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Impact of Business on Climate Change

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Impact of Business on Climate Change

Climate change is a menace that is receiving increasing attention due to its adverse

consequences. Human civilizations face pressing issues on many different geographical

scales as a result of climate change and associated social and environmental changes

(Mulungu & Ng’ombe, 2019). Many different groups of people have a hand in causing

climate change to occur, and many more people are feeling the effects of it now and in the

future. Business organizations are highlighted as crucial decision-making platforms for both

climate change prevention and resilience. They contribute significantly to the release of

greenhouse gases (GHG) into the atmosphere and hence must do their part to reduce this

phenomenon (Esty & Bell, 2018). Concurrently, these companies need to make substantial

adjustments to anticipate and respond to the worsening impacts of climate change on society

and the economy. Thus, business can help reduce or exacerbate climate change, while the

prevalence of climate change is also likely to result in adverse impacts for business.

The Role of Business in Climate Change

Companies are a major contributor to global warming. Businesses are largely to

blame for the CO2 emissions that are hastening the onset of climate change. The negative

effects of climate change on the earth and its inhabitants may be lessened, and even avoided

entirely, with the help of new innovations and creative approaches that can be sparked by

commercial operations (Esty & Bell, 2018). Businesses need to take action to help mitigate

climate change and achieve climate justice. Research from the NewClimate Institute in

Germany shows that some of the greatest multinational organizations not only leave a far

greater footprint than a similar number of people could possibly accomplish, but also fail to

adequately convey their climate responsibility efforts (Zandt, 2022). Thus, these businesses

exacerbate the effects of climate change by enhancing activities that are not eco-friendly. It is

estimated that the technology industry contributes about 3% of greenhouse gases emissions
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globally. This figure represents only one business sector with other industries also

contributing significant amounts. Thus, business can serve to enhance climate change.

The reduced integrity in businesses enhances their effect on climate change. Research

has revealed that most companies provide false information concerning social responsibility.

One study by think tank sought to measure the integrity of 25 companies (Zandt, 2022). The

research revealed that 84% of these companies had significantly low integrity (Zandt, 2022).

Although every business has an objective of some kind, how those objectives are achieved

varies greatly. Low integrity companies like Amazon and Ikea both say they will turn climate

neutral by 2030 and 2040, respectively. Only four out of the 25 firms demonstrated moderate

or greater honesty, whereas 13 were at least somewhat transparent about their climate

responsibility objectives (Zandt, 2022). Three of the four companies in this tier are from the

technology sector (Apple, Sony, and Vodafone), while Maersk, a logistics provider, has a

respectable integrity score despite the fact that its business is a major contributor to global

warming (Zandt, 2022). Thus, with such low integrity levels, it becomes difficult to estimate

impact on climate change. Consequently, these businesses have continued with unethical

practices that enhance climate change.

Business enhances climate change through the enhanced use of fossil fuels in

production. To a large extent, corporations contribute to global warming via their use and

production of fossil fuels. Greenhouse gases are released into the atmosphere when these

fuels are burned, leading to a global warming effect. The fossil fuel-dependent transportation

industry, along with other energy-hungry sectors like manufacturing and agriculture, are

major factors in this issue. The transport industry is among the most lucrative businesses

worldwide due to the huge returns gained. In the US alone, the sector is valued at more than

$1.26 trillion. However, this industry is responsible for 25% of all energy-related emissions

(Esty & Bell, 2018). Fossil-fuel still remains the preferred energy source in the sector with
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electric vehicles still in the early developmental stages. Hence, climate change is enhanced

through this sector.

