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Climate Change: The Game-Changer in the Business Community

Climate change is considered a major threat around the globe. Undeniable evidence of global warming and climate change impacts can be felt as major flooding, heavy rainfalls and thunderstorms, droughts, rise in sea-levels, melting polar ice caps and the increase of the Earth’s temperature are occurring worldwide. The world’s major global issues are related to climate change, particularly when it comes to basic needs such as food, shelter, water and health.

Climate change affects everyone as it is connected to our food supply and water security. According to the United States Environmental Protection Agency (EPA), droughts, heat stress and floods due to the changing climate have a significant impact on food production, and affected areas will have a sizable reduction of crop yields and livestock productivity for farmers in the agriculture sector. Consequently, climate change puts pressure on water resources and overall water quality, which will cause an imbalance in supply and demand as the world’s usable water sources slowly decline.

The changing climate also has adverse effects on population health, with extreme weather events increasing the transmission rates of infectious diseases through the consumption of unclean water and contaminated food. Communities may also be involuntarily forced to migrate to other areas as they experience severe flooding, droughts and hurricanes. Climate change adaptation and mitigation will greatly influence the lives of individuals, communities, cities, countries and the global population.

Over the years, there has been continued dialogue on climate change across world leaders during the annual G-20 Summit, APEC Summit and the United Nations Climate Change Conference. These discussions primarily focused on the importance of mitigating climate change impacts and working together to make countries more climate-resilient.

The recently released report by the United Nations Intergovernmental Panel on Climate Change (UN IPCC) showed that the world is already subjected to the adverse impacts of climate change as it continues to endanger lives, livelihoods, health, ecosystems, economies, societies, cultures, services and infrastructures. However, the report also reiterated that climate change adaptation cannot replace mitigation. Even though adaptation plays a key role in the reduction of environmental risks, it is also essential to invest in climate change mitigation efforts that will successfully alleviate impacts down the line.

Consequently, climate change mitigation is crucial for every nation and business around the globe. The ever-changing effects of climate change present a range of environmental risks that significantly affect supply chains and operations.

The Effect of Climate Change in the Private Sector

As the adverse effects of climate change become more evident, major corporations and businesses have started to reduce their greenhouse gas (GHG) emissions and invest in climate change mitigation efforts. According to the Guardian News, companies have started to include climate change mitigation initiatives in their investments and business planning in order to protect themselves from climate change impacts such as the disruption of business operations, increased costs of maintenance and materials, and rising insurance prices.

Today, climate change has become both a singular corporate objective, and a global concern that slowly became a game-changer in the business community. It prompted organizational stakeholders such as investors, shareholders and consumers to push companies to include environmental, social and governance (ESG) factors in their corporate sustainability agenda. As a result, consumers are more inclined to support products and organizations that are environmentally-friendly. Meanwhile, investors and shareholders have started to realize that environmental conditions have a direct impact on a company’s long-term viability.

A 2014 investor survey conducted by PwC showed that ESG factors enhance investment value. The survey showed that 80% of responding investors have incorporated ESG factors and sustainability issues as part of their investment strategy. Other studies also supported this claim and showed that there is a positive correlation between ESG factors and financial performance. A Harvard Business School working paper affirmed that sustainable companies have a tendency to gain higher stock performance, lower volatility, and a greater return on assets (ROA) and equity (ROE). Another study from the investor research review by PwC showed that during the 2013 proxy season, more environmental and social (E&S) resolutions were filed by shareholders of US companies. Shareholder and investor support for E&S resolutions increased by 21.7% in 2013, from 18.6% during the previous year, an indication of the general upward trend of increasing support for E&S issues.

Climate Change Mitigation as a Game Changer for Businesses

In today’s climate-driven economy, neither the private nor public sector can afford economic losses and business disruptions due to unforeseen climate change risks, which is why taking the appropriate action for climate change mitigation and preparing for such impacts has been a game-changer for organizations in this day and age. According to the American Climate Prospectus, future GHG levels will rest upon the pace of global economic and population growth, technological developments and policy decisions. In order to build a climate-resilient future, organizations must be prepared to lower their GHG emissions and invest in sustainable development and change mitigation.

