Lessons in Climate Change Strategy from the U.S. Navy

Summary

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.

Transcript

[Forrest Reinhardt]

Asana is the number one AI work management platform. It's where work connects across every department.

[Hannah Bates]

Even in the most complex organizations.

[Forrest Reinhardt]

Try for free [e-mail].

[Michael Toffel]

Youm know there's another HBR podcast you might like. Coaching Real Leaders takes you inside real life leadership coaching sessions. Host Muriel Wilkins has advised CEOs for nearly 20 years. Listen in as she helps guests work through their hardest career challenges. Find new episodes of Coaching Real Leaders wherever you get your podcasts.

[Hannah Bates]

Welcome to HBR on strategy, case studies and conversations with the world's top business and management experts, hand selected to help you unlock new ways of doing business. Climate change is causing severe weather, dangerously elevated temperatures, and water shortages around the world. Meanwhile, companies are struggling to reduce their carbon emissions while adapting their operations to these new conditions. To address both challenges at once, Harvard Business School professors Forrest Reinhardt and Michael Toffel have proposed an unconventional path forward. Borrowing the climate change strategies from the US Navy. They argue that the private sector can learn a lot from the Navy's approach to the world's changing climate. In this episode, you'll learn how to balance mitigation activities in the shorter term with long term investments that will help your organization adapt to future changes. You'll also learn how climate change could shift demand in your markets and affect your supply chains. This episode originally aired on HBR IdeaCast in August 2017. Here it is.

[Sarah Green Carmichael]

Welcome to the HBR Idea cast from Harvard Business Review. I'm Sarah Green Carmichael. Picture some companies you think are doing the best at fighting climate change and getting ready for it. Maybe you're imagining Patagonia's 1% for the planet. Or maybe Starbucks growing pest resistant coffee plants or Unilever's work to take carbon out of the supply chain. Our guests today say there's a different sort of enterprise that's a model for managing climate change. In fact, it's on the front lines of rising sea levels. Because it operates at sea level, the United States Navy is elevating docks, building advanced storm warning systems, and increasingly powering missions with the sun instead of with fossil fuels. Businesses can actually learn a great deal from the American military's forward looking approach, according to Harvard Business School professors Forrest Reinhardt and Michael Toffel. They're the authors of Managing Climate lessons from the U.S. navy in the July August 2017 issue of Harvard Business Review, and they're here with us now. Forrest, thanks so much for joining us.

[Forrest Reinhardt]

Thank you for inviting us.

[Sarah Green Carmichael]

And Mike, thanks to you too.

[Michael Toffel]

Great. Great to be here.

[Sarah Green Carmichael]

Why is the Navy preparing now for.

[Forrest Reinhardt]

Climate change, because it's taking place. So most firms in the United States, at least when they think about climate change, have been thinking mostly about mitigation. That is, they've been thinking about reducing their own carbon footprints, reducing the amount of emissions for which they're responsible. And that's important. But mitigation is no longer a substitute for adaptation. We have to think of them as complements.

[Sarah Green Carmichael]

What's really the difference there?

[Michael Toffel]

So mitigation are activities that reduce an organization's impact on climate change, whereas adaptation takes for granted that activities are occurring. And what investments do we need to do to adapt to the changes that are ensuing?

[Forrest Reinhardt]

And organizations, whether they're firms or the US Military, have not only to be thinking about their carbon footprints, but also the changes in their own physical environments, which are already taking place as a result of the buildup of our carbon dioxide and other waste gases in the atmosphere.

[Sarah Green Carmichael]

You argue in the article that climate change will actually increase demand for the Navy's services. That's sort of an economic way of putting it. Why is climate change going to do that?

[Forrest Reinhardt]

Well, for two reasons at least. One is that the Navy is our primary waterborne military force, and as the planet warms, the amount of water is going to increase. That is, the area near the poles, which until quite recently has been closed to marine traffic for much, if not all of the year, is going to be increasingly open as the ice melts. Do you think the last time the Western world really encountered a new ocean was in the early part of the 1500s? And the same kinds of opportunities and conflicts are going to exist in the Arctic? A second reason is that climate change is potentially destabilizing to societies, especially societies which are not particularly rich and not particularly well governed. And as those societies become increasingly stressed by things like drought and storm severity, the kinds of behaviors that call the military into action are going to become more frequent, whether those are wars or internal conflicts or just need for humanitarian assistance.

