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The Business of Climate Change

Technology innovation stands to reap billions from a warming planet.
July 26, 2016

Provided bySAP

The U.S. National Oceanographic and Atmospheric Administration (NOAA) recently announced that on May 23, 2016, the South Pole Observatory recorded carbon dioxide levels of 400 parts per million (ppm) in Antarctica, the first time ever in 4 million years. Carbon readings have been steadily creeping up—from 280 ppm at the dawn of the Industrial Revolution in the late 18th century (as later measured via ice-core data analysis) to 317 ppm in 1958, when formal records started being kept, to 360 ppm in 1998, when the U.N. Intergovernmental Panel on Climate Change (IPCC) was established.

When physics and politics collide, things tend to get unpredictable. That’s probably why, despite decades of debate, we are still struggling to address the existential crisis of climate change. Part of the issue may lie in how we’re looking at the problem. In other words, viewing climate change merely as a threat means that every country attempts to defend its own strategic interests while delaying the inevitable difficult decisions for as long as possible. If, on the other hand, we can also get people excited about the tremendous economic opportunity accompanying this massive threat, we might be able to find some sustainable solutions. After all, the prospect of making money has the power to unite people like nothing else.

One thing is very clear: the next stage of the fight against climate change won’t be cheap. According to estimates by the World Bank, developing countries alone will need $100 billion of new investments per year over the next 40 years to build resilience against the future effects of climate change. Additionally, mitigation costs for current effects are expected to range from $140 to $175 billion per year by 2030. Furthermore, Citibank released a study in mid-2015 indicating that the world could lose up to $72 trillion in gross domestic product (GDP) due to the adverse impact of climate change in the 21st century. (To put that figure in perspective, consider that in 2014, the entire world’s GDP was about $78 trillion!)

From eliminating our dependence on fossil fuels to changing the paradigm of how we extract, manufacture, distribute, and consume products worldwide, all kinds of technology-enabled activities will be needed both to reduce the impact of future changes and to remediate the mess that has been made thus far. Both will naturally involve companies both large and small that are making a difference in the value chain.

At SAP, we are committed to helping the world run better. And at SAP Startup Focus, our job is to build and scale our innovation ecosystem, driven by the power of startups. We work with more than 3,800 startups from 55-plus countries that are building the next generation of solutions to drive businesses forward, including a handful that are specifically focused on business opportunities arising from climate change. Following are some examples of startups already doing their part in helping the world deal with the fallout from climate change.

For example, France-based Meteo Protect offers financial products that protect companies and institutions when weather conditions adversely impact their business or generate additional costs. As weather uncertainty increases exponentially, so does the potential for negative impacts on all kinds of businesses, including farmers, transporters, and retailers. If you are responsible for an electric utility that has wind turbines, what do you do if the wind drops? Or if you are a farmer and unseasonable hail pummels your cherry crop, what then?

The U.S. government has offered crop insurance for farmers since 1938 and is currently on the hook for $102 billion in crop-insurance liabilities, which are packaged and sold by 17 private insurance firms. While the program has served farmers well over the years, it’s still firmly rooted in the agricultural traditions of the last century and isn’t especially responsive to the business needs of farmers today. For instance, the insurance must be purchased prior to planting and covers loss of crop yields from all types of natural causes including drought, excessive moisture, freezing, and disease. This doesn’t leave the farmer with much flexibility for obtaining coverage for specific risk factors that may occur well after the crop has been in the ground.

Meteo Protect allows businesses to buy insurance much as they would make a purchase on an e-commerce site. You pick the risk, select the variance you want to protect against, choose the appropriate ZIP code and—voilà—the system prices the coverage for your specific need in real time. Meteo accomplishes this by analyzing more than 40 years of historical weather data along with thousands of current weather data streams from various sensors, gauges, and remote-sensing satellites. The advantage? While traditional programs, such as crop insurance, focus on low-probability catastrophic events, such as hurricanes, Meteo allows farmers to defend themselves against the higher-probability unseasonable weather events. These might include circumstances such as lower-than-expected rainfall and higher-than-normal heat indices that end up causing significant economic loss.  

PEAT is a German company combining machine learning with the power of crowdsourcing and geodata analytics to provide farmers with a plant disease and diagnostics management tool. Farmers can simply take a picture of their affected plants and upload it to the system, where the power of crowdsourcing kicks in. Other users (and sponsors, one might imagine) can comment about what might be ailing the plant and provide customized information to fix it. By integrating data from both mobile phones and agricultural drones, this system supports the needs of the entire spectrum of growers, from subsistence farmers to those with large acreages.  

The resulting metadata provides valuable geo-spatial insights into the distribution of cultivated crops and the most significant associated plant diseases. Additionally, by mixing in other data sources, the system can also provide a deeper understanding of plant diseases, climate, and geographic factors that are in place at the time, as well as the ability to predict where disease might spread at a hyper-local level.

The PEAT solution is delivered via a mobile app. As mobile phones are now ubiquitous throughout the developing world (India alone crossed a billion mobile subscribers recently), this solution provides the last-mile connectivity that enables farmers to deal with the impact of a changing climate. Solutions like these could be integrated into traditional crop-insurance programs, to perhaps minimize claims payouts in the future. After all, if farmers around the world can help each other pinpoint issues with crops early on, they might be able to save those crops now rather than having to file insurance claims later.

In an Olympic year, it’s worth noting the extraordinary impact that the year of the first modern Summer Olympics—1896—had on human history and innovation. In that year, Charles King drove the first car on the streets of Detroit (months before Henry Ford), Wilhelm Röntgen announced the discovery of X-rays, and Swedish scientist Svante Arrhenius quantified carbon dioxide’s role in warming our planet.

We can only hope that one day in the not-too-distant future, the collective genius of humanity and many entrepreneurial minds will bring the carbon readings back to where they were when the early explorers first sailed the southern oceans.

Manju Bansal is vice president and global program head at SAP Startup Focus, which works with startups in the big data and predictive or real-time analytics spaces, supporting them in building innovative applications that use the SAP HANA database platform. The program serves more than 3,800 companies worldwide. Join the conversation on Twitter at @SAPStartups or follow the author: @BansalManju.

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