When people think about the risks of climate change, most focus on damage and disruption caused by the predicted increase in the frequency and intensity of extreme weather events.
However, there’s a lot more to consider in a comprehensive assessment of climate change and other environmental risks. Take shocks to input prices as governments introduce or expand the scope of carbon pricing schemes or impose costs on other environmental externalities. Or reputational damage – potentially accompanied by class action law suits – aimed at major polluters or plunderers of the earth’s natural capital.
How about the failure of whole industries or a regional collapse in demand? In Australia, coral coast tourism and alpine sports are likely candidates, with ripple effects along their supply chains. 2014 has already seen record autumn temperatures, and the traditional June start to the Snowy Mountain ski season has been scuttled by above freezing temperatures and still-grassy slopes.
Moreover, as water supply shortages bite in the face of prolonged severe drought, as has been occurring in the South Western United States, the future of water intensive agriculture and industry is also under threat.
A lack of water in turn precipitates climate-related migration, adversely impacting businesses with a local customer base. This has already been seen in the abandonment of small towns across Nebraska, Kansas and nearby states as the area’s lifeblood – the over-exploited Ogalalla aquifer – has begun to run dry and the land has reverted to near-desert conditions.
Is any business immune?
While organisations with few long-term assets, low capital investment and no involvement in the energy industry may consider themselves relatively immune from climate risks for the foreseeable future, our research suggests this is not always the case. Undertaking a detailed, climate focused risk assessment covering short, medium and long term time horizons is critical to understanding your organisation’s likely exposures to the wide range of direct and indirect threats.
Talk to Adaptive Capability today about safe guarding your business’ future.