Climate change has emerged as a force which is changing the way business is done. The new realities of increased global temperatures, unpredictable and extreme weather conditions, shortage of natural resources, and a resultant change in demand and supply patterns are impacting businesses significantly. While it is often discussed in board rooms as a major risk, climate change is also a business opportunity. The low-carbon transition creates opportunities for efficiency, innovation and growth that extend beyond high-carbon industries like energy and transport to all sectors. Through their governance role, boards can help to ensure that climate opportunities are captured by reviewing corporate strategy, reporting on the set frameworks such as TCFD, focusing on long-term value.
But with risk comes opportunity. The debate on climate change seems to have primarily focused on climate change mitigation and hence most of the new business opportunities support the transition towards a low carbon economy. However, lately realizing the impacts of climate change on their business, companies have embraced adaptation. New innovations have revolved around products, processes or the complete business model, resulting from drivers such as latent market opportunities, access to finance, government regulations as well as new standards incentivizing specific behavior. Essentially, these adaptation strategies require consideration of the company’s value chain to understand the areas of vulnerability and devise strategies to build resilience.
As society and policy frameworks shift to deal with the realities of climate change, businesses of all sizes are realizing they do not operate in isolation of the wider environment, economy and society. From a climate change perspective, they are beginning to assess these direct and indirect impacts on their core operations, which may vary based on geography and sector.
With an increased focus on reducing the use of fossil fuels in powering the global economy, business interest in the renewable energy market and energy efficiency technology to support the transition has grown. This can create potential for new start-ups and innovative firms in the areas of manufacturing of renewable energy technologies like solar photovoltaic, wind, geothermal power, regional biomass, tidal and energy storage options. Through technological advancements, they can benchmark on the best energy practices globally as well as the techniques of acquisition and incorporation into their core operations. Moreover, the use of biomass in industry has presented opportunities for farmers by considering the use of agro- residue or energy plantations as sources of energy.
Despite recent shifts towards paperless offices and e-papers which reduce the traditional usage of paper industry, the demand for better quality paper and paper products continues to increase with the economic growth in various countries. Governments are increasingly banning the use of plastic bags and de-incentivizing the use of plastic packaging. Nations like Kenya have already implemented a plastic bag ban. Through continuous evaluation of their foundation strategy, businesses in the pulping industry have amended their core operations and action plans considering the sustainable option, where they are selling paper or reusable bags. This has attracted more customers who are inclined to the purchase of environment-friendly products.
AÂ number of design innovations and opportunities for firms have emerged due to the climate change adaptation across the housing sector value chain. Due to the rising temperatures, demand has already risen for adaptation to buildings to offer heat protection. From external shading devices in form of canopies that block unwanted sunlight and heat to cool roofs which act as the key reflective surface, preventing the transfer of sun heat into the building. Customers are increasingly demanding installation of energy efficient building and insulating materials, expanding this sector and minimizing the energy consumed.
Recently, the weather conditions have begun to affect trends in customer demand for products and services. For instance, the insurance industry has seen an opportunity to enhance existing or offer new products. Innovative incentives and rewards have been incorporated, encouraging those who re-build damaged properties to use green and LEED- certified (Leadership in Energy and Environmental Design) building practices. New insurance products such as carbon capture and sequestration are emerging to insure the operation and insurance for liability to third parties from the activity. The insurance industry in many countries seem to be preparing to tackle the new challenges. Increasingly, analyses are being published on the impact of climate change on the economics of the industry while systematic efforts are being made to develop methods for integrating the losses expected to result from climate change for different customer segments.
Although climate change constitutes one of the major environmental problems of our time, negatively affecting the economy, the ecosystems and finally, the lives of billions of people, at the same time it creates opportunities in a series of economic sectors. The timely detection and grasping of those opportunities could lead to the reduction of the negative impacts of climate change as well as the adoption of a new and more sustainable development model.
