In the year 2023, the world's attention has frequently been captured by extreme weather events. Strangely enough, despite the increasing global awareness, many businesses seem to be relegating the looming threat of climate change to the background.
A recent PWC survey data presents an alarming insight: only 50% of business executives view climate change as a business risk. Even more concerning is the percentage of those who believe it's a severe threat has fallen to 19% from 23% just a year ago in 2022.
However, it isn't all doom and gloom in the corporate world. Businesses appear to be embracing environmental compliance. A solid 69% of executives indicate readiness to meet imminent sustainability reporting obligations. Moreover, a closely related 66% are diligently tracking the Securities and Exchange Commission's (SEC) regulatory movements and upcoming disclosure mandates. Tackling climate change is intricate, but when it comes to compliance, the path seems lucid. Following predefined guidelines and standards is a straightforward task for businesses. Yet, re-evaluating and evolving their business models to reduce carbon footprints remains a greater challenge.
But what about being prepared for the direct repercussions of climate change? A mere 23% of executives have devised contingency plans for potential climate-related disruptions expected in the next 12 to 18 months. It's surprising, especially considering the 18 devastating weather and climate catastrophes in 2022, each leaving behind a staggering financial imprint exceeding $1 billion. To avoid being caught off-guard, it's essential that management teams address this topic with their boards, incorporating it into both strategy and risk management.
Delving deeper into the corporate hierarchy, CHROs emerge as the most attuned to the threat, with 62% labelling climate change as a moderate to severe risk. This stands in contrast to the 37% of CFOs and the average 50% among all respondents. Notably, 35% of CHROs are also actively preparing for climate-related interruptions. Their heightened sensitivity might be attributed to two factors:
A growing consciousness of ecological issues among employees and prospective hires, positioning eco-friendly companies as more attractive employers.
An increased need to ensure employee safety during extreme weather occurrences, which are becoming distressingly common with the planet's rising temperatures.
Navigating the Climate Conundrum: Recommendations for Businesses
Harness the Green Wave: Rather than viewing environmental sustainability as merely another challenge, businesses should see it as a goldmine of opportunities. The paradigm shift in power generation, storage, and consumption can unveil a plethora of avenues for those who choose foresight over inertia.
Anticipate the Inevitable: The frequency and intensity of weather-related disturbances are on an upswing. Even if a company remains unscathed, there's a likelihood that its supply chain might be disrupted. Businesses should thus model worst-case scenarios encompassing their entire value chain to ensure preparedness.
Incorporate Climate Sensitivity into Transformation Strategies: In the same vein as cybersecurity, businesses must be wary of inadvertently creating new vulnerabilities when they undergo major transformations. For instance, relocating operations to areas threatened by rising sea levels could be a significant oversight.
For executives and teams aiming to understand the nuances of environmental, social, and governance aspects of sustainability and their ramifications, this course serves as a vital instrument for career growth. Click here for more details.
Businesses are at a crossroads. Embracing change and preparing for the challenges and opportunities of a warming planet will determine not just their survival, but also their success in the coming decades.