Another way business contribute to climate change is through enhanced waste

disposal. Commercial waste has adverse effects on the environment. Methane, a powerful

greenhouse gas, is released by landfills, and harmful chemicals may seep into the ground and

water, causing more damage (McVeigh, 2020). Companies in the consumer goods and food

industries, for example, have a pronounced effect on the natural world due to their wasteful

operations. Coca-Cola is one company that has been cited for waste disposal (McVeigh,

2020). The company has been consistently ranked as the leading firm in plastic pollution. The

company produces 200,000 plastics per minute, resulting in more than 3 million tons of

plastic packaging annually (Coca-Cola, 2022). Coca Cola’s plastic waste was estimated at

3.22 million tons in 2021, an increasingly worrying figure (Coca-Cola, 2022). Thus, without

effective strategies, business can enhance waste disposal, worsening the already bad situation

of climate change.

Despite the numerous shortcomings, business has had significant influence in the fight

against climate change. The demand for risk management and knowing where and how to

form partnerships has increased greatly as climate change has made its effects more frequent

and severe (Dunn, 2018). Companies' involvement in addressing the global climate crisis has

increased since the Paris Agreement was signed. Over 1,800 businesses, as reported by the

Science Based Targets project, have established carbon reduction goals based on scientific

evidence (Terent'ev, 2021). Various companies have led the fight against climate change by

implementing intervention strategies. The implementation of such strategies by international

companies can result in significant outcomes. For instance, a company like Coca-Cola serves

billions of consumers worldwide and has influence on all of them. Thus, when the company

decided to implement recycling as a core responsibility, this vast market followed suit.
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Consequently, the overall plastic pollution worldwide reduced significantly. Thus, business

serves a crucial role in mitigating climate change.

Businesses are leading the efforts to mitigate climate change. Despite enhanced

resilience, public pressure prompts policy changes (Dunn, 2018). Without strong pressure

from any stakeholder group, one-third of businesses report taking no steps to control, reduce,

or respond to climate change. In contrast, just 3% of businesses remain inactive when they

face pressure from three or more stakeholders (Terent'ev, 2021). Hence, increased efforts are

put towards reducing climate change. Apple is one of the companies that have historically

had to cave to public pressure. Apple Inc. is the most valuable brand but has through the

years contributed significant greenhouse gas emissions. These emissions worsen the climate

change situation. However, when public uproar on the matter emerged in 2015, the company

sought to make changes (Terent'ev, 2021). One of the projects initiated by the company is the

enhanced use of renewable sources of energy. The company has utilized solar and wind

energy to power most of its facilities, resulting in significant reduction in electricity use.

Consequently, the effects of climate change have been curbed substantially.

Businesses can implement reforms to mitigate climate change. According to CFOs,

however, most businesses are only implementing climate-related initiatives that will save

money in the near run (Dunn, 2018). When it comes down to the nuts and bolts, most

businesses will increase their energy efficiency and switch to more environmentally friendly

machinery. Government incentives are a common result of these actions, which assist

businesses save money. As a result, businesses are seizing the easy wins to save money.

Long-term strategies, such as the creation of climate-friendly goods and services, which

would produce profits and more resilient growth, are given less attention (Dunn, 2018).

Nevertheless, the small efforts yield significant benefits in the fight against climate change.

Impact of Climate Change on Business

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Climate change has significant influence on various human operations. Wildfires,

enhanced hurricane incidence, drought, and intense winter storms are just some of the

climate-related disasters that have recently affected people and locations throughout the globe

(World Economic Forum, 2022). Climate change represents an existential issue that may

have far-reaching effects on a company's employees and processes, and its leaders see this as

a commercial need. In addition to increasing insurance premiums and workforce shortages, a

warming world poses a number of other concerns for companies (Deloitte, 2021). The effects

of climate change and severe weather, like hurricanes, floods, and fires, are felt throughout

70% of the global economy (World Economic Forum, 2022). More than one-fourth of

businesses across the globe are feeling the effects of climate change, based on a survey by

Deloitte Global (Deloitte, 2021). More than 80% of CEOs in the public sector, consumers,

and life sciences/healthcare sectors are concerned about the financial implications of climate

change (Deloitte, 2021). Thus, climate change has the potential to affect business operations

and procedures.

