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Georgi Genchev
SES 360B
March 16, 2015
Assignment 8

How will a better understanding of climate change impact globalized business models in the
future or will it?
Since the industrial revolution, businesses have benefited the society in many ways.
They have made human life easier, more diverse and even longer, if we look at all the
progress the pharmaceutical industry has made. However, in order to exist, a business define
purpose is to maximize profit. By not pursuing this, all entities from the small kiosk on the
street to the big multi-million corporations doom themselves to stop operating. This is due to
how the whole business environment and the free market economy work these days.
However, in order for the business to maximize profit certain sacrifices have to be
made. Such is polluting the environment. Recently, I read a case called How Reserve Mining
Became Cleveland-Cliffs. It is about a mining company back in the 40s and 50s of the 20th
sentury, that with its operations polluted a lake in the state of Minnesota. It is not arguable,
that this is harmful and wrong. However, there is another side of the coin. After reconsidering
the license and permits of this mining company, the state closed it, laying more than 3,000
people out of work. So, the history of this company shows how difficult and important it is to
regulate an industry in cause of the environment.
The same goes with climate change. At this point, all serious companies follow
corporate social responsibility programs, ones because of their belief in contributing to the
well-being of the society (including for climate change related purposes), others to gain a
better public opinion. Regardless of the purpose however, these programs work. They are a

result of changed perception and better understanding of businesses about the environmental
issues created by businesses, such as the climate change.
In 2006, the British government released a report by the economist Nicholas Stern. In it, he
points to the potential impacts of climate change on water resources, food production, health,
and the environment. According to the Review, without action, the overall costs of climate
change will be equivalent to losing at least 5% of global GDP each year, now and forever.
Including a wider range of risks and impacts could increase this to 20% of GDP or more, also
indefinitely. Stern believes that 56 degrees of temperature increase is "a real possibility.
From a business perspective, this will be disastrous annual decrease in profits, less
production, less resources for innovation. Even if the abovementioned calculations are not
accurate, the impact would still drive businesses to be more efficient in and ecofriendly.
Predicting how a better understanding of climate change will affect globalized
business models is difficult. I firmly believe that with the deepening of this problem in the
recent years companies and states have undertaken certain precautions to slower this change,
an example for which are the gas emission permits or the abovementioned social and
environment responsibility programs. I presume that the biggest change in the business
models would be in the transportation of goods. Companies would no longer rely on offshore
outsourcing in their production and will be focus more on doing their business locally. No one
could indisputably say how will business change in the future decades but one thing is surethe effect of climate change, if not taken into serious consideration on time, might cause
serious damages to communities in every part of World.