It’s evident that the effects of climate change are already being felt, especially by land-dependent industries. This doesn’t mean that other companies outside of land-dependent industries are safe.
The forecast for climate change doesn’t look pretty. And while some businesses have been attempting to mitigate climate risk, others are falling behind. How is your business going to be affected by climate change and what can you do about it?
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How does climate change affect businesses?
Insolvency firm Company Debt has looked into the climate change issue and revealed that companies could lose millions of pounds due to climate change. Their research highlights the following four ways that climate change could affect businesses.
1. Damage from extreme weather conditions
The UK faces flash flooding, drought, storms, cold spells and heatwaves. Floods and storms can damage structures if not properly constructed. Additionally, especially for land-dependent industries, harsh weather conditions can destroy farm produce. The number of events like these has increased dramatically over the last four decades, and especially over the last five years.
Company Debt gives an example from a 2018 Weather, Climate and Catastrophe Insight Report published by insurance giant Aon. It describes an economic loss of £158 billion due to weather disasters in 2018, which followed losses of £314 billion in 2017.
2. Business supply chain disruption
Harsh weather conditions, especially flooding, can disrupt supply chains. In fact, Company Debt gives an example of Thailand’s 2011 severe flooding, which affected more than 14,500 companies. Business disruptions and insured losses amounted to between £11 billion and £15 billion.
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3. Fines from climate change regulations
Many companies are contributing to pollution, primarily through the emission of greenhouse gases (GHG), leading to climate change.
Company Debt explains, “Emissions regulations for the auto industry have already begun. They are projected to cost £29 billion in fines by the end of 2021. Related industries, such as seaborne shipping and aviation, will be next in line. But, over time, we should expect regulations affecting every industry in turn.”
Such fines can bring companies to their knees.
4. Climate change impact on employee wellbeing
The state of your employees’ mental and physical health has a significant impact on the success of your business. With this in mind, harsh weather conditions can negatively affect your employees’ mental and physical health.
This could be in the form of injuries, vector-borne diseases and sanitation problems, which in turn threaten the success of your business.
What can businesses do to mitigate the impacts of climate change?
All businesses need to conduct a detailed risk analysis first and keep tabs on the UK’s Royal Meteorological Society’s annual State of the UK Climate report. According to Company Debt, positive action you can take includes:
- Considering business insurance policies to protect you from the impacts of climate change/harsh weather. You can also train employees on weather safety (for example, how to shut off gas, electricity and water).
- Assessing your supply chain, especially in areas with high climate vulnerability. Based on your findings, you can work with your supplier to mitigate risks. You could also consider having backup supplies or stockpiling inventory of critical components.
- Calculating your business’s carbon footprint and consider energy optimisation strategies. You can also adopt internal carbon pricing and conduct feasibility analysis around renewable energy.
- Finding out how your employees are likely to be affected by climate change. This way, you’ll be able to meet their needs regarding wellbeing, safety and protection.
