By Forest L. Reinhardt and Michael W. Toffel
The United States Navy operates on the front lines of climate change. It manages tens of billions of dollars of assets on every continent and on every ocean. Those assets—ships, submarines, aircraft, naval bases, and the technology that links everything together—take many years to design and build and then have decades of useful life. This means that the navy needs to understand now what sorts of missions it may be required to perform in 10, 20, or 30 years and what assets and infrastructure it will need to carry out those missions. Put another way, it needs to plan for the world that will exist at that time.
The Department of Defense is clear-eyed about the challenges climate change poses. “The pressures caused by climate change will influence resource competition while placing additional burdens on economies, societies, and governance institutions around the world,” the most recent Quadrennial Defense Review, issued in 2014, states. “These effects are threat multipliers that will aggravate stressors abroad such as poverty, environmental degradation, political instability, and social tensions—conditions that can enable terrorist activity and other forms of violence.”
Leaders across the political spectrum, including former Presidents George W. Bush and Barack Obama and current Secretary of Defense James Mattis, have all noted the security implications of global warming. Like many other organizations, the navy cannot afford to treat climate change as a partisan issue. The Department of Defense knows that the mid-century world for which the admirals are now planning is likely to be warmer than today’s, with higher sea levels, new precipitation patterns, and more frequent and severe extreme weather events, imperiling and destabilizing many regions domestically and abroad. This creates two problems that exacerbate each other and that the navy needs to address simultaneously.
First, climate change is expected to increase the demand for the navy’s military and humanitarian services. Its effects not only will expand the geographic scope of the navy’s mission—from drought-prone regions experiencing heightened disputes over water rights, to coastal areas facing mass migration, to the Arctic, where melting sea ice clears the way for new shipping lanes, increased mineral extraction, and new opportunities for conflict. They also will alter the mix and frequency of demand for the navy’s various services.
Second, climate change may impair the capacity of the navy to deliver its services. As sea levels rise and weather patterns become more severe, the risk of damage to the domestic and global network of bases and ports on which it depends to maintain fleet readiness will also increase. Thus, the navy must boost the resilience of its infrastructure—and of the supply chains that provide critical energy and material support to its bases and fleet.
Climate change is not a onetime bump from one equilibrium to a warmer one but, rather, a continuous, accelerating process. This creates the need to plan not for a new static world but for an increasingly dynamic one. The navy’s leaders have been working to address this reality head-on, despite resistance from some politicians who continue to debate the very fact of climate change. To do otherwise would compromise its ability to meet its fundamental objectives: “to maintain, train and equip combat-ready Naval forces capable of winning wars, deterring aggression and maintaining freedom of the seas.”
Military organizations are idiosyncratic and special. Their primary “output” is lethal force, controlled in ways that compel people to do what they don’t want to do. No legitimate firm does anything remotely comparable. And yet there is a long tradition of business leaders learning from their military counterparts—in defining strategic goals, coordinating individuals’ activities to accomplish collective objectives, setting priorities and managing trade-offs, creating resilient organizations in the face of change, and leading others. In the climate arena, too, business leaders can learn from the military.
In this article, we’ll take a look at the navy’s approach to climate change and reflect on the implications for business.
Responses to climate change are typically categorized as mitigation or adaptation. Mitigation refers to actions that reduce the amount of greenhouse gas emissions that are causing climate change. Prime examples include replacing technologies with more-energy-efficient ones and switching to renewable fuels. Mitigation efforts may require substantial investment by individual companies or organizations, but the benefits of reducing the potential economic and societal damages associated with climate change are enjoyed by all. As such, mitigation is a public good—which notoriously attracts less investment because the returns are shared by noninvestors.
Adaptation refers to actions that make an organization more resilient in the face of ongoing and forecasted changes in the earth’s systems. Common examples include relocating water-intensive operations from increasingly drought-prone areas and siting and engineering buildings in ways that enable them to better avoid, withstand, or recover from floods and severe weather events. Adaptation differs from mitigation in that the investors in the adaptation activities are the primary beneficiaries. Thus, it doesn’t face the same incentive problems that mitigation does, and for that reason, one might assume that firms—and nations—would focus their resources on adaptation. But so far they haven’t.
