Impact of Climate Change On Business

The threat posed to companies by global warming and climate change is no longer something that will happen in the distant future; rather, it is already having an impact on businesses all over the globe across all industries.

Economic, social, and environmental effects are being felt in a global network of industries. The impact of climate change on businesses cannot be overstated and is yet to be truly quantified. The operations of industry, infrastructure, and the various supply chains and networks of businesses can be significantly impacted by physical climate risks such as rising sea levels, droughts, wildfires, an increase in the frequency of extreme weather events, and other natural disasters. In addition to these physical impacts, businesses also face numerous transition risks as society begins to transition to a low-carbon economy, such as government regulations, changes in technology, changes in consumer purchasing behavior, changes in energy demand and costs and other factors.

Do Investors Care?

Investors, financial institutions, regulators, and customers are among those putting pressure on businesses to address their climate-related impacts, risks, and growth opportunities Companies are responding to this challenge in order to gain a competitive advantage over their industry peers, mitigate risk, increase efficiency, drive innovation, and have digital tools to help recruit, retain, and engage employees.

A changing climate is a complex issue, and the consequences of not dealing with the global warming problem could be disastrous for corporations. Organizations can adapt to challenges of climate action such as this by focusing on corporate commitment to sustainability, their carbon footprint, and their carbon intensity, investing in better technology and infrastructure, analyzing climate change risks and opportunities, and making changes to their existing business strategies and models.

Climate Change Consulting

Climate positive business models, climate action, and climate action and resilience consulting have become important components for industries dealing with the effects of a rapidly changing global climate and the associated risks and opportunities.

Most business owners aren't fully aware of the role these consultants play in their business models overall corporate sustainability strategy, so it's important to teach them what they can do to help businesses deal with climate change.

The Need for Climate Crisis Consulting

It has been estimated that climate change will have an annual economic effect of more than 360 billion dollars in the world in just the United States.

Businesses that fail to tackle global warming run the risk of suffering damage to their reputation,global network, operations and finances, and this need few companies to address climate action within their corporate sustainability strategy is more essential than it has ever been.

Understanding Climate Change Consulting

The climate change consulting industry is a specialized field that helps organizations with things like climate risk analysis, climate impact governance, climate action and net zero planning, GHG emission accounting and management, sustainability solutions, and strategy development that deal with and address climate change-related problems.

Risk assessments, governance structure, growth strategy formulation, business resilience, operational efficiency, digital tool development, employee training, CDP and climate reporting, and reporting on business resilience are some of the key areas deep expertise that these consultants can offer their clients.

Sustainability consultants can help clients quantify their carbon footprint and reduce carbon emissions, optimize resource usage, and improve environmental performance, leading to sustainability journey to net zero and progress towards other sustainability goals and targets. Numerous advantages accrue to businesses from these various consulting services, including enhanced brand reputation, cost reductions, increased stakeholder engagement, risk mitigation, and employee recruitment, along with forming a sustainable future for clients themselves.

SEC Regulations

The proposed climate disclosure requirements by SEC for all publicly traded companies in the United States after years of investors focusing on climate issues and understanding that climate change poses a material risk to their investments. The law has been passed as of March 6, 2024. Check out the details here - Sec.Gov

Compliance with SEC Regulations

The proposed regulation states that, come 2024, the SEC will require organizations to disclose risks and opportunities associated with climate change. These disclosures will be in line with the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) and the GHG Protocol for accounting for GHG emissions. The SEC's climate disclosure regulations promote market transparency and facilitate investors' decision-making. Infractions of SEC regulations regarding climate change can result in damage to one's reputation, legal action, and hefty penalties.

Report cybersecurity incidents within four days of recognizing their material impact:

• Public companies must now promptly disclose any material cybersecurity incidents they experience. This disclosure should happen within four business days of determining that an incident is material.

• The statement should include particulars about the type, range, timing, and repercussions of the incident on the company.

• Companies should assess their existing disclosure controls and procedures to ensure proper escalation of cybersecurity incidents.

• Materiality analysis should align with the standard set out in securities laws, considering whether the information would be necessary to a reasonable shareholder or significantly alter the total mix of available information.

Board Expertise Requirement Removed:

• The SEC declined to adopt a proposed requirement to disclose cybersecurity expertise on a company’s board of directors.

• However, public companies must now annually describe in their Form 10-K the board’s oversight of risks arising from cybersecurity threats.

• This emphasizes the importance of addressing cybersecurity risks at the board level.

Climate-Related Disclosure Rules:

1.Material Climate-Related Risks Disclosure:

• Companies must report climate-related risks that significantly impact or could impact their business strategy, operational outcomes, or financial stability.

