For a long time, governments, investors, and consumers have downplayed the impact and contribution business operations have on the environment. Businesses contribute to a huge percentage of emissions and waste that are a major driving force behind climate change. The energy sector, in particular, has taken a lead in greenhouse gas emissions. Which has resulted in an average rise in global temperatures.
However, now more than ever, the impact of climate change is affecting the world. The need for individual corporations to calculate carbon footprint and address their contributions immediately has become a necessity. Companies can no longer treat climate movements solemnly as social responsibility. Here are reasons for the major turnaround in companies’ decision-making in favour of the need for more sustainable choices.
Climate change is costly
Essentially, climate change will hurt economies, decimate populations, and make resources more scarce. Which will indefinitely have a significant impact on corporate costs. Therefore, it is essential that businesses of all sizes take action for both humanitarian and business reasons. As a result, the international implementation of increasingly stringent and costly climate policies by governmental organizations is also likely to occur concurrently.
According to recent reports, the current and forecasted costs of mitigating the effects of climate change could add up to billions of dollars. The analysis predicts that rising temperatures, heat waves, and humidity will also increase energy demand. This will result in the construction of additional power plants. Furthermore, if current climate trends continue, the cost of damages will also increase exponentially.
Changes in the cost and availability of resources
The possibility of supply chain disruption from these extreme weather events makes it more difficult for enterprises to obtain the resources and supplies they require. A lack of crops used to make food, clothing, and other things could result from severe drought and changes in weather patterns. The scarcity of resources can spur companies to use alternative materials and recycle more waste.
Furthermore, the costs that come with mitigating the effects of climate change are also very high. Therefore, for businesses to continue running and making profits, the end result will be an increase in the cost of products. Which will affect consumers’ buying ability. For instance, major weather catastrophes have immense effects on yields and the rate of production, leading to high prices.
Investors are highly-concerned about climate change
Like consumers and employees, investors also seek to leave a mark through sustainable investments. Apart from the positive effects that come with green-conscious policies, sustainability has proven to be cheaper in the long run. Moreover, sustainable businesses are set to stand the test of time as the world continues to be environmentally conscious. Most companies have already begun setting their sustainability goals.
In addition, a green image has proven to have a competitive advantage over other businesses. This is because more consumers continue to support businesses that don’t harm the environment, which increases the demand for their products. Moreover, businesses that are yet to join the sustainability bandwagon can no longer hide their immense harm to the environment, which is detrimental to their operations.
Intense public pressure regarding climate change
The public is losing patience with businesses that don’t make efforts to reduce the environmental impact of climate change. Consumers are increasingly seeking out goods that are created with sustainable resources. Furthermore, companies are also under mounting pressure to behave ethically toward society, whether it is by minimizing the environmental impact of their operations or by making donations to environmental charity programmes.
The future of finance is green
Financial services are crucial to the success of the green economy because it holds the potential to bring about the most fundamental shift in industries across all sectors. In order to avoid harming the climate, industry, as well as the people, and sectors that depend on it, companies are stepping up their efforts to finance the transition to a green economy.
Financial institutions vs. fossil fuels
Notably, the increasing role of financial institutions is in their bid to reduce the use of fossil fuels. Green banks such as Aspiration have started denying or reducing the financial capital given to companies dependent on fossil fuels. On the same note, these banks aim at helping enterprises that have implemented clean energy in their business models and are geared toward sustainability.
Apart from taking the lead in climate action, banks can’t continue to make investments with climate-accelerating repercussions. As the world gears towards meeting the goals of the Paris Agreement, a lot of changes in laws and policies are expected. Investments contrary to these goals will cost banks in the future. Climate change risks are mounting, and the time to act is now.
How a business can prepare for climate change
A business should start by doing an analysis to determine how it affects the environment and the possible dangers that climate change poses to that business. The problem of climate change extends far beyond environmental concerns. So, it will also have a significant effect on enterprises. Therefore, businesses will need to change if they want to succeed in the future environment.