Council Post: How Companies Can Help Create A Green Future For The Global South

CEO of Smartlink Communications. Global analyst, consultant and trainer, passionate about leadership, global communications and competition.

While planetary in scope, climate change is often portrayed as a fairly uniform process of homogeneous effect. It is almost dichotomously not so, affecting countries, economies and businesses in vastly different ways and to vastly different extents. Places such as India are facing colossal challenges, and Russia, with a cautionary note, is seeing increases in crop yields and cost-effective sea routes (registration required).  

The most straightforward effect is a sheer increase in temperatures: double the global average in MENA and SSA countries. Given that the baseline scenario has moved toward a 3° Celsius increase, this is well above the level at which systems in the “Global South” can treat climate change as a side issue. Quite simply, within a few decades, I foresee that many of the economies of the Global South will face tremendous, chronic supply-side problems in an exogenous shock that keeps on giving. 

Significant Crop Damage: Crop patterns are likely unsustainable, lowering production yields for maize by 7.4% for each degree (registration required), wheat yields by 6% for each degree and rice by 3%. Given booming populations — near 400% in SSA at the median scenario, according to the UN — the combination of rapidly increasing demand and drops in supply is self-explanatory.  

Water Scarcity: As crops require more water, that will be in increasingly short supply in the Global South. In the Middle East, for example, long-term depletion of groundswell water in places such as Iran or Jordan is reaching acute levels, just as water scarcity arising from changing rainfall patterns is starting to affect agriculture, both in terms of yield as well as employment. With an estimated 70% of GDP already exposed to high water stress in places such as MENA, which technically ran out of water in the 1970s, the effects are not difficult to foresee. 

Unlivable Urban Areas: With an expected increase of at least 4.4° Celsius in urban areas, many places in SSA and MENA as well as the Indian subcontinent are at a high risk of facing increases in average temperature, which would make it prohibitively hot for people to sustain normal activities. In places such as SSA, where urbanization has not been correlated with significant reductions in poverty, the effect is doubly adverse: forced rural migration due to falling crops toward increasingly overcrowded cities.  

International Migratory Pressures: Forced rural to urban migration will not be the sole challenge. As climate change puts unsustainable strain on many states in the Global South, the already porous borders risk leaving many with climate refugees from the worst-hit areas, while putting others over the edge. Meanwhile, what Robert Kaplan called the border of “prison states,” holding back Global South migrants from Europe will likely be increasingly unable to fulfill its purpose.  

What It Means For Business 

SwissRe estimates that a scenario of a 3.2° Celsius increase, which has become the baseline scenario, would lead to an 18% loss of GDP globally by 2050. Much of this would be concentrated in relative terms in the Global South. As the World Economic Forum put it in relation to the SARS-CoV-2 pandemic in its 2021 Global Risks Report, “too many people have little left to lose.”

That might very well become the global norm, not the result of some unforeseen exogenous shock but a fairly predictable chain of events. That, in turn, translates into some highlighted risks for businesses: 

Supply Chain Disruptions: Most businesses have come to see integrated, just-in-time, global supply chains as almost a given. In fact, they were an aspect of a now-ended Third Age of Globalization. The impact of climate change may make a “fourth” globalization one of forced migration and state failure.    

High Risk of State Failure: State capacity to actually meet its commitments is expected to wane around the globe and “pitchfork politics” (registration required) could return. But what may mean protests and vetocracy in the “Global North” likely means outright state collapse in the Global South. Such weak states often fall apart quickly to leave room for organized crime and terrorism alike. In my opinion, business quite simply needs to prepare for a world where many of the states in the Global South will exist only in their capitals at best.  

Fiscal and Monetary Instability: Emerging markets always carry more risk for investors and entrepreneurs alike. But tail risks have been manageable. The ripple effect of climate change means those tails are getting larger as risk becomes more leptokurtic.  

A Greener Possibility 

With tremendous disruption, comes the opportunity for business disruption. Quite simply, a green future isn’t so much a matter of political “wants” but of practical “needs.” That makes for good business, and there are quite a few opportunities:  

GMO Crops: Cultivation of drought-resistant, pest-resistant GM crops is becoming imperative, both in limiting water and pesticide use as well as improving yields in a warming climate. Primarily, it’s a matter of survival, but the potential for reforming agriculture, which is 80% rain-fed, is enormous. 

Green Hydrogen: China has shown that green hydrogen can be cost-effective given hydropower. Many Global South countries have similar potential and could effectively copy projects for a hydrogen economy.  

Water Management: Micro-desalination and water treatment, in addition to macro-solutions, represent tremendous opportunities as water increases in value (paywall). Quite simply, I believe the market doesn’t have a choice. 

Conclusion

The Global South is affected by climate change disproportionately. In one scenario, SSA, MENA and sections of SA could sink into hunger, state failure, instability, forced migration and become hotbeds of disease, terrorism and organized crime. There is, however, the possibility that a different scenario might become viable, where a green future is actively embraced by governments and businesses alike. Let’s hope for the latter.

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