The rising price of preparing for and responding to catastrophic weather events is one

of the most obvious ways in which climate change is impacting commercial enterprises. The

annual cost of natural catastrophes in the United States, for instance, has risen from $3 billion

in the 1980s to over $18 billion in the 2010s, as reported by the National Oceanic and

Atmospheric Administration (NOAA) (Botzen et al., 2019). Costs have risen primarily

because of the increasing frequency and severity of weather extremes including storms,

droughts, and heatwaves. The bottom line of firms might take a hit if these things happen and

interrupt operations, destroy infrastructure and property, and wreak havoc on supply chains

(Botzen et al., 2019). The air transport industry is typically the most affected during such

disasters. Often, the occurrence of events like hurricanes leads to the cancellation of many

flights heading to or from the affected locations. The companies affected suffer reduced
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return as enhanced financial loss is suffered during such disruptions. Hence, climate change

can have substantial impact on business.

Temperature and precipitation shifts are another direct consequence of climate change

on industry. Fish populations and other marine resources are decreasing, for instance, because

of ocean warming and altered precipitation patterns. Enterprises that depend on fish and

seafood as part of their supply chains are feeling the effects of this change. It is estimated that

the continual worsening in climate change has the potential to wipe out about 60% of fish

species (Mulungu & Ng’ombe, 2019). The current situation has seen water levels reducing in

most fresh water lakes. Consequently, the amount of fish available for fishing has reduced

significantly. Enterprises depending on this industry have had to deal with lower product

quantity. Thus, they have suffered reduced returns. Variations in temperature and

precipitation trends are also having an effect on crop growth and production, which is

influencing the agricultural sector and might have consequences for companies that depend

on these products. Adverse climatic conditions have resulted in reduce yields in various

places globally. For instance, in Sub-Saharan Africa, there has been reductions of 34%, 15%,

and 10% in wheat yield, rice, and maize yields respectively (Mulungu & Ng’ombe, 2019).

Agriculture is among the main economic activities of the region, thus, the extent of damage is

enhanced. The reduced yield leads to low returns and insufficient finance for further

investment. Agricultural enterprises in the region suffer as a result.

There are also many indirect repercussions of climate change on commercial

enterprises in addition to the obvious direct consequences. Changes in customer behavior are

one of the most important. Consumers are more interested in purchasing environmentally

friendly goods and services as they become more conscious of the impacts their purchasing

decisions have on the environment (Esty & Bell, 2018). As a result, there has been a shift in

demand for items that are more long-lasting and eco-friendly. Several other markets,
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including those dealing with consumer products, transportation, and energy, are feeling the

effects of this change in demand. It is estimated that 74% of consumers are willing to change

their buying patterns to accommodate environmental conservation needs (Esty & Bell, 2018).

This shifting consumer preference has seen many companies loose customers as they turn to

more eco-friendly products. The transition to electric vehicles is one such impact of the

shifting preferences. Electric vehicles are deemed to be more eco-friendly and, therefore,

appeal to individuals with such deliberations. As a result, companies offering fuel-

combustible vehicles have suffered from reducing demand. The only advantage to these

companies is the high price tags attached to electric vehicles. Nevertheless, the shifting

preferences are taking a toll on many businesses.

Regulation is another unintended consequence of climate change for businesses. More

and more nations are passing laws to curb emissions and mitigate the consequences of global

warming as they become aware of the threat it poses to their populations and economy (Esty

& Bell, 2018). Products and services that contribute to climate change may also be regulated,

as can emissions from manufacturing, transportation, and energy generation. In addition to

raising prices, these rules might make firms less competitive and have an effect on their

bottom lines. One company that has suffered from regulatory measures is Coca-Cola. In

2004, Coca-Cola, one of the biggest companies in the world, used a massive quantity of water

to produce its goods. As climate change began to affect world water levels, the issue of the

2.7 liters of water needed to produce each liter of Coke became more pressing (Coca-Cola,

2022). Coke was confronted with two separate yet interconnected problems. One problem

was that, while people were looking for cheaper end products, the cost of raw materials was

going up. Secondly, the company's water requirements ran counter to the principle that

everyone should have access to clean water. The company’s operations were halted for a

while as they had to look for solutions. The strife continued until in 2015 when the company
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developed a strategy to reduce its consumption of water (Coca-Cola, 2022). However, the

damage had already been done as the company incurred huge amounts of money in

developing these systems. Price rise was an inevitable outcome as the firm sought to balance

its books.

