Business impact of climate change

Over the last few years there has been a manifold increase in the understanding about the impact of climate change on businesses. As global economies get transformed into low-carbon economies, businesses are getting aware about opportunities being thrown up by climate change.

Why should I be aware of this?

It is not possible for one company, a single industry, or even a nation to address this issue alone. All form part of a complex, energy-intensive global system which is growing larger and more complex as new markets like China and India come on line with dramatic increases in energy demands. Economic progress has led to significant growth in the number of vehicles on the road and miles traveled.

Strategies, therefore, need to be worked out which make financial sense, engage consumers, encourage technological innovation and provide stable, market-based mechanisms across the entire economy.

How does this affect me?

Though climate change and its potential effects on business and the economy across the world does not get adequate media coverage compared to other environmental effects it is important to remember that it is equally essential that we realize and prepare for the huge impact that these could have on the way businesses and the world economy function as a whole.

The impacts of climate change will vary from country to country and from location to location within that country. Therefore the level of risk faced by individual organisations will also vary.

All about business impact of climate change

Business needs to prepare how global warming is going to change and how accurate the predictions are. For this information, businesses rely on environmental scientists who create models of conditions to help them predict the type of changes that will occur.

The United Kingdom is predicted to have wetter, warmer winters and hotter, drier summers, along with more extreme weather events, such as storms. There could be a decline in the number of hurricanes in some countries, such as the United States, because of a reduction in the suitability of weather conditions needed for hurricanes to occur.

A rise in sea level, resulting in more flooding, and an increase in storm surge is also predicted. This can lead to major flooding events. The causes of global warming, most predominantly greenhouse gases such as carbon dioxide, are almost universally agreed.

Impact on business

Climate change of this nature is bound to have a huge impact not only on energy providers but also on the amount of energy needed and consumed. While warmer winters will cut heating bills, hotter summers will push the cost back up again when people use more air conditioning. There is already an energy surge in the US due to increased use of air conditioning systems.

This will require a re-look at the way we produce energy. There will be greater need to find more environmentally friendly methods of producing energy than the conventional fossil fuels. More stress will be on solar, wind energy and water power, or geothermal energy.

Effects in different industries

• Insurance

To keep pace with climate change certain sectors of the insurance industry have begun taking out newly designed policies like weather derivatives and catastrophe bonds. There are already examples of policies being developed in order to fulfill changing customer demands.

• Clothing industry

The clothing industry too will have to look at new strategies to cope with weather changes, such as offering retailers a rebate on winter clothes if it turns out to be a mild season and they are unable to sell enough of their winter stock.

• Consumer

Consumer trends and behavior are also dependent on climate change. If it is too hot in summer, fewer people go out. Same is the case in more severe winters. The weather also has an effect on when people go shopping and what they go out to buy.

• Home and health

Apart from environmental and economic effects, the change in the climate could also bring about a change in our general health. The quality and type of food we eat, the water we drink and our homes are all dependent on our climate and weather. It is feared that warmer climates may see the emergence of some conditions and diseases not found today. This will call for a re-think on the way we design buildings.

What can business do?

Industries such as water and electricity suppliers will need to ensure that their systems can cope with the change in rainfall. The industry has to ensure safe and reliable systems as flash flooding can cause problems such as short-circuiting, resulting in power outages. The change in rain distribution will also present new problems of water storage.

As our economy is based on industries that rely on fossil fuels for energy, finding a replacement for oil should be a main priority.

90 degrees

We are faced with a situation causing more fuel consumption at a time when we it must be reduced. It’s a huge issue for the energy producers and it’s a huge issue for policy makers across the world.

References:

• Mapping how corporate India is converting climate change
• Climate change
• Business impact of climate change