Thirty years ago, mitigation and adaptation could have been viewed as substitutes: If we had invested in more-aggressive mitigation then, we might not need to invest so much in adaptation now. But that window has shut. To be sure, mitigation can still reduce the magnitude of problems associated with climate change over the coming decades. Companies may decide to invest in mitigation efforts on their own, and governments may either require them to take particular actions or (preferably, because it’s more efficient) institute price-based incentives such as carbon taxes or cap-and-trade systems that motivate them to reduce emissions. But those efforts simply cannot obviate the need for extensive adaptation.
The navy has undertaken numerous initiatives that reduce greenhouse gas emissions. Since 2009, for example, it has been working toward a goal set by then Secretary of the Navy Ray Mabus to obtain half of its total energy from alternative sources by 2020. The objective is not to engage in mitigation for its own sake; it is to reduce the navy’s vulnerability to disruptions to fossil-fuel supply chains that originate in or flow through hostile regions and to better insulate the force from the price volatility that occurs when oil-producing regions are unstable.
The navy is also working to improve the fuel efficiency of its ships, aircraft, and expedition vehicles, not just to reduce costs or mitigate the speed and severity of climate change but to save lives. Supplying oil to military operations in Afghanistan led to an average of one casualty for every 24 fuel-resupply convoys. More-fuel-efficient ships, aircraft, and vehicles require fewer resupply missions.
One of the navy’s most visible signs of progress is the Great Green Fleet initiative, an aircraft-carrier strike group that traveled the world in 2016 with every service ship and aircraft operating on a 50/50 blend of biofuel and petroleum. While the navy initially purchased the biofuel at a huge premium over conventional fossil fuels, it has now signed contracts with several biofuel producers at prices on par with those of fossil fuels.
The navy has successfully managed transitions from one energy source to another several times in its long history. Its ships were first powered by wind, then by coal, and then by petroleum; more recently the navy developed nuclear-powered submarines and aircraft carriers. In this historical context, the latest shift is actually quite modest.
To power its bases ashore, the navy is relying less on mainstream electricity grids and more on distributed renewable-energy sources—that is, systems that generate clean energy onsite, where it will be used. Beyond reducing dependence on fossil fuels and mitigating greenhouse gas emissions, this energy transition strengthens the bases’ resilience to cyberattacks on electrical grids.
Although such initiatives are motivated by concerns over operational readiness and resiliency, they also serve to mitigate the navy’s contribution to climate change by reducing reliance on fossil fuels. The Department of the Navy, which includes the U.S. Navy and the Marine Corps, accounts for 1% of America’s total fossil-fuel use. It has signed long-term renewable-energy contracts for more than 1.2 gigawatts (GW) of the total 2 GW required by its bases, which exceeds its 2020 goal. This commitment to alternative energy is spurring private-sector investments in renewable energy technologies that are driving costs down, not only for the navy but for all consumers. It also buffers the alternative-fuel industry against price swings that could deplete its firms’ balance sheets and its human capital, much as the navy’s demand for nuclear energy to power its submarine fleet kept that industry moving forward during times when its commercial viability was in question.
The navy’s efforts to shift to renewable energy are not limited to its bases. It’s also developing technologies such as lightweight, flexible solar blankets that can recharge batteries to untether expeditionary forces from battery-replenishment supply chains while reducing weight in troops’ backpacks.
The navy is focusing most of its climate change efforts not on mitigation but on adaptation. As the world’s climate alters, the navy must address both increased demand for its services and an impaired capacity to deliver those services.
Let’s start with the likelihood that climate change will increasingly trigger international conflict, state failure, or both. The navy predicts that climate change will lead to more—and more-prolonged—droughts, which in turn will raise the potential for more military interventions. Drought is one of several climate-related “threat multipliers” that, by stressing societies and states, increase the potential for violent conflict. Such concerns are not merely theoretical: The bitter violence in Syria has been linked to drought-induced food insecurity and migration from rural to urban areas. And the U.S. Navy has sent warships into the Mediterranean Sea as a result. In this context of heightened instability, the navy expects to be called upon more frequently and in more places.