Despite these difficulties, many possibilities exist for companies to adapt to the

effects of climate change. Examples include increasing customer demand and enhanced

efficiency for companies that develop and implement sustainable practices and low-carbon

technology (Terent'ev, 2021). As the need for clean, renewable energy sources grows,

businesses in the renewable energy industry, for instance, are booming. Businesses that are

able to lessen their negative impact on the environment and embrace more sustainable

methods see a rise in their public profile and market value, as well as reduced operating

expenses and increased productivity.

Conclusion

In conclusion, business has both negative and positive impacts on climate change. The

same applies for climate change on businesses. Global companies feel the effects of climate

change in many ways, including disruptions to operations, supply chains, and bottom lines.

Adapting to and profiting from climate change's effects may be difficult, but there are plenty

of chances for companies to do so throughout the transition to a low-carbon economy. To do

this, businesses must have forward-thinking perspectives on sustainability and an awareness

of the risks and rewards posed by climate change.

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References

Botzen, W. W., Deschenes, O., & Sanders, M. (2019). The economic impacts of natural

disasters: A review of models and empirical studies. Review of Environmental

Economics and Policy. https://doi.org/10.1093/reep/rez004

Coca-Cola (2022). 2020 Business & Environmental, Social and Governance Report. The

Coca-Cola Company.

https://www.coca-colacompany.com/content/dam/journey/us/en/reports/coca-cola-

business-environmental-social-governance-report-2020.pdf

Deloitte (2021). Organizations Are Feeling The Pain Of Climate Change: Here Are Five

Ways It’s Affecting Their Business. Forbes.

https://www.forbes.com/sites/deloitte/2021/04/16/organizations-are-feeling-the-pain-

of-climate-change-here-are-five-ways-its-affecting-their-business/?sh=97012874e0c2

Dunn, S. (2018). Down to business on climate change: an overview of corporate

strategies. The Business of Climate Change, 31-46.

https://doi.org/10.4324/9781351281683

Esty, D. C., & Bell, M. L. (2018). Business leadership in global climate change

responses. American Journal of Public Health, 108(S2), S80-S84.

https://doi.org/10.2105/AJPH.2018.304336

McVeigh, K. (2020). Coca-Cola, Pepsi and Nestlé named top plastic polluters for third year

in a row. The Guardian.

https://www.theguardian.com/environment/2020/dec/07/coca-cola-pepsi-and-nestle-

named-top-plastic-polluters-for-third-year-in-a-row

Mulungu, K., & Ng’ombe, J. N. (2019). Climate change impacts on sustainable maize

production in Sub-Saharan Africa: A review. Maize Prod. Use, 47-58.

https://doi.org/10.5772/intechopen.90033
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Terent'ev N. E. (2021). Climate Change as a Factor in the Development of Companies:

Corporate Strategies and Guidelines for State Industrial Policy. Studies on Russian

economic development, 32(5), 485–491. https://doi.org/10.1134/S1075700721050130

World Economic Forum (2022). Critical Business Actions for Climate Change Adaptation.

https://www3.weforum.org/docs/WEF_Critical_Business_Action_2022.pdf

Zandt, F. (2022). Large Corporations Mostly Set to Fail Climate Goals. Statista.

https://www.statista.com/chart/26796/share-of-top-25-global-companies-by-climate-

responsibility-integrity-level/