Combating Climate Change Makes Good Business Sense
Tuesday, 20 May 2014
Global warming and extreme weather caused by climate change are costing companies millions finds a new report from CDP released this month. The white paper titled, Major public companies describe climate-related risks and costs says, “Each year, CDP requests climate-change-related disclosures from public companies on behalf of a growing number of institutional investors. In 2014, the request for disclosure was sent on behalf of 767 institutional investors with $92 trillion in assets. This report presents key findings and responses provided by S&P 500 companies across economic sectors to the risk-related questions in CDP’s annual disclosure requests from 2011 to 2013.”
Companies reported risks such as damage to facilities, reduced product demand, lost productivity and necessitated write-offs, whose totals run into the millions of dollars.
The paper goes on to say, “Findings show that S&P 500 companies assess physical risks from climate change to be increasing in urgency, with physical disruptions and cost impacts already being felt.
- 45% of risks were described by companies as current or predicted to fall within the next 1-5 years in 2013, up from 26% in 2011
- 50% of the risks disclosed were described as more likely than not to virtually certain in 2013, up from 34% in 2011
- 68% of the disclosed physical risks were direct to operations in 2013, up from 51% in 2011″
This is not merely theory either. Approximately 60 companies gave examples of current and potential future risks and their associated costs in the research, including:
- Wildfires in San Diego caused Sempra Energy’s costs to exceed its $1.1 billion of liability insurance coverage
- Consolidated Edison’s costs related to Superstorm Sandy topped $431 million.
- Gap reported higher material costs for cotton arising from precipitation changes and drought in China
Companies are poised to make a real difference in the fight on climate change while strengthening their bottom line. Mitigating the risks from climate change simply makes good business sense considering a study by Business for Social Responsibility published last month which says the exposure to the risks from climate change are on the rise. Some estimate the cumulative global cost could be as high as $4 trillion by 2030. The time to act is now. These costs are only going to increase the longer we delay investing in a low-carbon future.