Almost all industries are threatened by the effects of climate change, either directly or indirectly and most countries are working towards net zero carbon emissions by 2050, but in the meantime, it will probably get worse before it gets better.
It’s important, therefore, to understand how climate change could affect your business and what changes you need to make to reduce the coming impact.
Physical risks
It’s no surprise there are more extreme weather conditions (fires, floods) than ever before, damaging people, property and disrupting supply chains. The number of ‘once in a hundred year’ events almost seem to be every year.
The implications for businesses include:
- The time and cost to put in place risk mitigation and disaster planning strategies, solving issues such as critical buildings or production areas being unavailable, staff can’t get to work, or your operation going offline and you can’t sell to or service your customers for a period of time.
- The flow-on effect when certain industries either fail or face major financial stress. The agricultural sector is obviously exposed to flooding, drought, and other weather fluctuations. If farmers stop purchasing, it affects the wider ecosystem around them.
- Tourism and the infrastructure that supports their operation (bed nights, hospitality) will all be hit hard if climate change eliminates industries such as skiing. Short-term, it’s possible to alleviate climate conditions by creating artificial snow, but this drives up costs and it’s not sustainable.
Increase in costs
Governments are painfully aware of balancing budgets, climate, productivity and full employment, often pulling from different directions. In addition, there will likely be increasing costs to businesses with the introduction of policy, laws, and other regulations to manage climate change.
Insurance costs will increase as insurers work to shift the burden of loss from the few affected, to the many that could be. Even if you live in an area that’s extremely unlikely to see a twister, your premiums have probably increased.
With the push for greener energy sources, cities, towns and councils are also increasingly shifting to a reliance on renewable energy sources, demanding net-zero carbon emissions from the businesses in their community.
Reputational risk
As society changes its view on ethical business practices and sectors move away from activities that contribute to climate change, businesses risk being left with stranded assets (land, property or equipment) whose value has deteriorated. Customers may not want to see your fleet of trucks belching diesel fumes and the resale or residual value will plummet.
Other reputational risks to your business include:
- If you fail to mitigate, disclose, or comply with the changing legal and regulatory rules, you could face fines or even worse, media coverage that highlights your failure to participate in avoiding climate change.
- Losing customers as people switch suppliers to those that do embrace climate change and can demonstrate their green credentials.
- Struggling to find employees who want to work for you, or employees leave to a business that better fits their ideal business culture.
How to reduce the impacts of climate change
It’s hard to change everything at once and possibly damaging to your business to upend your processes and supply chain overnight. First, identify the main risks your business faces with climate change, then work out over time how you can reduce the impact to your business.
Identify:
- The low-hanging fruit (low cost, fast to implement) and fix those things first.
- How to plan a net zero emissions strategy over the next 10 years.
- Changing your business model if there is a serious threat to your operation. A good example, ski fields developing summer tourist attractions as the winter season shortens.
- Who else you can work with. Other businesses (even competitors) will be in the same boat, so aim to work collectively to develop climate risk solutions leveraging the expertise of others. Connecting with your industry association to see what support they can offer is a good first step.
Next steps
If you don’t care about climate change, your customers will vote with their wallets. Taking action to reduce the impact on our climate is crucial, but it also makes good financial sense.
For help, advice and to take action:
- Measure your carbon footprint and then start to reduce it.
- Keep up-to-date on what’s happening with climate change in your industry and link to associations driving change.
- If you’re unsure what to do, seek help from experts, and talk to other small business owners in a similar situation to discuss joint action.