The problem of climate change extends beyond the environment. Almost everything we do in society is affected by the climate. Businesses worldwide are already feeling the impact, and it will grow even more significantly in the future. Some of the most prominent ways in which climate change will affect businesses include the following:
- Shifts in Resource Availability and Cost
As a result of these extreme weather events, businesses may find it more challenging to obtain the materials and resources they need. Severe drought and weather pattern changes may cause a shortage of crops used for food, apparel and other products. Rising electricity and transportation expenses may also increase the cost of moving goods. Regulatory restrictions on goods linked to climate change could also increase costs. Resource scarcity could drive companies to use alternative materials and recycle more waste.
- Varying Demand
As the climate changes, demand will shift. As global temperatures rise, for instance, demand for cooling systems will increase, as will demand for other commodities needed during Nigeria’s dry or hot seasons. More consumers will prioritise sustainability in the products they buy, shifting demand toward more environmentally friendly goods.
- Changing Regulations
Regulations aimed at mitigating and preventing pollution will also significantly impact businesses. Companies that produce high emissions levels, such as electricity generation companies, will have to invest substantial funding into upgrading their facilities to reduce, capture or eliminate them. Energy companies, of course, are already working to shift their power generation toward cleaner resources.
The economy could also be significantly affected by cap and trade programs. Under these programs, companies are legally allowed a set level of emissions and companies emitting more than their legal limit must purchase extra credits. Businesses that keep their emissions below their legal threshold can sell their excess credits to other companies. Cap and trade programs can either be an expense or a source of revenue for firms, depending on how they handle emissions.
- Increased Public Pressure
In response to climate change becoming more accepted, businesses that fail to reduce their environmental impact receive less public support. Increasingly, consumers look for products that are sustainably produced or at least have a more negligible ecological impact than other comparable products, such as energy star appliances and hybrid or electric vehicles. Companies are also increasingly expected to be socially responsible and take steps to make their operations more eco-friendly. This push has been part of the reason that large companies like Total, IKEA, Swiss RE, Apple, Nigerian Breweries and Nestle have committed to a shift in the usage of renewable energy.
- Increased Risk and Harsher Working Conditions Due to Extreme Weather
Scientists have linked climate change to the increasing frequency and intensity of extreme weather events, including storms, floods, droughts and heat waves. In the coming years, we will likely see more events that disrupt the operations of businesses and cause them extreme financial and physical damage. Severe weather is a primary reason climate change increases business risk. Because of this increased risk, insurance costs for many companies will also rise. Also, changing weather patterns and rising temperatures can exacerbate working conditions in some sectors. Jobs that require physical labour, especially outdoors, will become more challenging, and health and safety risks in these industries will rise. This will increase costs in these sectors.
So, the big question is how businesses can prepare for climate change’s impacts on them. Many companies have already started to adapt, and all those that hope to succeed in the future will have to do the same with the evolving policies and discussions tied to climate change impacts and mitigation.
First, a business needs to analyse its environmental impact and the risks it faces due to climate change. In addition to risks, businesses should identify opportunities to improve their environmental performance. Companies should consider alternative materials and evaluate the feasibility of using renewable energy such as solar, wind, and biomass. Businesses can use this information to create an environmental management system to improve performance.
There is much more to climate change than just environmental concerns. It will also profoundly impact businesses in the years to come. To succeed in the climate of the future, companies have no option but to adapt and evolve.