[Michael Toffel]

And this is why the military refers to climate change as a threat multiplier. Many have made the connection between the breakdown of societies in the Middle east, in particular in Syria, for example, to be attributed to changing rainwater and other precipitation patterns. So you see these problems right now behind the growth of isis. You see these problems also with the migration into Europe and Europe's struggle with what to do with these migrants. These are examples of issues that climate scientists suggest are only going to get worse in the coming decades.

[Sarah Green Carmichael]

When you were conducting the research for this article, did you get a sense of the US Navy being kind of on the cutting edge of this or are they just kind of part of a larger international effort that's all happening at the same time?

[Forrest Reinhardt]

Officials in the Navy with whom we spoke are worried about the Russians lead in readiness for an open Arctic. More generally, however, militaries are alike in the sense that they none of them can be romantic about the world that we live in and the world that we are creating. So they all have to live in this fact based world. They all have to do as much research as they can to figure out what the world is going to look like in mid century. Because we and other militaries right now are building the assets with which we will fight the wars of mid century, if they exist.

[Sarah Green Carmichael]

When you guys think about where we could be in 30 or 60 years with Arctic sea lanes potentially opening up, what do you see potentially happening there? What would the Navy like to see the US Navy like to see happen there?

[Michael Toffel]

Well, one thing to remember is that we actually have a lot of experience in the Arctic. It's just that experience is underwater. So we've for a long time been sending submarines up there to patrol and to figure out how much pressure is needed. They've been measuring sea ice there because one of the reasons is they need to figure out how much pressure is required to launch missiles through the ice in order to potentially target enemies. So they've been studying this issue. They've been there for a long time. But what's different, as Forrest mentioned, is the navigability piece, which requires a whole different set of infrastructure. So that requires bases, that requires icebreakers, most of which the US does not yet have in place. And there's a big discussion now, or increasing discussion in Congress even about why is it that the Russians have upwards of 50 icebreakers and we have something like two better serviceable for Arctic conditions.

[Sarah Green Carmichael]

Do either of you have a sense of how accurate the forecasts at this point on global warming have been?

[Forrest Reinhardt]

So directionally the forecasts have been correct. There's a lot of uncertainty about the climate system. There's a lot that we don't understand. We do, however, extremely well understand the basic physics that's been known for a century. And while we don't know what next week's weather is going to be out in Montana, and we don't know how fast exactly the Arctic sea ice will diminish. We do know that on average, in the long term, the climate in Montana will be hotter and drier and the Arctic sea ice will diminish. And the, the Navy, historically, like the army and the Air Force and the Marines, have been in the business of ensuring the rest of us against long term threats, even if the probability of the threat being realized is far, far less than 1. And that's what we pay them for, that's what we want them to do, and that's what we should want them to do here.

[Sarah Green Carmichael]

You guys conducted a lot of the research for this under Barack Obama, a president who was very accepting of the science on climate change, who signed the Paris climate agreement. The current commander in chief has said in many different ways on many different occasions that he does not accept the scientific consensus on climate change. Do you think it's a challenge for the Navy to be, I mean, euphemistically we could call it managing up. You know, did they have a problem when they're their boss essentially says this isn't a priority, it's not happening.

[Michael Toffel]

Well, I think the way that the Navy has been going about their work with respect to climate change has been fact based. It's been based on the best science and it's really at the end of the day, all about force readiness.

[Forrest Reinhardt]

Which.

[Michael Toffel]

Has widespread support across the political spectrum. So when you think about addressing climate change from a force readiness perspective, it's really not a political issue. It's not cast in political language. When we were in the Pentagon interviewing some of the senior folks responsible for these various programs, no one mentioned the President. It just really wasn't part of the conversation at all. They took their mandate to be, as Forrest mentioned earlier, about providing the protection for the United States in ways that their expertise guides them.

[Forrest Reinhardt]

ASANA is the number one AI work management platform. It's where work connects to goals so your entire organization can move forward faster. ASANA is where AI is seamlessly intertwined with every project team and goal. Try for free [e-mail] that's asana.com.

