Keywords: climate change, climate change entrepreneurship, biophysical and socio-economic stressors, undermine earth’s capacity

There is narrowing scope for entrepreneurial action as the biophysical and socio-economic stressors reduce Earth’s resilience and our collective capacity to help the planet recover. We are talking about ‘climate change entrepreneurship’.For centuries, entrepreneurs have acted with impunity to plunder the biosphere without returning value to it. They must now learn not to undermine Earth’s capacity to meet present and future needs of humanity.[1] Versión en español se encuentra aquí.

Why does the earth matter to entrepreneurs?

Melting of the Sea Ice off Greenland portends a rise in sea levels around the globe

There’s no avoiding it. Our planet is suffering in many ways:

Climate change due to the increase in green-house gases

Fluorocarbons depleting the ozone layer

Acid rain and air pollutants

Shortages of fresh-water resources

Overfishing, habitat destruction and pollution in the marine environment

Crop loss and grazing depletion due to desertification and erosion

Cutting down the world’s tropical forests, leading to erosion and flooding

Mass extinction of species and the associated loss of genetic resources

Threats to human health from exposures to chemicals in production processes, products, consumption activities

Rapid population growth and migration, burgeoning mega-cities, and ecological refugees

Entrepreneurs are partially responsible for the climate crisis

Henry Ford and the electric light bulb

Entrepreneur Henry Ford was the greatest contributor to global heating.

It is no exaggeration to say that entrepreneurs such as Thomas Edison and Henry Ford have played a major role in contributing to the climate crisis. It is also no joke to think that today’s entrepreneurs –perhaps like Elon Musk, with his electric car that uses new battery technology, his Tesla automobile, and his SpaceX Mars program – can help ease the problem.

The need for climate change entrepreneurship is seen all over the world. Here is a vivid example how entrepreneurs contribute to the climate crisis. High above Indonesia, satellites identify plumes of smoke drifting over the oil palm plantations and rainforests, sweeping towards Singapore, Malaysia and deep into Cambodia, Laos and Thailand. At ground level, south-east Asian cities choke for weeks during Indonesia’s burning season.[2] Across the vast archipelago, swathes of rainforest are cut down and burned off by small- and large-scale entrepreneurs to make way for palm oil production. The pursuit of economic growth is at the expense of the environment. Thousands of Indonesians are employed and many entrepreneurial families are coming out of poverty because of the enterprise. However, the result is an environmental disaster. Deforestation accounts globally for about 12% of total man-made greenhouse gas emissions, about the same as transport (13%) and agriculture (12%).[3] Indonesia is home to approximately three percent of the world’s forests. Yet deforestation in this region represents over a third of the total global carbon emissions from deforestation and land degradation.[4]

Air pollution over Southeast Asia due to Indonesian entrepreneurs

Climate change is a ‘cold shower’ for entrepreneurs

Around the world, economic growth and entrepreneurial activity are inextricably linked to global heating. Safety on Earth is slipping away. We are at the end of the tether and the only option is innovation and enterprise to get it right. We have been wasteful of our time and now is the last chance to preserve life on Earth as we know it. Entrepreneurs who understand the new climate reality – and are willing to invest in preparedness and risk management – are best equipped to seize opportunities.

Yet here’s the paradox. When written in Chinese, the word ‘crisis’ is composed of two characters. One represents danger and the other represents opportunity. Some of the most innovative ideas have emerged during times of crisis. Just because the world experiences a crisis, the spirit of innovation does not hibernate.

Joseph A. Schumpeter, who coined the term ‘creative destruction’.

If the most famous theoretician of entrepreneurship, Joseph Schumpeter, were alive today, he would say that recessions ‘clean the slate through creative destruction and create lasting, positive change’. Entrepreneurial organisations are the engines of job growth and create more jobs than large established organisations.[5] In part, this is because breakthrough inventions are contributed disproportionately by independent inventors and entrepreneurs.[6] Here are some examples:

During the Great Depression, General Electric introduced the fluorescent light bulb, which has twice the lifespan of incandescent lighting but used half the power.

Ray Kroc opened the first McDonald’s during the Eisenhower recession.

