In the coming years, companies around the world are likely to witness more catastrophic events and extreme weather conditions that disrupt the operation of businesses. Thus, in order to prepare and adapt to the environment of the future, leaders need to start implementing climate action.
As Sir David Attenborough emphasises in his new documentary A Life on Our Planet, there is still time to act, but it needs to happen now.
From severe weather conditions to reduced agricultural yields and serious health impacts, climate change is an evident risk to business, society and the economy.
“Public finance constraints, electoral incentives and populist discourses risk reinforcing the flawed belief that there must be a trade-off between economic growth and climate action.” – Emilio Granados Franco
The outbreak of COVID-19 has also given the world a chance to see how an economic shutdown can influence climate outcomes.
The results were significant: from levels of pollution in New York reducing by nearly 50% to carbon emissions in China falling by 25%.
The World Economic Forum (WEF), referencing research by Nature, highlights that 2020 annual emissions could decrease by as much as 7% globally due to the downward shift in energy demand worldwide. While, before the pandemic, “emissions of carbon dioxide were rising by about 1% per year over the previous decade”.
The research also indicates that the resulting short-term cooling effect could last until 2025, even as economies reopen and travel restrictions are lifted.
Additionally, the WEF’s Regional Risks for Doing Business Interactive Map shows that several environmental risks included in the Executive Opinion Survey – which polls thousands of the world’s business leaders – were among the top 10 global concerns for businesses. The dangers of biodiversity loss and natural catastrophes were second and third while infectious diseases were of the utmost concern.
“While these are encouraging data, the reality is that economic shutdowns are unsustainable, and any gains in GHG emissions will be obviated by a return to ‘business as usual’, particularly in the ‘dirtiest’ industries,” writes WEF’s Head of Global Risks and Geopolitical Agenda Emilio Granados Franco.
“This is even more the case in a fractured geopolitical environment in which alignment toward common goals has proven more elusive. And without the support of the business community, real action on climate change may be a non-starter.”
Moreover, companies that neglect to implement climate action may experience new business risks such as physical, from impacts of extreme weather events, or supply shortages caused by water scarcity, as well as changes in technologies and markets, and regulation that can increase business costs.
The 2019 European CFO Survey also indicates that another climate-related risk for companies is the potential liability for emitting greenhouse gases. An increasing number of legal cases have been brought directly against fossil fuel companies and utilities in recent years, holding them accountable for the damaging effects of climate change.
The report further highlights that climate change also offers significant business opportunities. Companies can aim to improve their resource productivity (by increasing energy efficiency), thereby reducing their costs. Climate change can also encourage innovation and inspire products and services that are less carbon intensive.
Companies can enhance the resilience of their supply chains, for example, by reducing reliance on price-volatile fossil fuels by shifting towards renewable energy. Together, these actions can foster competitiveness and unlock new market opportunities.
“This is even more the case in a fractured geopolitical environment in which alignment toward common goals has proven more elusive. And without the support of the business community, real action on climate change may be a non-starter.” – Emilio Granados Franco
Additionally, businesses returning to their normal capacity and operations may also implement permanent shifts in the workforce that are more climate-conscious such as continuing Zoom meetings and commuting less.
Only time will tell if more business leaders choose to embed green policies into their future strategies.
“Public finance constraints, electoral incentives and populist discourses risk reinforcing the flawed belief that there must be a trade-off between economic growth and climate action,” Emilio notes.
“As the World Economic Forum’s COVID-19 Risks Outlook warned, some governments have relaxed, suspended or rolled-back environmental protection regulations to boost industrial activity, and these policy decisions risk becoming permanent and incurring a severe setback for sustainability in the long run.”
However, there is some good news; commitment to the environment is stronger than ever – making it possible to enact climate action. Businesses should not miss the opportunity to use their capabilities and power to ensure a green recovery.
“Many individuals are doing what they can. But real success can only come if there is a change in our societies and in our economics and in our politics,” says Sir David Attenborough.