Climate Change and Corporate Governance

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CLIMATE CHANGE AND CORPORATE GOVERNANCE

[pic]

BY

SHIRLENE KOLA-BANKOLE

03005093

CLIMATE CHANGE AND CORPORATE GOVERNANCE

“We believe Climate Change is one of the most significant environmental challenges of the 21st century... voluntary action alone cannot solve the problem.” Henry Paulson, CHAIRMAN, GOLDMAN SACHS INTRODUCTION

Environmental challenges, particularly climate change are something we all have to think about. Politicians from David Cameron to Gordon Brown are outlining ambitious agendas and consumers are demanding greener products. Leading businesses such as BP and Unilever have been joined by General Electric, Tesco and even Wal-Mart in announcing strategic investments [1]. Over the millions of years of earth’s existence, the climate has changed many times in response to natural causes such as variations in energy received from the sun and volcanic eruptions. Today, when people talk about 'climate change', they mean the shifts in temperature that have happened over the last 100 years. During this time the average temperature of the atmosphere near the earth’s surface has risen by 0.74°C [2]. Climate change is any long-term significant change in the “average weather” that a given region experiences. Average weather may include average temperature, precipitation and wind patterns. It involves changes in the variability or average state of the atmosphere over durations ranging from decades to millions of years. These changes can be caused by dynamic processes on earth, external forces including variations in sunlight intensity, and more recently by human activities [2]. Most scientists agree that global temperatures could rise between 1.1 and 6.4°C above 1990 levels by the end of the 21st century, depending on future emissions of greenhouse gases (GHG). If the rise is high, then changes are likely to be so extreme that it will be difficult to cope with them. There are likely to be more intense and frequent extreme weather events, like floods and hurricanes, and a further rise of up to 59 cm in sea levels [3].

CAUSES OF CLIMATE CHANGE
There is very strong evidence that humans are changing the climate with their actions, through emissions of GHG like carbon dioxide (CO2) and methane. In the UK, 40% of emissions are caused by individuals, mostly from energy used in the home, driving and air travel [4]. These changes are being studied by scientists all over the world who are finding evidence from tree rings, pollen samples, ice cores and sea sediments. The causes of climate change can be divided into two categories - those that are due to natural causes and those that are created by man [5]. [pic]

Figure 1: Factors that influence the Earth's climate. Source: PhysicalGeography.net

Natural Causes: There are indications that significant global warming cannot be explained just by natural variations [5].The changes seen over recent years and those which are predicted over the next 80 years are thought to be mainly as a result of human behaviour [4]. The Intergovernmental Panel on Climate Change (IPCC) is a scientific body set up by the UN to look at climate change. They say that human activity is the main driver of the changes seen in climate [4]. Human Causes: The Industrial Revolution in the 19th century saw the large-scale use of fossil fuels for industrial activities. These industries created jobs and over the years, people moved from rural areas to the cities with a continuing trend. More and more land that was covered with vegetation has been cleared to make way for houses [5]. Natural resources are being used extensively for construction, transport and consumption. Consumerism has increased by leaps and bounds, creating mountains of waste. Also, our population has increased to an incredible extent. All this has contributed to a rise in GHG in the atmosphere. Fossil fuels such as oil, coal and natural gas supply most of the energy needed to run vehicles, generate...
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