During the Vietnam War and the 1973 Oil Crisis, Bill Gates and Paul Allen formed Microsoft.

During the Reagan recession of the early 1980s, Microsoft introduced Word.

During the First Gulf War, the World Wide Web and Apple PowerBook debuted.

When the dotcoms crashed and the 9/11 attacks took place, the iPod came to the market.

During the Global Financial Crisis (GGC) of 2007-2009, Facebook and Twitter grew to become global corporate giants.

Now, as the Climate Crisis bears down on us, we need to recognize the need for climate change entrepreneurship.

Kauffman Foundation says that more than 50% of the fast-growing and largest companies of today were founded during times of crisis. Launching a new company does not actually put companies at a disadvantage as many may suspect. In fact, at the height of the crisis in 2008, more low-overhead, low-revenue businesses launched than in previous years.[7]. The rate of entrepreneurship actually went up during the GFC[8]. Carl Schramm lists four reasons for this: (1) the explosion of creative impulse that leads to innovations, (2) scarcity in available options, (3) lower operating costs and (4) severely hit behemoths (large corporations).[9]

Schumpeter’s entrepreneurs, by using their creative energies, help pull us out of crisis. For a Schumpeterian economist, downturns can act as a good ‘cold shower for the economic system’, releasing capital and labour from dying sectors and allowing newcomers to recombine them in imaginative new ways.[10] Economic downturns can have positive effects. They can force companies to increase their efficiency, cut waste and strive to do things in smarter ways. In such times it has been claimed that innovation is the single most important condition for transforming crisis into an opportunity.

Biosphere and opportunity in climate change entrepreneurship

Now we are engaged in a great climate war, testing whether the human race can long endure as we know it. Although entrepreneurs must take a great share of the responsibility for global heating, they are also agents of change who may help to turn the situation around. They need to go beyond business and social entrepreneurship into the realm of climate change entrepreneurship.

Who can benefit from this? Of course, it’s entrepreneurs. Entrepreneurs are the ones who can seize the opportunity toward climate-resilient pathways. Our world is threatened by multiple stressors that affect the earth’s resilience (the ability to recover readily). These stressors are all challenges and opportunity for the type of entrepreneurial personality who spots unfilled needs and gaps in the market. These stressors are the “pains” that entrepreneurs look for and provide solutions for. They include climate change and variability, changes in land use, remediation of natural ecosystems, alleviation of poverty and inequality, and changes in cultural factors.

Biosphere opportunity spaces are arenas in which entrepreneurs identify opportunities to create value for a more resilient planet.[11] Opportunity spaces are pressure points created by both the physical and social worlds and reveal the gaps, market failures, unmet needs of the Planet.[12]

Biosphere opportunity space framework

Figure 9 Biosphere opportunity space framework

Narrating this framework from left to right, our world (a) is threatened from the outside (Biosphere) by biophysical stressors, such as climate change and degradation of ecosystems; and from the inside (Econosphere and Sociosphere) by social and economic stressors, such as unrestrained economic growth, exploitation with impunity, population increase, poverty and inequality. These stressors expand and contract the resilience space, which is Earth’s capacity to become strong, healthy, and to recover. Entrepreneurs operate within an Opportunity Space (b), where they face multiple decision points (d) and pathways that lead to different possible futures (c), each with differing sizes of resilience space—small, medium, and large (hatched areas). Entrepreneurs take advantage of these pathways and exploit routes to market in which they act (or fail to act), or in which they manage (or fail to manage) risks related to the planet’s resilience. Some pathways (e) can lead to a world with lower risk and higher resilience (top right) while others (f) lead to higher risk and lower resilience (bottom right).

