It may not seem like it yet, but climate change is altering the world so drastically that all enterprises will need to undergo a transformation to avoid going extinct.
The UN’s Intergovernmental Panel on Climate Change (IPCC) reported (with high confidence) that at the rate we’re going, global warming of 1.5°C is likely between 2030 and 2052. This level of warming will cause irreversible damage and increase climate-related risks to health, livelihood, food security, water supply, human security, and economic growth. While it’s technologically still possible, it explained that pathways limiting global warming to 1.5°C with no or limited overshoot would require rapid and far-reaching transitions in energy, land, urban infrastructure (including transport and buildings), and industrial systems.
Some of the impacts on business are indirect, like changes in how insurance firms assess natural disaster risk, while others are clearly direct, such as Coca-Cola’s fear of water scarcity and IKEA’s fear of deforestation. These more immediate physical impacts are leading companies to invest in new processes and technologies to mitigate risk.
There are also less intuitive impacts related to the transition to a carbon-free economy, as well as new trends in how customers, investors, business partners, and regulators make decisions. For example, customers are rewarding companies for sustainability efforts, governments and partners are enforcing goals of the Paris Agreement, and investors are demanding climate-risk disclosure. In fact, since 2013 more than $6 trillion in financial assets have been divested from funds related to fossil fuel, and hundreds of businesses have made clean energy commitments.
Firms that listen to their stakeholders and take a stand on values, sustainability, and climate resiliency and adaptation are better fit to serve and retain customers today and in the long run. To win in the age of the customer, your firm must assess and act on its risks and opportunities from climate change and there are many more than you may think.
The Forrester report, “Adapt to climate change or face extinction,” aims to help business and technology leaders understand climate change as a risk and opportunity multiplier. We use real-world examples to explain how more sustainable investments can transform your business, reduce risk, and uncover opportunities. Every initiative is unique, including investments in clean energy which reduce risk and attract talent, conservation efforts that protect natural resources and lead to new markets, and climate risk assessments that help investors make more informed decisions.
Because it is difficult to know exactly how dramatic the effects of climate change will be, it is hard to know just how much it will affect various industries but some of the changes already are being seen. Climate-related disasters like droughts and hurricanes, for example, are hitting pocketbooks and insurance premiums, even for people living on the other side of the world. Meanwhile, the complicated supply chains of a globalised retail industry mean that a disruption in one place can cause consequences elsewhere. That was shown recently when earthquakes hit Japan in April 2016, damaging Plants that sold parts to Toyota and forcing the auto giant to suspend production.
Even the health industry may be affected. As well as affecting the availability of clean water and food, warmer weather is increasing the vulnerability of areas already at risk of diseases like malaria and dengue. The recent Zika epidemic may have been exacerbated by warmer weather patterns. Between 2030 and 2050, the World Health Organisation predicts that climate change will cause roughly 250,000 additional deaths per year.
Now, while it may not be very popular to admit that climate change is real and worsening, around here, and there can still be healthy debate about the factors which contribute to climate change, businesses must accept that they have a role to play in combating climate change, and the more businesses which adapt, the better the effect on all their bottom lines.