Climate change has risen to the center of global politics in recent years, with large-scale protests spearheaded by multinational organizations gaining traction. The year 2019 may go down in history as the year when climate change activism became mainstream.
An estimated six million people in more than 180 nations took to the streets. The protesters demanded more significant action to reduce carbon emissions in a series of protests. These protests were scheduled to coincide with the United Nations climate conference. This was most likely the world’s largest climate protest.
These protests were a result of organizations realizing the heat of climate change. As a result of global warming, businesses face a wide range of hazards. For instance, interrupted supply chains, increased insurance costs, labor problems, and so on.
Climate change and extreme weather events like hurricanes, floods, and fires have a direct influence on 70 percent of all global economic sectors. According to research by Deloitte Global, climate-related circumstances are already hurting more than one in four companies throughout the world.
Impact of Climate Change on Businesses Around the World
Climate change is already influencing businesses all around the world. And it will continue to have an even more significant impact in the future. Here is how the changing weather is affecting the bottom line of companies around the world.
Severe Weather Conditions Increases Business Risks
According to scientists, climate change is linked with the increase in the frequency and intensity of extreme weather events such as storms, floods, droughts, and heatwaves.
More incidents that disrupt corporate operations and inflict significant financial and physical damage are anticipated to occur in the future years. Severe weather is one of the main reasons that climate change puts companies at risk.
Increased Scarcity of Resources
Resources such as food, water, and energy, natural resources are in jeopardy as a result of both environmental and human factors. And as a result, energy and consumer industries will bear the brunt of the consequences. Lack of raw material is severely impacting the demand and price of goods and services.
Higher Prices for Goods and Services
Energy regulation and the costs it generates can have an indirect impact on businesses that aren’t in the energy industry. Suppliers must pass on large pricing changes in utilities and transportation. And the middlemen must pass these costs on to their clients. Therefore, resulting in increased commodity prices.
Demand for Goods Is Changing
Changes in demand for particular commodities are caused by a combination of changing pricing and changing weather patterns. Cold-weather items such as heating oil and ski equipment may see a drop in demand.
Moreover, increased storms, floods, and natural disasters due to climate change affect the demand for goods. As the prices will rise, people will demand less of those goods, which will negatively impact the business. But new possibilities are opening up for environmentally conscious companies.
Lack of Insurance Coverage
Executives are well aware of how climate-related catastrophes have resulted in large rises in insurance premiums. Many firms’ insurance premiums will rise as a result of the increased risk.
Environmental sustainability activities are becoming essential principles of businesses’ culture and brand identity, resulting in reputational damage.
How Should Businesses Respond to Climate Change?
What can companies do in the face of growing demand to act on climate change? Companies are required to handle climate change through four core management disciplines. According to the TCFD, governance, strategy, risk management, and measurements are the fundamental pillars.
- TCFD reporting would aid investors and other stakeholders in assessing a company’s exposure to climate-related risks and the quality of its response to them.
- It will help the company to analyze the environmental effect and harm they produce. Following that, businesses can establish goals to decrease carbon emissions.
- Businesses will be able to find opportunities to enhance their environmental performance.
- Companies can look into alternate materials and assess the viability of renewable energy sources such as solar, wind, and biomass.
- Businesses can use this data to develop an environmental management system that will help them improve their results.
Due to climate change, consumers, workers, and shareholders evaluate and interact with businesses in new ways. Climate change is more than a concern for the environment. It will also have a significant influence on enterprises in the next years. Companies will have to adjust to prosper in the future climate.
Therefore, companies must not only assess and manage their exposure to climate-related risks but also integrate climate change into their strategic goals. Failure to do so will jeopardize their company’s long-term viability.