Climate Change: how will businesses adapt?

After the COVID-19 pandemic, the next big challenge for many businesses will be climate change.

Many conversations in the last year have been around the impact of the COVID-19 pandemic. As we emerge from the pandemic and adjust to the new world of work, our next challenge is arising. With deadly heatwaves, floods and extreme weather events becoming another new normal, businesses will have to answer a new set of questions as the UK, due to host COP26 in Glasgow in November, is priming companies for action.

A decarbonised market

At the opening of the COP26 private finance agenda, Alok Sharma, the COP26 president and UK business secretary, highlighted the need for a shift in funding. “Only decarbonised economies will be able to grow through the worst impacts of climate change”.

Investment in climate action is already creating jobs, with workers on the frontline of the necessary industrial transformation. For example, the solar energy industry in the US is already creating jobs 20 times faster than the overall economy.

The increasing pressure on organisations to become more environmentally responsible comes from a broad range of stakeholders, including investors, employees, governments, and customers. Year after year, the percentage of funds held in green and sustainable investment rises.

As part of the green industrial revolution in the United Kingdom, the sale of non-electrical cars will stop after 2030. Scotland is ramping up quickly in its effort to become a wind-energy leader on the European continent with ambitious plans for offshore wind farms.

Still, many climate responses in business currently primarily focus on short-term cost-saving measures, and targets for carbon reductions are not always in line with the Paris agreement.

The challenges

Climate change creates new business risks that will vary per industry. Apart from the most obvious risks for operational impacts from extreme weather events, supply shortages and rising sea levels, climate change poses challenges at various levels:

Transitions

Business models will have to adapt, and offsetting emissions will soon no longer be enough. This can include office models as a fifth of UK emissions come from commercial property, but also travel policies, office recycling plans and suppliers. There are also transition risks that arise from the response to climate change: changes in technologies, markets and regulations that can increase cost, product, and asset values.

Regulations

If companies do not voluntarily work towards low-carbon targets, regulation will eventually force the issue. Aside from this, an increasing risk for organisations is the liability for emitting greenhouse gasses. Although legal cases at the moment have primarily focussed on fossil fuel and utility companies, more organisations will face accountability for the damaging effects of climate change.

Despite rising pressures, many still consider climate change a distant problem.

Reputation

Despite rising pressures, many businesses still consider climate change a distant problem. As long as customers do not appear to care, action can be considered an unnecessary expense. But younger generations are particularly engaged in the issue, sidelining visible climate offenders as employers of choice, and changing their purchasing and investment decisions. Walmart, Target, Ikea, Nike and Amazon have recently come under scrutiny in a report that measures the climate pollution retailers emit from overseas shipping. Next, it is likely for scrutiny to shift to companies in sectors that have been avoiding action. Increased transparency, a stance on climate change and improvements are becoming part of an (employer) brand, and questions businesses will have to answer in interviews, client pitches and online.

The job market

With a shift in any market, comes a shift in employability, required skills and job availability. In urban labour markets, damage by extreme weather events will be more likely, while rural labour markets face a greater incidence of flooding and damage from extreme heat. Supply chains, labour conditions, health & safety, and labour productivity are at risk from rising temperatures and the effects of forced short- and long-term migration from rising sea levels.

Jobs can disappear without replacement in the banning or discouragement of particular processing methods or resources, especially in energy and pollution-intensive industries such as manufacturing, tourism and transport.

On the other hand, jobs will be created in emerging and adapting green sectors that will need various skills for their transitions, development and operations. Most studies show that the transition to a low-carbon economy will lead to a net increase in employment. Stimulating investment and innovation in green products and services that are more environmentally friendly and low carbon enables enterprises to access new markets and offers a competitive advantage for other enterprises to emerge.

The opportunities

The UK identified the low-carbon economy as an area of opportunity; it’s forecast to grow 11% a year up to 2030. In the wind industry, it is believed that jobs in the offshore sector could grow to 70,000, primarily based in northeast England, Yorkshire, the Humber, East Anglia, and Scotland.

While in the US, it is anticipated that millions of jobs will be created in sectors from renewable energy to innovation of low carbon-related construction. The growth for wind turbine service technicians is predicted to be 58% in the next eight years and NETs, negative emission technologies, could increase to generate annual revenues of 800bn$ by 2050, larger than the current market of the oil and gas sector.

Millions of jobs will be created in sectors from renewable energy to innovation of low carbon-related construction.

Earlier this year, the Sustainable Market Initiative Insurance Taskforce, including 17 firms like Allianz, Hiscox and Axa, has pledged its support to the transition to a less carbon-intensive economy. They are expanding their insurance coverages for projects such as offshore windfarms and partnerships with governments to provide better disaster protection.

The opportunities go further than the demand for renewable energy and environmentally friendly products. The transition to net-zero has been dubbed the greatest commercial opportunity of our time. Industries will see an increased opportunity to come together to, for example, use AI and technology to analyse large data sets in efforts to cut plastic and food waste, for service and for consulting industries to offer assistance in energy transitions and legal advice.

Conclusion

Most organisations have seen how vital adaptability is in light of the pandemic. Climate change is likely to become the next challenge the world of work has to overcome. While some businesses may be further advanced in their efforts than others, it is never too late to start. Starting points can include reviewing company travel policies, encouraging trains over inland flights, reviewing suppliers and commuting practices. In a changing market with fluctuating demands, an RPO partner can offer flexibility, scalability and advice. Get in touch today.

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