Climate change is also expected to increase the demand for humanitarian assistance and disaster response. Almost every year the navy distributes food and medicine in the aftermath of a catastrophe, whether domestically, as after Hurricane Katrina, or abroad, as in Haiti in 2016, after Hurricane Matthew. There’s every reason to expect that hurricanes and typhoons will get fiercer and more widespread, and that the flooding they produce will escalate the frequency, scale, and scope of disaster response requested of the navy. Moreover, increased drought intensity will spur mass migrations that put lives at risk, and the U.S. Navy can be expected to receive more calls to aid with rescue missions.
Further, just as climate change alters the mix of services needed to meet evolving demands, it modifies the geography and distance over which those services will have to be delivered. For example, in the Arctic, the widespread melting of sea ice means increased opportunities for commerce (via shorter shipping lanes) and resource extraction (more continental shelf from which to extract more oil and gas) and hence more requests for assistance and an increased likelihood of conflict in that part of the world.
The navy doesn’t currently possess all the assets it needs to operate effectively in the Arctic, making adaptation a necessity. For example, icebreaking ships are useless in both ice-free waters and waters so thickly frozen that the ships can’t move; but as the ice pack thins and we spend more time between these extremes, they are critical. Alaska Senator Lisa Murkowski told Foreign Policy, “I get very impatient because I don’t see us prioritizing icebreakers as a national asset.” Pointing to the behavior of the United States’ rivals, she observed, “People can quibble about what we have versus what Russia has versus what China is building. All I can tell you is we are not in the game right now.” Indeed, the United States has only five icebreakers capable of functioning in the Arctic (only three of which the military operates; private companies operate the other two). Russia has 41, half of which are owned by the government, and more are under construction.
Just as climate is altering the demands for the navy’s services, so it may affect the manner in which the navy fights. If conflict breaks out in an arid area, available freshwater may be a strategic asset that navy fighters can manipulate to their advantage. According to U.S. military doctrine, the objective of war is to destroy the enemy’s capacity to resist. This can occur through death or captivity, but also through physical paralysis (which is why militaries seek to deny their enemies access to fuel) or psychological paralysis (thus, tactics such as “shock and awe,” designed to undermine psychological resilience). If the navy controls access to freshwater in a desert theater, it can destroy the enemy’s capacity to resist. The point here is that climate change may create opportunities—grim though they may be.
Companies will have to make the same kinds of strategic shifts, both to seize new opportunities and to defend existing market positions from long-standing rivals and new competitors. For example, a company that produces seeds for farmers may see opportunities to develop new drought-resistant crop varieties. It may also find new customers among farmers in higher latitudes as growing seasons lengthen. At the same time, current customers will need more managerial and financial attention, not less, as they figure out how to cope with the short-term manifestations of climate change. Long-established giants like Monsanto and start-ups like Boston’s Indigo Agriculture are already investing in the agricultural solutions that farmers in a world of climate change will demand, and their counterparts in transportation, real estate, insurance, and finance are—or should be—making similar bets.
Climate change also complicates the navy’s ability to deliver its services. According to the Department of Defense’s Climate Change Adaptation Roadmap, climate change will affect the military’s built and natural infrastructure and its acquisition and supply chain in dramatic ways. For example, we can expect increasing flooding at naval facilities at Norfolk; flash flooding and mudslides in Hawaii, home to the navy’s Pacific Fleet; and intensified droughts in California, where the navy has more than $40 billion in assets. In Alaska, the navy is being forced to rebuild and relocate roads, buildings, and airfields as the permafrost melts, and it might eventually have to relocate some of its bases. International bases are also likely to be severely affected by storm surges and higher sea levels, including Yokosuka base in Tokyo Bay, which serves as the Seventh Fleet’s headquarters, and the Diego Garcia facility, on a low-lying atoll in the Indian Ocean, which serves as a critical logistics hub for operations in the Middle East, the Mediterranean, and Southern Europe.