[Sarah Green Carmichael]

How does the Navy's approach compare to the approaches you guys have seen in for profit companies? I mean, on the one hand, the Navy has a kind of long term planning that maybe is not present in a lot of corporations obsessed with quarterly earnings calls and things like that. So I understand there would be differences, but is anything kind of jump out to you?

[Michael Toffel]

One difference that actually looks like a similarity but is actually motivated by something different, is a lot of companies, as Forrest mentioned earlier, are thinking about mitigating their impact on climate change by shifting, for example, to renewable energy to supply their factories or their warehouses or their offices. So they're Often doing that from a sense of trying to promote the public goodwill or to be resonant with desires of their employees or of their top managers who want to have a green edge to their company. The Navy also is investing in massive amounts of solar to power their bases, but it's not motivated so much by those effects that I just mentioned. The private sector is trying to claim it's really about, in their case, about mission readiness and the resilience of their bases. They want to be sure that as climate change occurs with more intensive storms, that that's not going to knock out the power grids that supplies their bases. So they're investing in some of these power sources because of their distributed nature, the fact that they can produce power on site and not have to rely on long distance generating lines. So similar behaviors, but for very different motives.

[Sarah Green Carmichael]

What do you want sort of corporate leaders to take away from what the Navy's doing? Are there ways in which the Navy's example would make it easier for a corporate leader to kind of see how their own company could prepare?

[Forrest Reinhardt]

Yeah, I would say there are two big things, at least. One is that I mentioned that most companies climate change policies have been primarily geared toward mitigation, but that's not going to be enough. They need to think about how they're going to adapt to this new world as well. And at the same time, many of the companies have resorted to this no regrets rhetoric. They say, well, of course we're doing the right things. We're doing things that are going to pay for themselves anyway, and that's great, and they should be doing that, of course, but maybe they need to be doing some other things as well. Because if you're, if you're only making investments that will pay for themselves no matter what the state of the world turns out to be, then you are not taking advantage of opportunities to make strategic bets which, under the existing understanding of the science, are likely to pay off.

[Michael Toffel]

So I would say what I would want firms to take away from what we've learned from the Navy is to think about climate change not only from a mitigation and adaptation perspective, as Forrest mentioned, but also to sort of cast a lens to ask the question, how will this affect our strategy? How will it affect the demand for our products and services? Will it shift the markets where we're expecting demand on the one hand, and then on supply side is how will it affect our operations and how will it affect our supply chain? The other question is the question of mitigation and adaptation. The rhetoric has long been we have to do mitigation to avoid adaptation. And maybe at one point, had we mitigated quickly enough, that might have been the case. But the reality is we haven't. And so now we have to be balancing mitigation and adaptation. It's not an either or, it's really a both, both and. So companies need to be thinking about that within their own organizations. But I would argue that companies need to be thinking about this from a policy perspective as well. They, I think, need to think about what opinion am I going to have on the policy making process. Am I going to sit out or am I going to try and use some of the power that the system currently affords them to make a legacy statement on trying to fix this problem in the institutions that are running capitalism right now, which is allowing carbon to be a free good, even though it's increasingly creating harm and expected to create more harm as the century unfolds.

[Sarah Green Carmichael]

Mike, is there a company that you think is doing really well at preparing for climate change or mitigating their carbon footprint?

[Michael Toffel]

I can't point to an organization that there often comes up the question of what is a sustainable organization? And there are. If you ask a thousand people, you'll get 5,000 answers. People just have not really figured out what that means. But my definition of that is quite simple. In a way, it's one that uses renewable resources and that doesn't impose pollution faster than nature can absorb it. So there's a resource like what it brings in and what it puts out. And I am still searching for ideas and maybe some listeners have some suggestions of particular companies that fit that definition. So it's broader problem than climate. There are on climate companies have been trying to offset the amount of carbon that they put out into the atmosphere by reforestation projects or trying to reduce deforestation or by investing in trying to cap carbon emissions elsewhere. So there are a host of companies that are coming out describing their activities as carbon neutral by doing these alternative projects. There's probably not enough projects in the world to enable everyone to act that way, which is why it's necessary to green the grid and to change the power at the source.

[Sarah Green Carmichael]

Are we getting to a point where we have to really make hard trade offs, do things that are more expensive, even if we might lose money on it?

