Climate Change, Business & ESG
Learn about the impact business operations have on climate change & vice versa, plus steps businesses can take to improve.
The role of business in climate change
Businesses play a significant role in climate change and sustainability, both as contributors and as potential solutions.
On the one hand, businesses are responsible for a large share of global greenhouse gas emissions. According to the World Resources Institute, businesses account for 69% of global energy-related emissions.
This includes emissions from the production and transportation of goods, as well as from the operation of buildings and other facilities.
On the other hand, businesses can also play a key role in addressing climate change.
Business impact on climate change
Businesses are responsible for a large share of global greenhouse gas emissions in a few different ways:
Energy production
The energy sector is the largest source of greenhouse gas emissions globally, and businesses are responsible for a significant share of these emissions. This includes emissions from the production of electricity, heat and transportation fuels.
In fact, the 100 largest publicly traded fossil fuel companies account for 71% of global industrial greenhouse gas emissions since 1988.
Manufacturing
The manufacturing sector is another major source of greenhouse gas emissions. Businesses in the manufacturing sector emit greenhouse gases from a variety of sources, including industrial processes, energy consumption, and transportation.
Agriculture
The agriculture sector is a significant source of greenhouse gas emissions. Businesses in the agriculture sector emit greenhouse gases from a variety of sources, including livestock production, crop production and land use change. The global food system is responsible for 34% of global greenhouse gas emissions.
Climate change affect on business
The transportation sector is a major source of greenhouse gas emissions. The transportation sector, including the transportation of both goods and people, accounted for 24% of CO2 emissions in the UK in 2020.
Climate change affect on business
Increased costs
Climate change is increasing the costs of doing business in a number of ways. For example, businesses are facing higher costs for insurance, energy and transportation.
Supply chain disruptions
Climate change is disrupting supply chains by causing extreme weather events such as floods, droughts and storms. These events can damage infrastructure and make it difficult to transport goods and materials. In addition, the COVID19 pandemic is thought to be a direct result of loss of biodiversity, which is a key factor in the climate crisis.
Reduced productivity
Climate change is reducing worker productivity by making it more difficult and dangerous to work outdoors. For example, workers in hot and humid climates are more likely to experience heat stress and exhaustion.
Regulatory compliance
Businesses are facing increasing regulatory requirements related to climate change. For example, businesses may be required to reduce their greenhouse gas emissions or disclose their climate risks.
Damage to property and infrastructure
Climate change is causing damage to property and infrastructure due to extreme weather events. This can lead to significant financial losses for businesses; such as in 2019, when the Australian bushfires caused an estimated $103 billion in damage. Hurricane Harvey caused an estimated $125 billion in damage in the United States, and the 2021 floods in Germany caused a reported $40 billion in damage.
ESG and climate change
Climate change is a major ESG issue. ESG provides a framework of environmental, social and governance factors that investors use to review an organisation’s investability.
This movement towards green investing and net zero has prompted governments and regulatory bodies to implement stricter regulations and disclosure requirements related to ESG issues. Businesses that take ESG seriously are better positioned to address the challenges posed by climate change.
How can businesses tackle climate change?
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Work to reduce your emissions and invest in clean energy to improve your environmental performance and reduce climate risks.
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Protect your workers from the impacts of climate change by paying fair wages, providing good working conditions, and making supply chains resilient.
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Develop a good governance structure, with a board of directors that is independent and accountable, to ensure that sound decisions are made about climate change.
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Help to raise awareness of climate change and its impacts, and encourage people to take action to reduce their carbon footprint.
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Choose to source materials and products from suppliers that are committed to environmental sustainability.
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Support climate-friendly initiatives in your communities, such as tree planting and community solar projects.
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Develop and commercialise new climate technologies, such as carbon capture and storage, and direct air capture.
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Advocate for climate action at the local, national, and international levels.
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Aim to become B Corp certified.
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Disclose your climate risks and opportunities in ESG reports; commit to transparency and accountability as opposed to greenwashing.
60-second takeaways
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Businesses account for 69% of global energy-related emissions contributing to climate change.
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Climate change is also having a significant impact on business profits and operations, through supply chain disruption, increased costs and regulatory compliance.
ESG provides a framework of environmental, social and governance factors that businesses can use to reduce their contribution to climate change.
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There are many ways businesses can do their bit to slow climate change, including reducing their carbon footprint, advocacy, supporting climate-friendly initiatives, and becoming B Corp certified.