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Climate risks encompass the adverse future effects of climate change, including increased extreme weather events, sustained higher temperatures, and sea level rise. The implications of these risks surpass just our physical surroundings and seep into our economic systems. People and organizations’ financial performance will be harmed by direct damages to assets, supply chain disruptions, changes in water availability, food insecurity, and more. The table below details specific climate risks and their economic impacts identified by the Environmental Protection Agency.
Climate risks threaten every business. However, these risks also come with opportunities to adapt to climate change, insulating your company from environmental changes. Company leaders who factor climate risks into their business strategies can not only help to mitigate global climate change, but enhance their long-term viability and resiliency.
This summer has been characterized by heat waves, floods, and other extreme events. Many individuals, communities, and companies are feeling the effects of climate change this summer, beyond just uncomfortably hot days. Environmental disruptions are causing long-term effects for human systems, from workers’ safety to global supply chains. Already in 2024, as of July, there have been 15 climate disasters in the U.S. that each inflicted at least $1 billion in economic losses. In 2023, there were 28 billion-dollar climate disasters, causing $94.9 billion in damages.
The National Atmospheric and Oceanic Administration has recorded 15 billion-dollar climate disasters in 2024 as of July 9.
According to PwC’s Annual Global CEO Survey, more than half of CEOs believe that their companies will experience climate risk within the next five years. Yet, only 17% of CEOs say that they have taken action to protect their companies from climate risk. The disparity between expected risk and preventive action may be attributed to companies’ prioritization of emissions reduction efforts to slow climate change, rather than protecting their assets from immediate risk. Decarbonization is a crucially popular effort, but companies should not disregard immediate climate risks, such as infrastructure disasters and supply chain disruptions.
The World Economic Forum identified failure to mitigate climate change as the number one risk facing the world in the next ten years. No business is immune from operational disruptions, just as no country is immune from climate events. Climate disasters (e.g., heat waves, floods, and fires) can shut down facilities’ operations and jeopardize the safety of workers. In fact, over 70% of the global workforce is at high risk of extreme heat. The International Labour Organization predicts that heat stress will cause working hours losses equivalent to 80 million full-time jobs by 2030. Looking ahead even further, a 2024 study projected the economic losses of climate change to reach between $3.75 trillion and $24.7 trillion by 2060.
Some governments are now requiring that corporations monitor and report their climate risks. Specifically, the European Union’s recent Corporate Sustainability Reporting Directive states:
“EU law requires all large companies and all listed companies (except listed micro-enterprises) to disclose information on what they see as the risks and opportunities arising from social and environmental issues, and on the impact of their activities on people and the environment.”
Company leaders who take steps towards climate adaptation are preempting regulation compliance and reducing costs down the road. Companies that do not factor climate risks into their long-term plans will struggle to meet ever-changing business standards. In order to secure opportunities for growth in international markets, businesses need to maintain a cutting edge in regulatory changes—going beyond just compliance. Companies innovating to become more sustainable now will be more resilient in the uncertain future of climate change and business.
Planning for climate risks can bring benefits beyond cost savings. As consumers become increasingly aware of climate change, the demand for sustainable, environmentally safe products will follow. Going above and beyond current regulatory requirements can unlock new markets and opportunities, paving the way for stable business success. Social and environmental impact do not come at a cost to a company’s financial prosperity.
By committing to climate adaptation now, Ecolytics’s clients avoid current and future losses. Ecolytics assists in building businesses’ climate risk strategy. Under Ecolytics’s expertise, clients stay on top of global regulatory changes, evolving business standards, and third-party certification requirements (e.g., becoming B Corp certified). Rather than struggling to keep up with a changing world, clients gain a cutting edge in climate adaptation.
Further, Ecolytics assesses clients’ supply chains and identifies vulnerabilities, helping to formulate a more sustainable and resilient strategy. Ecolytics specializes in sustainability metrics and reporting, the most important tools for monitoring regulatory compliance and identifying climate risks. After all, if you don't track a metric, you can't improve it. Check out Ecolytics’s website and request a demo to learn more about how we can help your company realize its goals.
