These days, many organizations are looking to lighten their carbon footprint to do their part in the fight against climate change. This is commendable and should be encouraged; however, businesses should also study how increasingly severe and frequent climate events like droughts and hurricanes can affect their operations across their supply chains. Any company that wants to safeguard its assets and stem financial losses must explore its risk-mitigation options thoroughly.
Climate risks come in many forms, including physical, transition, and liability risks. By implementing best practices for curbing these risks, businesses can limit their exposure to financial and reputational damage and build more sustainable practices..
Physical climate risks refer to the real-world consequences of climate change that directly impact the environment and society. Wildfires, flooding, and severe storms are often catalysts for these sorts of threats which can lead to property damage, ecological instability, and disruptions in local economies.
Businesses can mitigate physical climate risks by implementing best practices such as:
Transition climate risks are rooted in the indirect effects of climate change, like regulatory and market shifts. Businesses can blunt transition climate risks by:
Liability climate risks refer to the legal and financial risks associated with climate change, for example, lawsuits or insurance claims. Companies can mitigate liability climate risks by:
At present, it’s estimated that climate change has already affected 70% of all economic activity worldwide. Some of those effects are bound to be less obvious than others since an increase in the price of raw materials on one continent can affect the price of goods and services on another. Any business that wants to shore up its operations against future uncertainties will want to look into mitigating its exposure to climate risk sooner rather than later since emergencies rarely afford the luxury of time.
Our technology and data platform helps clients to understand the climate risks they face and to assess the potential direct and indirect financial impact stemming from those risks. To learn more how we can help your business, please don’t hesitate to reach out to us:
Companies must understand that mitigating climate risks is an ongoing process that requires diligent efforts and a long-term commitment. By staying apprised on the latest trends in climate risk management, organizations can do their part as good corporate citizens to build a more favorable, more humane future.