Entrepreneurs must address the climate crisis as a social and economic activity

The basic learning is that there is narrowing scope for entrepreneurial action as the biophysical and socio-economic stressors reduce Earth’s resilience and our collective capacity to help the planet recover. During the historical transition from entrepreneurship based on extraction of resources with impunity to value-adding to the biosphere, entrepreneurs must address the complexity and the dynamics of ecosystems and climate in relation to social and economic activity. In the face of technological change, the uncertainty of consumer expectations, and the unpredictability of new regulations, entrepreneurs must learn not to violate conditions that systematically undermine Earth’s capacity to meet present and future needs of humanity.[13]



Endnotes

[1] Major thinking for this article comes from Chapter 3 Entrepreneurship and Sustainable Development, in Frederick, H. H., A. O’Connor, and D. F. Kuratko. Entrepreneurship Theory Process Practice. 4th Asia-Pacific edition. Melbourne, Australia: Cengage Learning Australia, 2016. http://www.cengageasia.com/en/Browse/2015/10/28/9780170352550

[2] John Vidal, “Indonesia’s forest fires feed ‘brown cloud’ of pollution choking Asia’s cities”, The Guardian (UK), 23 March 2014 http://gu.com/p/3nmkp; Fildes, A. The burning season: Study guide. http://www.theburningseasonmovie.com/students-teachers/p/103.html

[3] Inter-Governmental Panel on Climate Change. Climate Change 2014: Impacts, Adaptation, and Vulnerability: Technical Summary. Geneva: Inter-Governmental Panel on Climate Change, 2014. http://epic.awi.de/37531/

[4] World Wildlife Federation. (2014). Borneo and Sumatra: Threats. http://www.worldwildlife.org/what/wherewework/borneo/threats.html

[5] Van Praag, C. M., & Versloot, P. H. (2007). What is the value of entrepreneurship? A review of recent research. Small Business Economics, 29(4), 351–82. doi: 10.1007/s11187-007-9074-x. https://link.springer.com/article/10.1007/s11187-007-9074-x

[6] Baumol, W. J. (2005). Education for innovation: Entrepreneurial breakthroughs versus corporate incremental improvements. NBER Innovation Policy & the Economy (MIT Press), 5(1), 33–56. https://www.journals.uchicago.edu/doi/abs/10.1086/ipe.5.25056170

[7] Bullough, Amanda, and Maija Renko. “Entrepreneurial Resilience during Challenging Times.” Business Horizons 56, no. 3 (May 1, 2013): 343–50. https://doi.org/10.1016/j.bushor.2013.01.001.

[8] Fairlie, Robert W. “Entrepreneurship, Economic Conditions, and the Great Recession – Fairlie – 2013 – – Wiley Online Library.” Journal of Economics & Management Strategy 56, no. 3: 343–50. Accessed June 20, 2019. https://onlinelibrary.wiley.com/doi/abs/10.1111/jems.12017.

[9] Carl Schramm, cited in Sharma, P. (2008). In a recession, entrepreneurs hold the key to a fast recovery. 23 December, http://www.3dsyndication.com/dna/article/DNBAN993

[10] Cited in Wooldridge, Adrian. “Global Heroes.” Accessed June 20, 2019. https://www.economist.com/special-report/2009/03/14/global-heroes.

[11] Excerpted from Frederick, Howard H. “The Emergence of Biosphere Entrepreneurship: Are Social and Business Entrepreneurship Obsolete?” International Journal of Entrepreneurship and Small Business 34, no. 3 (2018): 381–419. https://www.inderscience.com/info/inarticle.php?artid=92785

[12] Field, Christopher B., Vicente R. Barros, Michael D. Mastrandrea, Katharine J. Mach, MA-K. Abdrabo, N. Adger, Yury A. Anokhin, et al. 2014. “Summary for Policymakers.” In Climate Change 2014: Impacts, Adaptation, and Vulnerability. Part A: Global and Sectoral Aspects. Contribution of Working Group II to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change, 1–32. http://epic.awi.de/37531/ http://ipcc-wg2.gov/AR5/images/uploads/IPCC_WG2AR5_SPM_ Approved.pdf .

[13] Norton, Michael. 2012. Sustainability: Duty Or Opportunity for Business? Routledge. https://www.taylorfrancis.com/books/9780203109991

Source: Excerpted from Frederick, H. H., A. O’Connor, and D. F. Kuratko. Entrepreneurship Theory Process Practice. 5th Asia-Pacific edition. Melbourne, Australia: Cengage Learning Australia, 2019. https://bit.ly/cengage-etpp.