• This includes information about the actual and potential impacts of identified climate-related risks on the registrant’s strategy, business model, and outlook.

2.Mitigation and Adaptation Activities:

• Suppose a registrant has undertaken activities to mitigate or adapt to material climate-related risks. In that case, they must provide a quantitative and qualitative description of expenditures and impacts resulting from these actions.

• This includes disclosing the use of transition plans, scenario analysis, or internal carbon prices.

3.Board Oversight and Management’s Role:

• Registrants must describe the board of directors’ oversight of climate-related risks.

• They should also detail management’s role and expertise in assessing and managing material climate-related risks.

4.Integration into Overall Risk Management:

• Registrants should outline their processes for identifying, assessing, and managing material climate-related risks.

• They should describe how these methods are incorporated into their overall risk management framework if they manage these risks.

5.Reporting Requirements:

• These climate-related disclosures will be required in a registrant’s annual report on Form 10-K.

• Comparable disclosures are also required for foreign private issuers on Form 6-K and Form 20-F

Role of Climate change consultants in the light of SEC Regulations

Climate change consultants can assist businesses in complying with SEC regulations by

1. Quantify and report their enterprise GHG emissions following GHG Protocol standards

2. Set Net Zero targets for all Scope 1, 2, and 3 emissions

3. Assisting with the comprehension and interpretation of SEC regulations

4. Identification of risks and opportunities related to climate change using climate scenario analysis

5. Development of disclosure strategies including incorporating the TCFD reporting framework

6. Implementation of other sustainability reporting frameworks.

7. Provide training and education to company employees in order to enhance environmental performance.

Case Studies

Walmart

According to its sustainability report, Walmart has successfully used climate change consultants to create a holistic sustainability strategy that includes reducing its carbon footprint and making its whole supply chain and value of supply chain even more sustainable.

Microsoft

Microsoft has promised to become carbon-neutral by 2030 and it company has invested in renewable energy sources to make energy and reduce its carbon intensity and carbon footprint and intensity.

Amazon

Amazon has committed to achieving net-zero carbon emissions by 2040 and has taken a number of steps to reduce its carbon footprint, such as investing in renewable energy and green transportation.

BlackRock

Environmental consultants have been a big part of how BlackRock has been able to incorporate sustainability into its own strategy, operations and investment decisions. As a result the company which is the largest asset manager in the world, has promised that all of its investments will have net zero emissions or almost net zero carbon emissions by 2050.

Tesla

Tesla has been a leader in the energy transition by making electric cars and focusing efforts on reducing carbon emissions from transportation.

According to their Impact Report, climate change and energy transition experts have worked with Tesla to create a sustainable energy supply and value chain, and make its manufacturing processes better for the environment.

These companies show that hiring consultants on climate change and sustainable finance can help businesses reach their sustainability goals and follow SEC rules. Companies that take steps to reduce their carbon emissions and build a more sustainable future gain a competitive edge and show leadership in sustainable finance and energy transition.

In Conclusion

Corporations must address climate change in their business plans. Sustainability solutions give business owners a competitive edge that helps them increase profits and reach their sustainability goals. Expert consulting to mitigate impacts from and against climate change can help business leaders deal with problems and spot opportunities in their own supply chains, in their operations, and beyond. More and more, financial institutions are pushing for sustainability, and brands must follow suit if they want to stay in business. For companies to stay ahead of the curve, they need people who can understand the risks and opportunities associated with climate change. 

A global survey found that more than 80% of business leaders think that sustainability will be a big part of their strategy thought leadership or organization's strategy for success in the future (Accenture, 2021).

How to select the right climate change consultant for your needs?

Companies can choose the right climate change consultant by looking at their experience, expertise, qualifications, testimonials, and how they are able to communicate climate change management fitting into the organization or business’ larger mission and business objectives. Look for climate change consultants that have a lot of experience quantifying and reporting GHG emissions and working with companies on climate scenario analysis and TCFD reporting.

Why Should You Choose Sustridge

At Sustridge, our clients have deep expertise in strategy, thought leadership, TCFD, and carbon accounting and management can provide climate consulting services to our clients and help them navigate the complexities and challenges of sustainability efforts.

Our extensive experience in GHG emissions management and many years of work in corporate sustainability and sustainability reporting can help businesses comply with SEC regulations and gain a competitive advantage. We can help companies understand, report, and reduce carbon emissions, identify and assess climate risks and opportunities, and promote a more sustainable future together. With a holistic approach and our extensive experience and guidance in the low-carbon economy and energy transition, businesses can make a real impact on the environment and society.

Contact us today to learn more about how we can help your business become more sustainable.