In 2014, Barack Obama – then US President – told the UN climate summit in New York
“We are the first generation to feel the impact of climate change and the last generation that can do something about it.”
We no longer have the luxury of ignoring the effects of global warming. What's been a political issue for decades is now having an impact on economies and industries.
How Flooding Affected Businesses in Thailand
A heavy monsoon in Thailand in 2011 saw the country’s highest rainfall in decades.
9 million people were affected by the extreme weather but it was the impact on businesses that really highlighted the vulnerability of global supply chains and industries.
- Around 1,000 factories had to close in Thailand because of flooding.
- Sony delayed the release of several products due to disruption at its Thai factories.
- 3.5 million tonnes of rice were damaged by the flooding. Thailand is the world’s biggest exporter of rice.
The Science Nordic website explains that more than 800 industrial parks were affected which disrupted electronic and car component supplies. Acer, Samsung, Lenovo, Apple, Toyota and Honda all reported interrupted production.
It’s easy for us sitting in our offices in the UK to feel separated from extreme weather on the other side of the world but in today’s global economy, where supply chains and transport routes can stretch tens of thousands of miles, the reverberations of something like flooding in Thailand can be felt in entirely unrelated industries.
Why Companies Need to Respond to Climate Change
- Physical: extreme weather can impact a business’s ability to operate its factories and manufacturing centres as well as affect supply chains.
- Price Risks can impact the cost of not only raw materials but also insurance.
- Product risk is when the item you’re selling is untenable or which has no profit. McKinsey uses the example of a ski resort unable to operate because it no longer has enough snow.
- Rating risks can affect stakeholder interests
- Regulation risk: Governments and international bodies might introduce laws that make it harder for companies to operate. Equally, they may reward competitors with incentives or subsidies.
- Reputation risk can occur if the public believe business practices are unethical or are not in keeping an acceptable ethos.
We already know that younger generations are likely to pay more for a product from a company they believe to be ethical or eco-friendly.
How Can Companies Better React to Global Warming?
Climate change isn’t going away and neither are the challenges and threats it poses. Ignorance isn’t bliss; it has the potential to damage or even destroy your company.
One of the first things any business should do is to look at its own carbon footprint. Consider it an environmental audit.
A carbon footprint is the impact a business or individual has on the environment.
Businesses can be some of the biggest contributors.
The carbon footprint of a company could include: the number of computers left on inside a building overnight, the amount of food produce wasted each year, the amount of flights taken for business trips and even how much printer toner is used each week (and what happens to that cartridge when its empty).
Your carbon footprint will also include the amount of green house gas emissions you release into the environment.
It could be difficult reading but without knowing how much your business is contributing to the climate crisis, you can’t do anything about it.
Reducing your carbon footprint could actually save your business money, too. Energy bills can often be reduced simply by finding a better deal or by switching to cleaner energy sources.
For example, Energym develops devices that generate electricity from human power which will save gyms and fitness centres a huge amount. Any unused energy goes back into the network – win-win for the environment and for business.
Businesses also need to become more resilient to changing weather patterns.
It’s important to be proactive rather than reactive.
This isn’t always popular because up-front costs to mitigate potential threats can be a tough sell to the people holding the budget. It’s easy to think of extreme weather as being isolated events unlikely to be repeated. Unfortunately, this thinking only costs companies more money in the long-term.
In 2018, Zurich released a report urging companies to respond to the climate change threat rather than ignoring it.
It argued that adapting to climate change is cheaper than paying for the damage after a disaster. Alison Martin, Group Chief Risk Officer and Member of the Executive Committee, uses the example of a flood defence programme initiated before there was a threat where every dollar spent on prevention saved five dollars on recovery efforts after flooding.
There’s a belief, too, that global collaboration is needed to make the biggest changes.
Some of this may be motivated by a need for good PR but with climate change predicted to accelerate considerably over the coming decades, even a cynical PR strategy is something to be thankful for. We know that younger people are more environmentally minded and that as consumers they’re happier to pay more for greener products and services. It could be a great marketing strategy for the future: attracting new customers by aligning your company to a greener strategy.
Your business could be affected by climate change. Our entire country is likely to feel the effects of global warming more acutely over the coming decades, and it’s vital that you start preparing your company sooner rather than later.
Forewarned is forearmed, so they say.