The views of this article are the perspective of the author and may not be reflective of Confessions of the Professions.
Climate change is a growing and serious concern worldwide. People’s reliance on fossil fuels and nonrenewable resources has increased their carbon footprint and elevated global temperatures. The effects of global warming are widespread, harming the environment, people, and businesses.
Companies face a range of risks because of global warming, including disrupted supply chains, higher insurance premiums, and reputational damage. Regardless of your industry or sector, it is almost impossible to escape the consequences of climate change, with damages in some industries expected to reach hundreds of billions of dollars yearly by the end of the century.
It is crucial for business leaders to understand how to navigate the challenges of climate change. Here are some things you need to know to help your organization prepare for and mitigate the impact of climate change:
When your business relies on physical or natural resources, the effects of climate change may be detrimental, especially to your supply chain. Weather-related shipping delays, a shortage of available parts due to manufacturing disruptions, water scarcity due to drought, and power outages caused by storms can impede production and compromise product quality.
Rising electricity and transportation costs may raise the cost of shipping products. Regulatory restrictions on commodities associated with climate change may also increase costs.
Furthermore, a scarcity of resources may prompt governments to become more protective of their natural resources, making it more difficult for businesses to access the raw materials they need to manufacture products.
Regulations aimed at reducing carbon emissions and pollution will significantly impact businesses. To comply with greenhouse regulations, several businesses have been obligated to invest substantial funds in the modernization of polluting facilities and the installation of emission control systems. These regulations have the greatest effect on energy and utility companies that operate refineries and power plants.
Failure to manage, adapt to, disclose, or comply with changing legal and regulatory requirements creates liability risks. Climate litigation is on the rise, reflecting advances in climate attribution science, ongoing legal disputes, and changing public perception.
Scientists have linked climate change to the increasing frequency and severity of extreme weather events, such as droughts, heat waves, typhoons, and floods. Because of these events, business owners are bracing themselves to experience more incidents that disrupt operations and cause financial and physical damage.
Premiums for flood and storm protection are projected to climb as the danger of extreme weather events increases. Many businesses may face higher insurance costs as a result, considerably affecting their net income.
As more consumers recognize the existence of climate change, they become less supportive of businesses that do not endeavor to reduce their environmental impact. More than ever, customers, investors, and other stakeholders prefer to engage only with businesses with sustainability goals, practices, and programs.
A growing number of customers seek only goods that are produced responsibly or those with a lower environmental impact than similar items. Consumers also expect the brands and businesses they follow to be socially responsible by making their operations eco-friendly or donating to environmental charities.
Any environmental catastrophe, or even the notion that your organization is not environmentally responsible, can cause reputational damage and loss of credibility, customers, and business opportunities.
According to Deloitte’s Climate Check report, nearly 30% of organizations experience the operational consequences of climate-related disasters, such as labor disruption and damage to facilities.
Climate change poses various threats to every industry. In manufacturing, extreme weather events can cause significant delays in delivery and damage to equipment and facilities, resulting in operational shutdowns. In agriculture, higher temperatures, along with decreased precipitation and soil moisture levels, increase the number of days prone to wildfires, affecting farm productivity and crop supply. Climate change also has an impact on the leisure industry, with many ski resorts suffering financially as a result of warmer weather and lesser snowfall.
Moreover, when temperatures increase and weather patterns shift, working conditions in certain industries may become more difficult. Jobs requiring manual labor, particularly those performed outdoors, may become more challenging, increasing health and safety risks. Staff shortages caused by disaster-related displacement can also compromise productivity.
In addition to its tangible commercial consequences, climate change is also a mental health concern. According to the American Psychological Association, people’s stress and anxiety over the implications of climate change are impairing their mental health and well-being. Cases of depression, anxiety, and post-traumatic stress disorders have been connected with climate change-related weather events, such as flooding and severe droughts.
When employees struggle with mental health, businesses can suffer significant losses. Because high levels of stress are directly related to lower productivity, organizations may see a considerable drop in efficiency.
Climate change will continue to have a massive impact on businesses in the years to come. To thrive in the future of work, business leaders must adapt and address the challenges of climate change and global warming.
The good news is many companies now recognize the benefits of sustainability and have started investing in renewable energy and eco-friendly practices. These organizations have created a positive ripple effect in their industries, with business partners and competitors following their lead.