The Risky Business Project report, released in June 2014, warned about the imminent disruption of the American economy due to climate change unless US businesses, including the government and policymakers, would take immediate action on reducing climate risks. During a press conference, the Risky Business Project committee members recognized that in order to thrive in our climate-driven economy, business investors should mandate that companies disclose their environmental performance information and climate risk exposure. In addition, they agree that the fiscal costs due to the changing climate must be included in an organization’s budget projections, and that the private sector must engage with policymakers on public policies regarding climate change.

Industry experts at the Risky Business Project press conference also noted that the agricultural and real estate sector will be disrupted by climate change. Organizations in these industries must take a more cautious approach, gather more information and adapt to these significant trends. The report highlighted that extreme heat and a rise in sea levels, the two primary impacts of climate change, will inexplicably affect a number of regions in the US which, in turn, will pose higher risks across the entire nation.

For example, the Risky Business Project report pointed out that a rise in sea levels and damages from storm surges in the US Gulf Coast, Northeast and Southeast regions will likely lead to an additional $2 to $3.5 billion in yearly property losses by 2030, with escalating costs beyond this timeline. In the Midwest and Southwest, extreme heat will threaten human health, reduce labor productivity and put pressure on energy grids. On the other hand, in northern states such as North Dakota and Montana, winter temperatures will likely rise, resulting in the reduction of frost events and cold-related deaths, and lengthening the growing season for some crops.

The Risky Business Project report also indicated that different sectors are already starting to factor climate change in their decision-making process and include it in the corporate agenda. They noted that the business community is taking steps to develop accurate flood zoning, maps that determine threats to life and property, better water management, and tougher building codes to mitigate the effects of extreme weather. Through these small yet significant mitigation efforts, the report encourages other American businesses to rise to the challenge of reducing their own climate risks, to lead to a more secure economy and climate-resilient business in the future.

Strategies in Building a Climate-Resilient Organization

By including climate change mitigation on the corporate agenda, businesses are taking a more proactive approach in mitigating climate change impacts. According to a report by the United Nations Environment Programme (UNEP), organizations already know the critical role they play in enabling an effective climate change mitigation program. As they begin to identify the risks that climate change poses to their operations, they have also recognized the opportunities that it presents to increase their market share, as they find ways to develop various climate-resilient products and services to help stakeholders, other businesses and governments mitigate climate change.

Following are strategies to help organizations build a climate-resilient future:

1. Introduce new practices within your organization
Integrating climate change mitigation measures into new management practices by adapting a more efficient energy system helps reduce a firm’s GHG emissions and foster the development of low carbon societies. An organization can show its dedication to climate resilience through the use of low-carbon materials and incorporating facilities that help reduce GHG emissions. Consequently, organizations can cite their best-practice examples by providing an annual Corporate Social Responsibility (CSR) report showing GHG emissions reductions across their value chain, both upstream and downstream, and through all the GHG scopes (1, 2, and 3).

2. Develop new products and services to help vulnerable communities
Strengthening the ability of a community to adapt to climate change helps improve the health of the world’s ecosystems. By adopting this strategy, organizations promote climate change mitigation by reducing a community’s GHG emissions and creating new climate-resilient products and services that benefit the organization as well as the general population. Communities, governments and businesses will need products that will safeguard their assets against climate change. According to the World Resources Institute, multinational companies (MNCs) are in the best position to provide products that can safeguard the assets of a community, government and business because of their excellent financial, technical and human resource capabilities.

3. Engage governments, communities and other stakeholders
Working hand-in-hand alongside governments and non-government organizations (NGOs) to raise climate change awareness will greatly strengthen the advocacy against climate change. Organizations can begin by conducting awareness-raising campaigns, outreach and education programs among their various organizational stakeholders. Through the promotion of climate change programs, best practices and success stories, the organization helps its stakeholders become more exposed to climate-related issues, as well as its causes and consequences. These awareness campaigns will eventually drive stakeholders’ will to take informed actions when it comes to climate change.

FCS’s Climate Change Solutions

FirstCarbon Solutions (FCS), FirstCarbon Solutions (FCS), is a renowned sustainability solutions provider with expertise on climate change and carbon management, as well as experience identifying and mitigating environmental risks and ecological management. FCS helps organizations understand the business drivers for carbon management, and provides expert advice and best practice examples for incorporating climate strategies into your business agenda. As various industries and governments around the globe deal with the challenges brought about by climate change, FCS develops solutions that support regulatory environmental and mitigation programs for sustainability across the entire organization.