HBR On Strategy: Lessons in Climate Change Strategy from the U.S. Navy

Podcast Information:

• Title: HBR On Strategy
• Host/Author: Harvard Business Review
• Episode: Lessons in Climate Change Strategy from the U.S. Navy
• Release Date: October 9, 2024

Overview: In this insightful episode of HBR On Strategy, Harvard Business School Professors Forrest Reinhardt and Michael Toffel delve into the United States Navy's strategic approach to climate change. They discuss how the Navy's framework offers valuable lessons for the private sector in balancing short-term mitigation with long-term adaptation strategies. The conversation highlights the Navy's proactive measures in response to climate-induced challenges and explores the implications for businesses striving to navigate a rapidly changing environmental landscape.

1. The Navy's Dual Approach: Mitigation and Adaptation

Balancing Act: Reinhardt emphasizes that while many U.S. firms focus primarily on mitigation—reducing their carbon footprints—adaptation—preparing for the inevitable changes climate change brings—is equally crucial. He states, “[Organizations] have not only to be thinking about their carbon footprints, but also the changes in their own physical environments...” (03:56).

Definitions Clarified: Toffel elaborates on the distinction:

• Mitigation: Activities that reduce an organization’s impact on climate change.
• Adaptation: Investments and strategies to cope with the changes already occurring due to climate change.

2. Increased Demand for Naval Services Due to Climate Change

Strategic Opportunities: Reinhardt discusses how climate change is set to increase the Navy's demand:

1. Opening Arctic Sea Lanes: Melting polar ice is making previously inaccessible regions navigable, leading to new maritime routes and strategic interests. Reinhardt remarks, “...the area near the poles... is going to be increasingly open as the ice melts” (04:23).
2. Destabilization of Societies: Climate-induced stressors like droughts and severe storms can lead to conflicts and humanitarian crises, necessitating a stronger military presence. Toffel notes, “Climate change is potentially destabilizing to societies...” (05:31).

Threat Multiplier: Toffel explains that climate change acts as a threat multiplier, exacerbating existing social and political tensions. Examples include the rise of ISIS in Syria and increased migration pressures in Europe (05:31).

3. The Navy's Proactive Measures in the Arctic

Infrastructure Investments: The Navy is enhancing its presence in the Arctic by:

• Elevating Docks and Building Storm Warning Systems: Preparing for extreme weather conditions.
• Investing in Renewable Energy: Transitioning to solar power to ensure base resilience.

Icebreaker Fleet: Reinhardt highlights the strategic importance of icebreakers, noting the disparity between Russian and U.S. fleets: “...the Russians have upwards of 50 icebreakers and we have something like two better serviceable for Arctic conditions” (07:18).

4. Comparing Naval and Corporate Climate Strategies

Long-Term vs. Short-Term Focus: The Navy's long-term strategic planning contrasts with the private sector's often short-term focus driven by quarterly earnings. Reinhardt observes, “...the Navy has a kind of long term planning that maybe is not present in a lot of corporations obsessed with quarterly earnings” (11:30).

Motivations Behind Renewable Investments: Toffel points out that while both the Navy and private companies invest in renewables like solar power, their motivations differ:

• Navy: Focused on mission readiness and operational resilience.
• Private Sector: Often driven by public goodwill and employee expectations (11:54).

5. Lessons for Corporate Leaders

Integrating Mitigation and Adaptation: Reinhardt advises companies to go beyond mitigation by also investing in adaptation strategies. “They need to think about how they're going to adapt to this new world as well” (13:30).

Strategic Thinking: Toffel encourages firms to assess how climate change will affect their market demand and supply chains, and to view climate strategy through a policy perspective. He emphasizes the necessity of balancing both mitigation and adaptation: “It's not an either or, it's really a both, both and” (14:26).

Empowering Employees: Reinhardt underscores the importance of fostering passion and diligence among employees to drive effective climate strategies, drawing inspiration from the Navy’s commitment (22:01).

6. Challenges and Trade-Offs in Climate Strategy

Financial Trade-Offs: Reinhardt acknowledges that achieving environmental goals often involves hard trade-offs and investments that may not yield immediate financial returns: “We need to confront those costs. We need to acknowledge that living in the world... is going to take investment” (18:05).

The Cost of Inaction: Choosing to ignore climate change is itself a strategic bet with potentially severe consequences. Reinhardt states, “To decide not to make a bet is itself to make a bet” (19:12).

7. Future Outlook and Recommendations

Science-Based Decision Making: Toffel praises the Navy's reliance on scientific data for decision-making, highlighting its rational and fact-based approach as a model for businesses (21:13).

Commitment to Long-Term Security: Both professors emphasize the Navy’s unwavering focus on long-term force readiness as a blueprint for corporate resilience in the face of climate uncertainty (10:25, 22:01).

Notable Quotes

• Forrest Reinhardt (03:08):

  “...we have to think of them [mitigation and adaptation] as complements.”

• Michael Toffel (05:31):

  “Climate change is potentially destabilizing to societies...”

• Forrest Reinhardt (08:19):

  “...on average, in the long term, the climate in Montana will be hotter and drier and the Arctic sea ice will diminish.”

• Michael Toffel (14:26):

  “Climate change should be considered not only from a mitigation and adaptation perspective... but also to ask how it will affect our strategy.”

• Forrest Reinhardt (19:45):

  “If we can't answer that question, then we're automatons, not people.”

Conclusion

This episode underscores the critical importance of integrating both mitigation and adaptation in climate strategies, drawing valuable lessons from the U.S. Navy's proactive and science-based approach. Corporate leaders are encouraged to adopt similar forward-thinking frameworks to enhance resilience and strategically navigate the complexities of climate change.