When businesses first begin to think about their responsibility to the environment, what often gets missed is that climate change should not only spur them to embrace sustainability, it will also have direct effects on their business operations. Every company, from the largest to the smallest, needs to address adaptation and build resiliency into their business and their strategy. Those who do will find that they are future-proofing their business and building resiliency and a competitive edge into their operations.
Firms should assess risks and vulnerabilities, as well as opportunities, at a country level. There are transition risks, policy changes and technology changes, and there are also physical risks, from extreme weather events and dwindling resources.
The Earth’s water resources, for example, will alter with climate change. Precipitation will become more frequent and more intensive in some regions, and businesses need to be ready with flood defenses at key locations. Assets or operations below a certain height above sea level, often as little as five metres, will be at risk. Similarly, ports and surrounding infrastructure may be at risk, affecting your supply chain. If you’re in a water-intensive industry, you need to think about how water availability may change. In agriculture, you need to think about sea rises.
Net-zero targets will need to be backed up with methodologies for implementation. Carbon pricing will become more prevalent, starting with larger companies, but moving down the emission thresholds with time. Some jurisdictions, including Europe and the US, are considering carbon border taxes that will require products and services to be below a certain common threshold. These trends will eventually affect all companies, but even initially, it will be important for smaller companies along the supply chain to conform to the standards of larger corporations. Small firms may actually find that their products gain a competitive edge if they build in sustainability from the start. Larger companies may find it difficult to pivot an entire product cycle towards sustainability, but by starting out sustainable, small firms will already be in a prime position to benefit.