How Will Climate Change Affect My Business?

Top Tips on How to Climate-Proof Your Business

How climate change is impacting business and what businesses can do to climate-proof their product and service offerings
Photo by Charles Forerunner on Unsplash

There isn’t a person on the planet who hasn’t heard about climate change, but sometimes it can be confusing to grasp precisely how and when the impacts of climate change will affect businesses.

Many large corporations have taken steps to build resilience to climate change risks and shocks through climate-proofing strategies. But there are thousands of businesses around the world that are looking for information on the reasons why they should get prepared for climate change. And there are many businesses that are ready to take the next steps to climate-proof themselves, but they don’t know what they can do or where to start.

This blog aims to help you better understand climate change and how it can affect your business — and what you can do to climate-proof your business.

How can climate change affect businesses?

The impacts of climate change are already being felt all around the world, in different ways. Some examples of how we are already experiencing climate change are more obvious like changes in weather patterns that bring severe storms, flooding or droughts to areas that typically didn’t experience those before (or as frequently).

But there are also more subtle and complex ways that climate change is impacting our lives, and will do so in future. Many of these will impact how businesses operate and those that don’t adapt may suffer the consequences of their inaction.

Here’s a list of 6 ways in which different types of businesses are (and will be) impacted and affected by climate change:

  1. Availability of resources: As the climate changes, certain resources will decrease in availability, making them more expensive. For example, water will become scarce in some areas that currently have enough water, and for companies that produce products that require large amounts of fresh water (e.g. agricultural and farming products), it is critical that they plan for these business risks well in advance.
  2. Changes in consumer preferences: as the climate changes, lifestyles and spending on specific types of activities will change — for example as places warm, people may spend less on heating and cold-weather items and on activities like jackets or skiing. Companies that are able to foresee these trends, would be more able to adapt and create alternative startegies.
  3. Public pressure: many people who support efforts to tackle climate change, avoid buying products and services from businesses that have poor environmental reputations or that don’t actively take steps to promote and enhance climate action. People are looking for green credentials and often demand transparency in terms of where and how you source your products and raw materials and what you are actively doing to mitigate climate change. As mounting public pressure shapes society and consumer-driven demand, companies that respond to this will be better placed to satisfy and retain their customers and grow their customer base.
  4. Changes in regulations and policies: We are already seeing an increase in regulations and policies that dictate how companies can operate and how they are able to use resources in order to enhance general sustainability and mitigate climate change. For example, as forests are carbon sinks and help mitigate the effects of climate change (and are also areas that provide important and valuable ecosystem services), governments are placing restrictions, levies and taxes on activities in, and use of, forest resources to help conserve them. This can increase business operating costs significantly and can also prevent and excluse many business activities.
  5. Physical damage from climate change: Many businesses have physical premises, which may be vulnerable to weather-related impacts of climate change such as flooding and severe storms. While the impacts of climate change may result in physical damage which could be costly, other impacts could be higher operational costs due to increased insurance premiums or construction related costs to safeguard premises against weather-related damage.
  6. Changes in landscapes: certain businesses will be impacted by changes in landscapes as a result of climate change. For example, a property development company that builds large coastal housing developments or commercial developments near coasts, may be exposed to the effects of sea level rise, which could put their physical properties at risk and could mean that their assets depreciate in value as people perceive investment in that property as too high-risk.
Photo by Hrvoje_Photography 🇭🇷 on Unsplash

How can businesses climate-proof themselves to be more resilient?

Many businesses have established strategies that help them to climate-proof and be more resilient to the impacts of climate change. This will ultimately help give them a competitive advantage over those that don’t.

The first step to climate-proofing is to assess your business impacts on the environment and your risks in relation to climate change. Companies should be looking at ways that they can mitigate the costs and risks of climate change along their value chain. They should also assess how vulnerable they are to climate shocks.

For example, because of climate change and changes in weather patterns, certain areas may have significant reductions in the availability of resources like water or energy, or because of increases in temperatures there could be more spread of disease which affects its consumers.

By strategically analysing all the possible risks, companies can prioritise their responses and re-design their operations accordingly.

Companies should also look for business opportunities to be future-proof, through improved environmental performance and other means. For example, a company may look at whether it could source its energy requirements from renewable energy sources, or whether through implementing an environmental management system they could enhance their overall performance and save costs.

Through thorough future-planning in terms of climate change, companies may also identify new business opportunities through innovating new products, extending their service offerings, or by tapping into new consumer trends.

It’s important that companies also look at the cost of not doing anything to mitigate and adapt to climate change — and through reflecting on this, it should become apparent that there could be many cost-savings in the long-run to adapting timeously to climate change. Businesses can also take advantage of increasing consumer support (and demand) for responsible business ethics in relation to climate change and the environment.

OurFutureWorld is a blog where we share ideas about how we can create a better future for our world, together.