A business operates in an environment that has many other elements or players. There are customers, competitors, government, suppliers, and many other parties. Also, companies are affected by various forces of nature such as climate; hence any change affects them.
As a result, it would be necessary for any company to consider the kind of impact the climate changes would have on it and quantify that in monetary terms. Therefore, companies need to hire people trained assessing and quantifying the interaction of climate and business. Some companies even look for new entrants with TCFD training as a job requirement qualification.
Here are some ways in which climate changes affect businesses:
Change in the Cost and Availability of Resources
Due to extreme weather conditions, for example, too much rainfall, companies may face problems due to interference with supply chains. This can make it more challenging for businesses to get the raw materials and other supplies they need.
Companies may face shortages in the food industry or the apparel business due to the low production of crops used to provide food and other things. Also, climate changes could increase transport and power costs, which can negatively impact the business. Additionally, regulatory restrictions on products linked to climate change could lead to increased costs.
Increase in Capital Expenditure for Systems to Control Emissions
The emissions from factories and other sources like motor vehicles lead to pollution in the environment, and the various governments seek to regulate the emissions. The authorities have required some companies to install or upgrade emission control systems which leads to spending colossal amounts of money. This is to ensure compliance with the various guidelines and legislation on greenhouse gas emissions. Some of the businesses affected by such regulations include those in the energy sector and utility firms that run power plants and refineries.
Increase in Public Pressure for Businesses to Take Measures
Society and the general public are becoming more aware of climate change and are appreciating it as a force that affects their lives. In addition, society is becoming more concerned about companies’ efforts to reduce their harmful effect on the environment.
Customers turn to buy sustainably produced items or at least those with a lesser environmental impact than other similar products. Besides, various stakeholders like customers expect businesses to be socially responsible, adopt measures to make their activities more environmentally friendly, or support environmental charities.…