Especially vulnerable are the navy’s coastal infrastructure and the supply chains that furnish energy and materials to its bases and fleet, all of which are essential to mission readiness. Most of the navy’s land-based assets—shipyards, bases, and other installations—are on seacoasts. Its 111,000 buildings and structures on bases and other installations, located on 2.2 million acres around the world, would cost $220 billion to replace.
These assets were designed and built to be resilient to historic sea levels and storm intensity. But sea levels rose on average nearly half a foot over the 20th century, a rate faster than that in any century since at least 800 BC. The rise so far is mostly owing to thermal expansion (warmer water takes up more space), but future sea level changes are likely to be driven by melting ice sheets in Greenland and Antarctica. Sea-level rise and related storm surges are the two biggest threats to the navy’s coastal infrastructure, according to navy officials. Not only do such floods inundate roads and damage buildings, but they put ships being repaired in dry docks at risk. (An independent report by the Union of Concerned Scientists showed that a three-foot rise in sea levels would significantly threaten 55 naval installations in the United States valued at $100 billion.)
The average rate of sea-level rise masks substantial variation among regions. As the navy celebrates the centennial of its enormous Norfolk base, the sea level there is a foot and a half higher than when the base was established, during World War I. Since much of the base sits less than three feet above sea level, heavy rains and higher-than-usual tides are flooding it more often, submerging some of its piers and immersing the electrical wires and steam pipes that run underneath. Pier inundation now happens at least monthly, impeding training and maintenance schedules and thus fleet readiness. Sea levels are rising at the Norfolk base an inch every six years—more than double the global average rate. Tidal flooding at Norfolk is expected to increase from the current rate of nine times a year to 280 times a year by 2050, and low-lying areas could be underwater 10% of the time. And navy engineers expect sea levels to rise at Norfolk another two to four feet over the next 80 years, by which time as much as 20% of the base’s land might experience daily floods, essentially becoming part of the tidal zone.
The navy must find ways to protect its bases, both by investing to prevent damage from rising seas and storm surges (raising infrastructure and creating stronger and higher floodwalls) and by enhancing its ability to recover rapidly when damage occurs. The navy now requires planners to provide additional justification when a new building is to be situated within two meters of sea-level-rise forecasts. Buildings that pass this new hurdle must incorporate flood barriers and backup systems to withstand rising sea levels and storm surges. In some cases, the navy is partnering with nongovernmental organizations to identify ways to increase the resilience of its bases. For example, to assess the vulnerability of its naval base in Ventura County, California, the navy has partnered with The Nature Conservancy, which has developed models and mapping tools that assess the resilience of U.S. coastal communities to rising tides and storm surges.
While long-term planning is under way, the navy is taking steps to reinforce its current infrastructure. For example, the Norfolk base piers that provide power and heat to navy vessels—when they are not periodically submerged—are being replaced at a cost of more than $100 million each. The new piers are designed with sea level rise in mind: Their electrical, water, and steam utilities sit on a second deck running above the piers instead of underneath them.
Yet even with these efforts, the threats from climate change are so serious that the navy will eventually need to decide which bases to protect and which to abandon. It prefers engineering solutions that keep assets in place, but that may not always be feasible as the century unfolds.
No Regrets Versus Bets
Some of the navy’s actions to address climate change make sense even if climate change doesn’t alter the world as much or as quickly as scientists are forecasting. These are win-win, or “no regrets,” investments. For example, installing backup power generators in elevated positions at naval bases increases operational resilience by protecting them from storm surges and rising sea levels. The generators also bolster fleet readiness by protecting the bases against other threats, such as cyberattacks on electrical grids.
Similarly, investments in ships and aircraft that are more fuel efficient not only mitigate the navy’s contribution to climate change but also increase the resilience of its supply chains and enable the force to better fight where it needs to fight. All these investments can pay for themselves by saving on operating costs, irrespective of climate change. They follow a no-regrets strategy: They deliver payoffs whether or not climate change occurs at forecasted rates.
