With a busy week behind you and the weekend within reach, there’s no shame in taking things a bit easy on Friday afternoon. With this in mind, every Friday TriplePundit will give you a fun, easy read on a topic you care about. So, take a break from those endless email threads, and spend five minutes catching up on the latest trends in sustainability and business.
On the heels of the latest three-part report from the Intergovernmental Panel on Climate Change (IPCC), it seems a new study comes out daily about how a changing climate may impact life as we know it. It’s always tricky to ask: Why now? But, as recent research shows, not asking may prove even more costly. To get your mind going this Friday afternoon, we gathered up five reasons businesses should care about climate change — not tomorrow, not next year, but right in the here and now.
1. Climate change is expensive
Like, really expensive, according to a new report. If current climate trends continue, the East Coast and the Gulf of Mexico will likely see a $7.3 billion increase in the annual cost of coastal storms and hurricanes, bringing the total annual price tag to $35 billion on average.
Increases in temperature, heat waves and humidity will also drive up demand for energy, calling for the equivalent of 200 new power plants across the country, which could cost up to $12 billion a year, the report predicts. Long-term impacts pose even greater risks to property and lives.
As costs of dealing with the physical effects of climate change mount, they threaten to impact the entire economy–from consumers, who may see increased insurance costs or even lose their homes due to sea level rise, through the businesses that depend on increasingly volatile commodities markets and the discretionary income of at-risk consumers.
2. It poses risks along the entire supply chain
The rising costs of business in a changing climate are already doing damage to corporate bottom lines across the country. In a recent interview with Triple Pundit, Andrew Winston, author of “The Big Pivot,” pointed to a recent example from General Mills:
“The cost of doing business is rising pretty dramatically,” said Winston, who also advises some of the world’s biggest companies on environmental strategy. “General Mills in their last quarterly report said that due to the extreme winter they lost 62 days of production … and this cost them a significant amount for their earnings for the last six to nine months.”
According to the new Risky Business report, which examines the economic impacts of climate change in the U.S., the agricultural sector in the Midwest and South may see decline in yields of more than 10 percent over the next 5 to 25 years. Considering the fact that the ongoing drought in California is already causing a noticeable increase in food prices, such spikes in commodity costs could be disastrous for both business and consumers.
3. A smart climate policy helps attract and engage employees
At the 2014 Sustainable Brands conference in San Diego, Andy Savitz, author of “Talent, Transformation and the Triple Bottom Line,” called employee engagement “the human thread between sustainability, the triple bottom line and business results.”
Employee engagement has long played second-fiddle to risk mitigation and cost savings when companies consider crafting climate and other environmental policies, but that’s starting to change quickly. A recent PwC study found that more than half of recent college graduates are seeking a company that has corporate social responsibility (CSR) values that align with their own, and 56 percent would consider leaving a company that didn’t have the values they expected.
“I hear this a lot in companies: The ability to attract and retain really good people partly depends now on how you’re managing [the world's] mega challenges,” Winston told us, relaying the sentiments of Fortune 500 clients. “Companies are hearing this in recruiting, even from the millennials who are desperate for jobs.”
4. Investors are asking
Employees aren’t the only ones interested in a company’s climate policy. Data shows a growing number of investors are asking, too. PwC recently surveyed a broad mix of institutional investors – asset managers, pension funds, mutual funds, hedge funds and others – responsible for managing over $7.6 trillion in assets to find out how sustainability influenced their decisions. Their findings may surprise you:
Four out of every five institutional investment companies responding to PwC’s survey said they considered a variety of sustainability issues in at least one, if not more, investment contexts in the past year. More than four of five (85 percent) said they anticipate doing so three years hence.
“Fund managers can’t play casino capital like the short-term traders do on Wall Street,” Clinton Moloney of PwC said in a recent interview with Triple Pundit. “They’re really looking to place assets over the longer term. They’re the investors for whom sustainability really matters.”
2014 also saw a record number of environmental and social shareholder resolutions, with political spending and climate change driving the majority of the activity.
5. Now is the time to act
In “The Big Pivot,” Andrew Winston uses the metaphor of health warnings to describe the mounting risks of climate change, saying, “You don’t want to wait until you actually have the heart attack to start changing your behavior.”
“This is the time because the costs are starting to hit, but it’s not so devastating that we don’t have the resources to react,” he explained. “We’re getting those warning signs, but we’re not having the heart attack yet in most businesses. So, now is the time to get healthier before things get ugly.”
Experts note that changing up business as usual is no easy feat. As Amy Longsworth of PwC said in a recent interview with Triple Pundit, “You really have to rethink your business model which is very scary.”
But, as Winston notes, failing to act may prove even more costly in the long-run: “It’s getting increasingly expensive to not do this. If resource prices keep rising as they do, then not getting more material efficient, not building a circular economy, not finding ways to de-materialize, is going to get more expensive.”
Why do you think businesses should care about climate change? Tell us about it in the comments section.
Image credit: Flickr/nicholas_cardot
Based in Philadelphia, Mary Mazzoni is a senior editor at TriplePundit. She is also a freelance journalist who frequently writes about sustainability, corporate social responsibility and clean tech. Her work has appeared in the Philadelphia Daily News, the Huffington Post, Sustainable Brands, Earth911 and the Daily Meal. You can follow her on Twitter @mary_mazzoni.