Let’s Talk Business: Climate Change Edition

Share on facebook
Share on twitter
Share on linkedin
Share on email

The risks to businesses associated with global climate change and global warming are immensely complex and almost infinite in number. All businesses will be affected by climate change. However, your company’s climate-related risks can be managed. Each business is unique in how it will be exposed to climate change. Increases in the frequency and severity of extreme weather events coupled with rising temperatures and sea levels have already caused numerous problems with the growth and welfare of companies and communities globally. The frequency of weather-related loss events annually has tripled since the 1980s. The Swiss Re Institute warns that up to 18% of GDP could be wiped off the worldwide economy by 2050 if we do not act. For the US, this could mean annual economic losses of approximately $500 billion. There is no choice, businesses must adapt to climate change or face extinction. Solutions and options exist to improve a business’s mitigation and adaption strategy. With the effects of a difference between 1.5°C and 2°C so great, action is fundamental.

Physical risks
As mentioned, extreme weather events are increasingly becoming more common. From flooding to droughts and hurricanes to wildfires, the severity is increasing globally. Long-term risks include changing precipitation patterns and rising sea levels; global sea levels have risen over two inches in the past 20 years alone. The effects can be devasting, from a hurricane destroying powerlines and infrastructure, a flood shutting down transport routes, or high temperatures threatening operations and supply chains. Approximately 90% of the S&P Global 100 Index have identified climate change and extreme weather as a future risk, with over one-third stating that they have already experienced adverse effects. Extreme weather can reduce demand, close facilities, disrupt communication systems, prevent employees from travelling to work, among many more impacts.

While the risks are overwhelming, there are opportunities. Businesses need to build resilience by assessing and managing these risks. Several companies are working on storm-resistant building materials and weather-related insurance products. Climate-specific forecasting tools are most effective at assessing how risks are evolving and the impacts this brings.

Transition risks
The legal risks of climate change require significant attention. Litigation may arise from climate-related issues, such as a company failing to mitigate, adapt, or disclose a climate risk. For example, ExxonMobil was sued for failing to disclose the climate change-related risks that may arise to investors. Regulatory risks need to be accounted for from the effects of policy actions targeted at mitigating climate change or incentivising adaption; such policies are typically aligned with the Paris Agreement goals. Litigation could result from such risks, for example, failing to adhere to updated policies. Securing carbon neutrality and clean energy could increase operational costs and increase the risk of compliance failures. Many companies have set goals to reach net zero but failed to address the potential risks.

CSR and ESG are under the microscope more than ever, stakeholders, clients, and the public are increasingly looking at companies’ corporate governance. The reputation of businesses is increasingly being led by their response to climate change. Companies caught cheating on emission regulations are being held accountable and suffering a public backlash, such as Volkswagen in 2015. As audiences continue to change and become more environmentally aware, the market will continue to change. Certain products, services, and commodities will experience fluctuations in supply and demand. The demand for renewable energy will increase as we strive to meet net zero targets, while coal will be phased out.

Technological disruptions necessary to achieve a lower-carbon economy involve various costs. Transitioning to renewable energy is inevitable, alongside adopting many other changes to reduce corporate carbon footprints. In the long run, many of these changes will be cost-effective, however, they may incur an initial cost that needs to be factored in. Companies need to ensure that they have planned for the impending changes that society will face and the costs associated with this.

Climate Wise Your Business
Climate change will continue to be a threat unless we undertake meaningful action. Therefore, businesses will continue to be at threat of the above-mentioned risks. Adaption and mitigation are essential in this climate emergency, no business is immune but effective planning can minimise the impacts. If your company is seeking assistance making these changes, Climate Wise Your Business will help by providing Climate Positive Solutions through our 3-stage approach. Take the first step and book a FREE Business Consultation by contacting info@climate-wise.com.

Scroll to Top

subscribe to our newsletter