The world is at a tipping point when it comes to climate change, and over 80% of executives are concerned, according to Deloitte Global’s 2021 Climate Check report. Perhaps that’s because most global organizations are already starting to feel its negative impacts.
“It’s hard to ignore the increasing number of catastrophic, climate-related events affecting populations and geographies all over the world—from wildfires to increased hurricane activity to droughts to extreme winter storms,” says Deloitte Global CEO Punit Renjen. “Leaders acknowledge the business imperative of climate change and increasingly understand it to be an existential threat that can have long-term impacts on their people and business operations.”
A warming planet creates a wide range of risks for businesses, from disrupted supply chains to rising insurance costs to labor challenges. Climate change and extreme weather events such as hurricanes, floods and fires, for example, have a direct impact on 70% of all economic sectors worldwide.
Climate-related events are already affecting more than 1 in 4 organizations worldwide, according to Deloitte Global’s report. Public sector, consumer and life sciences/healthcare industries are the most worried about the business impacts of climate change, with over 80% of executives in these sectors expressing apprehension about the planet’s future.
According to the survey, here are the top five ways that climate change is already impacting (or threatening to impact) companies across the globe:
- Operational impact: Nearly 3 in 10 organizations are noticing the operational impacts of climate-related disasters, such as facilities damage and workforce disruption.
- Scarcity/cost of resources: Resources like food, water and energy are at risk due to both environmental and human causes, with the energy and consumer industries reporting the greatest impacts.
- Regulatory/political uncertainty: Rounding out the top three concerns, over a quarter of executives say they are wary about shifting regulatory and political environments. The banking and life sciences/healthcare industries overwhelmingly cited this as the issue impacting their sustainability efforts the most.
- Increased insurance costs or lack of insurance availability: Executives are very aware of how climate-related events have, in some cases, led to dramatic increases in insurance costs.
- Reputational damage: Environmental sustainability efforts are becoming core tenets of organizations’ culture and brand identity.
Turning Concern Into Action
Despite these threats, many companies are still hesitant to make significant operational changes to address climate change, even though 81% of executives agree that businesses should make even greater efforts to protect the environment. Their hesitancy is most likely due to short-term thinking.
A focus on near-term business issues or demands emerged as the top obstacle for implementing sustainability initiatives this year—up to 37% from 30% in 2020. In fact, the majority of executives (65%) said their organizations needed to cut back on environmental sustainability initiatives in some way due to the pandemic.
But companies can’t afford to wait any longer before taking action, Renjen adds. He stresses that while it’s understandable that there may be a short-term lapse in prioritizing climate change based on immediate business continuity efforts, executives haven’t taken their eye off the ball completely, which is promising for the longer-term actions that will be required by business.
“If we don’t act, we are at increased risk of an alarming intensification and uptick in these climate-related disasters, which will likely affect almost every part of life as we know it,” he says. “That’s why it’s imperative that we take collective action now to avoid worst-case scenarios down the line.”
Fortunately, it’s not too late to make a change, with nearly two-thirds of executives surveyed in the Climate Check agreeing that immediate action can limit the worst impacts of climate change. Among the organizations that are most concerned about climate change, a third also plan to accelerate their sustainability efforts over the next year.
Executives cited education and the promotion of science-backed climate research as the environmental actions that are critical to spurring action and pointed to collaboration as an important way to advance progress and inform public policy solutions. However, to make significant environmental progress, Renjen believes business and government have a larger role to play beyond education and advocacy. Renjen says, “Businesses are well positioned to lead on the innovations and technology that will help curtail private sector impact on the environment, and government should lead on the massive societal transformations required to combat and curtail climate change.”
In the long term, sustainability is good for business, adds Renjen, and companies have an increasingly important role to play in protecting the environment.