How to prosper in an uncertain world? Businesses wake up to climate risk
- 25 Apr 2014, 16:45
- Roz Pidcock
Even supermarket giants and the biggest multinational
corporations may struggle to stay afloat as valuable natural
resources dwindle. From food retailers to engineers, the private
sector is becoming increasingly aware of how climate change could
affect future profits.
A collection of papers in Nature Climate Change
today looks what businesses are already doing to future-proof
themselves against climate change - and what more needs to
Scientists expect greenhouse gas warming to
bring changes to temperature and rainfall patterns and an increase
in the frequency and intensity of extreme weather, a report
from the Intergovernmental Panel on Climate Change (IPCC)
concluded in September.
Overall, wet places look set to get wetter,
while dry places get drier. Regions that already experience heavy
rainfall face an increasing risk of flooding, the report
The UK is set to see about a 10 per cent
rise in annual average rainfall by 2100 (right) compared to the
period 1985-2005 (left). Source: IPCC 5th Assessment Report
Sumary for Policymakers (p20).
Extreme weather, such as heat waves, droughts,
floods, cyclones and wildfires, has knock-on effects for the
environment and human society, a second
IPCC report out last month warned.
The impact on increasingly volatile weather on
access to food and water worldwide is a particular concern. The
Summary for Policymakers said:
"[S]everal periods of
rapid food and cereal price increases following climate extremes in
key producing regions indicate a sensitivity of current markets to
climate extremes among other factors".
But while the IPCC identifies food security as a
serious global problem, water availability is an even bigger one.
Its recent report says
risks of climate change increase significantly with increasing
greenhouse gas concentrations … The fraction of global population
experiencing water scarcity and the fraction affected by major
river floods increase with the level of warming in the 21st
The World Economic Forum
ranked water stress third in the top ten
global environmental and economic risks in 2014.
collection of papers published in Nature Climate
Change today looks specifically at the problem of climate-related
water stress - and what it means for the business community. In one
article, ASDA employee Paul Kelly
describes the complacency that has existed
until now. He says:
established tendency to see water everywhere as an endless resource
is being increasingly challenged in many parts of the world,
including here in the UK. For too long, water has been taken for
granted and UK businesses rarely debate the consequences of water
mismanagement at the regional and national levels."
As water becomes limited, businesses will start
to face operational problem or disruptions to supply chains, the
articles explain. Even companies in water-abundant regions can be
vulnerable because supply chains typically stretch across the
globe, one paper
Supermarkets and food retailers will be
particularly badly affected. Kelly describes a recent report
highlighting the supermarket giant's vulnerability to climate
change - and it makes for a sobering read:
recent study ... has shown that only five per cent of our fresh
produce supply chain is not at risk from future impacts of climate
Food retailers are particularly vulnerable to
supply chain disruption as a result of climate change, risking
empty supermarket shelves.
But it's not just businesses relying directly on
agricultural produce that will be affected. The "ripple effect"
reaches right across the economy, with retailers, engineers,
manufacturers and investors whose business relies on predicting
commodity prices all taking a hit.
So how to cope with unpredictable and
far-ranging new risks? An effective response means managing risk
and making the best possible choices to ensure businesses' survival
in the coming decades, says Nature Climate Change.
Some private sector
companies are taking big steps toward improving sustainability.
A commentary by Peter Simpson from Anglian Water describes the
sustainable roadmap for balancing supply and demand out to
2020, called 'Love Every Drop'.
ASDA employee Paul Kelly
describes how the supermarket is engaging with growers to
achieve better quality crops sustainably and offering guidance on
saving water. Kelly says:
"There are tangible
business incentives to urgently respond to these risks and
guarantee the long term ability of the food chain to meet market
demand … When water becomes scarcer locally, it has knock on
consequences on the retail industry."
The private sector is a natural problem-solver,
a Nature Climate Change
are traditionally innovators and are mostly concerned with finding
practical solutions. They are increasingly stepping forward as key
players to identify new sustainable strategies for the benefit of
their own operations as well as society".
Companies will continue to be profit-making
entities but they are waking up to the fact that contributing to
societal well-being secures a more prosperous future, the editorial
Call for bolder action
But businesses need to be making much bigger
changes, argues Arjen Hoekstra from the Dutch Twente Water Centre
Companies need to think not only about the
direct impacts of water scarcity but also how stricter
regulation might affect them, says Hoekstra. There's also the
reputational risk to consider as the public and media become
increasingly aware of companies who persist with unsustainable
What needs to happen? Hoekstra
suggests the business sector needs to start
setting targets for reducing the water footprint of individual
supply chains, establish benchmarks for the footprint of water
intensive products and ensure greater transparency for consumers
through product labelling or certification.
But it is difficult to see quick progress if
governments don't force companies to do it, Hoekstra
adds. He says:
"Despite good efforts
undertaken by several companies, it is unlikely that the business
sector as a whole will sufficiently regulate itself. There is an
urgent need for governmental regulation and international
A 21st century approach
The solutions exist, it seems. The challenge is
creating incentives to start moving at speed in the right
direction. As Anglia Water's Peter Simpson puts it:
to the variability of our weather can be done, but it will need a
twenty-first century approach. It means that we need to innovate
and collaborate to transform the way we deal with these
How much will a water-secure future cost?
study Hoekstra cites calculates closing the
water availability gap would cost less than 0.1 per cent of current
global GDP by 2030.
As the latest IPCC report highlights, adaptation
strategies can help alleviate the climate change impacts we're
locked into because of past emissions. But such strategies aren't
enough on their own, adaptation plans need to happen alongside
efforts to bring down emissions - that's the bottom line for
limiting climate change risks to any sector.