By Salvatore Schiano, Researcher
Listen to Forrester’s What It Means podcast to learn more about the threats climate change poses to business operations and how and why firms are preparing for climate uncertainty.
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.
Earlier this week, 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.
Combat Climate Change And Adapt To Its Effects
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.
Customer-Obsessed Firms Act On Climate
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. As Larry Fink, CEO of BlackRock, put in his annual letter to CEOs (titled “A Sense of Purpose”):
“Your company’s strategy must articulate a path to achieve financial performance. To sustain that performance, however, you must also understand the societal impact of your business as well as the ways that broad, structural trends — from slow wage growth to rising automation to climate change — affect your potential for growth.”
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.
Our 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. And every initiative is unique, including investments in clean energy that 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.
This post originally appeared here.
