Today, few people can claim not to have noticed the impact of climate change on global society. Some of the obvious effects are unprecedented heatwaves, hurricanes, disastrous floods, drought, wildfires, eroded coastal areas and excessive rainfalls. These events result in harsh weather conditions and tremendous damage to the natural and built environment, affecting not only humans but also animals, plants and businesses.
Consequently, governments and nongovernmental institutions across the globe have introduced series of campaigns, recommendations and policies aimed at achieving a sustainable environment alongside economic activities.
This article discusses 4 effects climate change has on companies that warrant the compliance and collaboration of business leaders across industries in order to promote environmentally friendly business activities.
How Climate Change Affects Businesses
Find below 4 ways climate change impacts businesses globally.
1. Operational disruption
Business operations are increasingly being disrupted by climate change. Disasters like flooding, hurricanes and heatwaves cause damage to facilities and collapse supply chain networks. These events make businesses find it more difficult to source materials and resources by causing uncertainty or delay in delivery, eventually grounding operations.
Droughts, for example, can have debilitating effects on companies in the food and beverage industry due to scarcity of crops. Also, the agricultural sector is more prone to wildfires during extreme weather, which can destroy crops, farming equipment and other property.
2. Increased risks and insurance costs
Owning and managing businesses involves risks. While business owners cannot completely avoid risks, climate change increases these risks by bringing extreme weather events into the picture.
Floods, storms, heat waves and drought are now more important than ever as factors to consider in business risk analysis. For instance, Hurricane Harvey cost the U.S $125 billion in damage in 2017. This rise in risk of financial and material losses translates to a corresponding increase in insurance costs.
3. Impact on labour
Rise in temperatures and unpredictable weather create harsh working conditions for workers. Periods of extreme heat expose workers who work outdoors to a greater risk of occupational hazards. Areas that are prone to floods and other climate-related disasters also experience labour shortage as a result of high rate of migration and displacements.
Extreme heat is often a precursor to drought. According to the WHO, about 700 million people stand the risk of being displaced by drought in 2030.
4. Transitional challengeIn an attempt to address climate change and global warming, governments are introducing new policies, laws, rules and regulations that render the business environment more dynamic. To survive and thrive, businesses must develop sustainable technologies, operational capabilities and strategies.
Business leaders from the automobile, manufacturing and energy industries are major stakeholders in this regard. For example, 30% of all vehicles sold globally by 2025 will be electric, according to a report by J.P Morgan. In 2020, the UK government announced that petrol and diesel-powered vehicles would be phased out by 2030.
Concurrently, governments are pushing for renewable energy options in order to drastically reduce carbon emissions, putting transitional pressures on the energy industry. Similarly, the manufacturing industry is faced with the dilemma of meeting the demand of growing consumer population with less carbon emissions.
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Climate change and the survival of businesses
Adaptation remains an efficient way to avoid extinction. To survive in their various industries, organisations are adopting multifaceted approaches and strategies to build sustainable businesses. In the automotive industry, for example, companies are moving away from the manufacture of gasoline-powered vehicles to hybrid and fully electric cars, buses, scooters and flying cars.
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