in Carbon Management.
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