[Forrest Reinhardt]

It would be surprising if win wins were so common that we could have everything that we wanted at the same time. That's not the way we normally think about the world. And it's not, I think, realistic to think that that would be the case here. The idea that the environment can be free if only we think about it more sensibly is almost certainly untrue. And we need to confront those costs. We need to acknowledge that living in the world that we aspire to create for our children is going to take investment. It's going to take investment in other kinds of physical infrastructure far from the seacoast. It's going to take investment in education, it's going to take investment in information technology infrastructure. And it's going to take investment in creating buffers against the deleterious effects of climate change.

[Sarah Green Carmichael]

What if companies just decide to do nothing? I mean, is that a bet in itself?

[Forrest Reinhardt]

Of course it is. To decide not to make a bet is itself to make a bet. We all have skin in this game. We cannot avoid it unless we go to the moon.

[Sarah Green Carmichael]

Forrest, what would you say to an executive who says it's fine for the US Navy to be involved in mitigating and adapting to climate change? You know, they don't really have to make financial trade offs the way my company does. They have a massive budget. It's just a totally different thing. My company just could not do that. What would you say to that?

[Forrest Reinhardt]

At one level, the idea that firms can learn from the Navy seems crazy. They're so different from one another. The Navy is a government entity. Most firms are private. The Navy's primary product, if you can call it that, is lethal force delivered anywhere in the world at short notice to compel people to do stuff they don't want to do. There is no legitimate firm that does that. At the same time, the fundamental similarity between the leaders of the Navy and the other people in the Navy, and leaders and other people in firms, is that they actually have to live in the world. They don't have the luxury of being ideologues. There are a few people in the political arena who have that luxury, but most of us have to live in the world as we find it. And we have to prepare for the world that we think we are creating. And we do that with our best understanding of the science. We're not all scientists. Our understanding of the science is incomplete and imperfect. But we need to continue to try to educate ourselves and try to learn more about it and understand what the evidence is that would make us want to change our behavior. Because if we can't answer that question, then we're automatons, not people.

[Sarah Green Carmichael]

When you were studying the Navy, what was your sort of favorite example of something they were doing where it sort of gave you hope for the future.

[Michael Toffel]

It's not exactly an example, but the fact that they were science based and really attentive to that and not caught up in this bizarre questioning of science and conspiratorial theories that they were confronting the science, they invested in science, they used science from other federal agencies and are making decisions based on, yes, there's uncertainty, but that doesn't stop them. And it's an approach that I think rational managers that we try and train at Harvard Business School also take, and managers around the world take, you know, they take in information and make decisions based on that information. And that information at its core is based on facts and science and projections, Right?

[Forrest Reinhardt]

So more than any one particular example, I was heartened by the energy and diligence and passion that the people we talk to bring to their jobs. They are focused every day, not just in their time at work or at sea, but all the time, about how to make us safer and how to make the military a more effective organization at doing the very difficult things it has to do in extremely difficult and challenging environments. And I hope and trust that all of those people that we met and literally millions of others that we didn't meet will continue to bring that kind of energy and diligence and zeal to their jobs. It's an extraordinary thing. And if I were to talk about one lesson that firms might take from this Navy example, it would be to try similarly to empower their employees to bring that kind of passion and diligence and intelligence to their work.

[Sarah Green Carmichael]

Thank you both so much for the article and for coming in today to talk about it.

[Michael Toffel]

It was a great pleasure.

[Forrest Reinhardt]

Thank you for having us.

[Hannah Bates]

You just heard Harvard Business School professors Forrest Reinhardt and Michael Toffel in conversation with Sarah Greene Carmichael on HBR IdeaCast. We'll be back next Wednesday with another handpicked conversation about business strategy from Harvard Business Review. If you found this episode helpful, share it with your friends and colleagues and follow our show on Apple Podcasts, Spotify or wherever you get your podcasts. And while you're there, be sure to leave us a review. And when you're ready for more podcasts, articles, case studies, books and videos with the world's top business and management experts. Find it [e-mail] this episode was produced by Ann Sani and me, Hannah Bates. Ian Fox is our editor, and special thanks to Maureen Hoke, Nicole Smith, Erica Troxler, Ramsey Kabaz, Anne Bartholomew, and you, our listener. See you next week.

[Sarah Green Carmichael]

Sa.