The biggest threat to business is climate change. No profit will be possible on a dying planet. For decades, scientists and activists have been warning about stronger and more frequent extreme weather events caused by the unmitigated emission of greenhouse gases into the environment. The consequences of the rising global temperature will lead to worsening droughts and wildfires, massive flooding in low-lying areas, and other natural catastrophes.
Now, more companies and investors are looking at climate change as a threat that is far bigger than cyberattack and geopolitical conflicts.
Global Supply Chain Disruptions Caused by Climate Change
Businesses will not be spared from the consequences of climate change. The storms and floods or droughts and wildfires will disrupt production, distribution, and sales.
The risk will mostly affect developing nations, particularly in the Asia-Pacific region where businesses rely on cheap materials and labor. These places are already experiencing the brunt of climate change. The Philippines, for example, has experienced the three most powerful landfalling tropical cyclones in the history of the world.
These climate disasters will cause flooding in factories and warehouses that will lead to a major global supply chain disruption. In 2017, the weather-related global supply chain disruptions doubled.
However, the extreme weather events would not just affect developing nations. The United States is also at risk of experiencing environmental catastrophes. In the same year, Hurricanes Harvey, Irma, and Maria left destruction and deaths in the region, disrupting the supply chain for the first time.
Businesses should, of course, start preparing for the consequences of climate change no matter where they are. They should invest in a business continuity and disaster recovery plan to ensure that, no matter what happens, their data will be safe. They should also assess and act on the risks of extreme weather events on production and distribution.
Financial Impact of Climate Change
The biggest companies around the world have already made estimates of the financial impact of climate change on their operations. Around 215 companies, including Apple and Microsoft, have disclosed in a report that around $970 billion will be lost from climate change-related events.
They believe that the losses from assets that have to be abandoned from flooding in factories will reach about $250 billion. This includes properties near coastlines that will be claimed by the rising sea levels worldwide.
PG&E estimated in 2018 that it will lose up to $2.5 billion from wildfires. Before the power company filed for bankruptcy in 2019, it raised its potential losses from wildfires to $30 billion.
Moreover, the companies in the report feared that many of these losses from extreme weather events caused by climate change will happen in the next five years.
Pressure for Businesses to Do Something
Businesses are already facing mounting pressures from consumers to start changing how they operate and prioritize the planet over profit. Nowadays, consumers want goods and services that are made ethically and through sustainable practices that leave as little carbon footprint as possible. They avoid plastic packaging and prefer products that are considered eco-friendly.
However, investors can also no longer ignore the risks and financial losses that will stem from climate change. The world’s top investors are demanding that more companies start developing their own environmental action plans.
In 2018, investors managing $32 trillion in assets called on businesses to step up efforts to fight climate change. They also urged governments to phase out thermal coal power, end fossil fuel subsidies, and set a price on carbon emissions to meet the goals set in the Paris Agreement.
Investors are also forcing company executives to consider the financial impacts of changing public opinion about their products and services. For example, a business that manufactures and sells plastic products will receive criticism and be the subject of boycotts, affecting profit.
Many corporations have already fallen out of the public’s favor. Coca-Cola, Pepsi, Nestle, and many others have been criticized for producing the largest amounts of pollution in the ocean.
What the Biggest Companies in the World are Doing
Realizing the risk, the biggest companies in the world have already started efforts to minimize their environmental impact. Apple, Microsoft, and others are transitioning to renewable energy sources to power their headquarters and facilities around the world.
Coca-Cola said that it is working with different initiatives to reduce its carbon footprint and be more sustainable. In response to the amount of plastic waste it generates and ends up in the ocean, the company promised to clean up marine debris, boost recycling programs in public places, and come up with innovative ways to reuse plastic waste.
Climate change is a problem that will affect everyone. It, therefore, requires efforts from individuals and businesses to consciously choose the planet over comfort and cost.