But many of the actions that the navy needs to take to confront climate change don’t have this characteristic. Relocating naval bases to protect them from forecasted effects of climate change will require billions of dollars of investment that provides little benefit if the seas don’t rise and coastal storms don’t get worse. Similarly, opening new bases in the Arctic makes sense only if scientists are right about the increasing navigability of the Arctic Ocean. Given the long timeline required to build new ships and bases, the navy cannot simply wait to find out before making investments. Not every risk can be hedged, so it pursues a “bets strategy,” informed by the best possible scientific forecasts. While the investments will yield benefits only if the forecasts are correct, doing nothing could be catastrophic. Making informed bets regarding climate change is not unusual for the navy, which, as Rear Admiral David Titley (Ret.) points out, “would rather plan for something that doesn’t happen than be taken by surprise.”
Indeed, bets strategies are the bread and butter of any commander. In combat situations, navy admirals, like patrol-boat commanders and SEAL team leaders, have to make decisions every day that may lead to regrettable outcomes. In the words of one recently retired SEAL officer, “We make decisions, and then we live with the consequences.”
Businesspeople, however, like to talk about no-regrets tactics, especially in the arena of climate change—for example, making climate-related investments in supply chains that will pay for themselves even if the climate doesn’t alter. These tactics may seem easy and uncontroversial; but pursuing exclusively no-regrets strategies involves choosing not to place considered bets. That course of action is fraught with risk—and could be disastrous.
Some organizations are responding to the need to place bets. For example, Starbucks is developing coffee plants and testing coffee-growing practices to make crops more resistant to new pests and diseases, such as leaf rust, that spread with warmer temperatures. Its early results have produced plants that are more resistant—but lower-yielding and slower-growing. This is a bets strategy that will have a favorable outcome only if temperature trends in the coffee-growing regions that are already experiencing declining yields continue, as scientists are forecasting, and are not simply a short-term anomaly. Similarly, Boston and other cities are considering investing billions of dollars in massive seawalls to protect against rising sea levels and the increasingly damaging storm surges that scientists predict for the coming decades. Such investments will be viewed as wise only if these manifestations of climate change materialize.
The point is that coffee companies that are not investing in botanical research, and coastal cities that are not building seawalls, are making bets too: They’re just betting that climate change will be unimportant or that some solution will present itself later. If you think that all your firm’s climate-related activities fall into the no-regrets categories, it’s virtually certain that you’re making implicit bets that climate change will not affect your business. It’s okay to take that risk, but you should do so consciously.
The leadership challenges involved in climate change are enormous. For the navy, it creates new difficulties in achieving existing mission objectives even as it expands the scope of missions the force will be called upon to undertake. Fortunately, the navy can build on centuries of tradition and insight into the ways in which humans can be led to perform extraordinarily in difficult circumstances.
For businesses, it’s time to move beyond no-regrets efforts, however admirable those may appear to customers, employees, or other stakeholders. Leaders need to follow the navy’s implicit checklist to ensure that their organizations can fight the battles they will face in the coming decades: They must examine their operational and supply-chain resilience in light of rising temperatures, higher sea levels, and changing precipitation patterns, leading to heavier downpours and droughts and more frequent and severe extreme weather events—the manifestations of climate change for which the Department of Defense is planning. They need to consider what sorts of products and services will be more valuable, or less, in a climate-altered world. They must identify the new geographic scope over which they can or must be active. They need to design and operate the information and control systems that will allow them to integrate the new imperatives with the old. And they need to understand the demands that climate change will impose on their ability to lead the men and women in their organizations.
The navy is a microcosm of society at large. Despite its amazing power, it cannot afford the luxury of ideology. It has to operate and fight in the world as it exists and to plan to operate and fight in the world we are creating. Exactly the same is true for the leaders of firms.
A version of this article appeared in the July–August 2017 issue (pp.102–111) of Harvard Business Review. Image by Eiko Ojala.