(5 minute read) Bring British I of course feel an inherent need to talk about the weather. In recent conversations with people in America, Hong Kong and New Zealand I found that, consistently, the first question out of my mouth after the usual greetings was ‘what’s the weather like where you are?’. In the developed world we can easily forget just how dependent humans are on our climate for survival. For those of us in the UK, we have seen droughts leading to a hose-pipe ban in some places, as well as significant moorland fires, and while too much rain can come with significant consequences, these days those consequences rarely include loss of life (note – sadly this does still happen). Climate change is resulting in more extreme weather events happening across the globe. So what are the hidden costs of climate change on business?
In a world of global supply chains a wet summer in Spain can mean a European shortage of salad ingredients. While some children might celebrate, there are far reaching consequences. This actually happened – at the beginning of 2017 Southern Spain had far too much rain at the wrong time of year. As a consequence the price of courgettes went up by 60% (Source: Spanish Government via Zurich Insurance) and in the UK food prices had an upward effect on the inflation rate for the first time since April 2014 (Source: ONS 2017). More recently, UK food prices are predicted to rise by 5% because of the hot weather experienced over last summer.
Of course, it’s not just food that is affected by extreme weather events. Lack of water can affect most businesses, particularly if they rely on water supplies for cooling or manufacturing. The fires in Europe last year will have far-reaching consequences for businesses, not only those directly impacted by fire but also any businesses with staff impacted by it, not to mention any businesses supplying or supplied by those impacted. See ‘What insurers can teach us about sustainability‘ for more information.
With more extreme weather events resulting from climate change, businesses are increasingly facing hidden costs and challenges. The key to being a resilient business, no matter what your size and sector, is to fully understand your dependencies. Let’s take some examples:
Let’s say you have a small factory, building specialist products for larger clients. The products that you build rely on several smaller parts that you source from around the world. So here are some questions that you can ask yourself:
- Where, exactly, do those parts come from? Chances are at least one or two of them might be sourced from factories in China or India – both of which are experiencing increased extreme weather events
- What happens if the factory that those parts are sourced from is flooded, damaged or destroyed?
- Will it be possible for them to fulfil your latest orders?
- Will delays in receiving these parts cause you to miss deadlines with your own customers?
- Does your supplier have larger clients that they may prioritise over you? Are you able to source from elsewhere?
This type of business continuity planning focuses on ensuring your business is as resilient as it can be. In particular, the questions above focus on climate change related events, which are often overlooked in a typical business planning context.
Catering and the restaurant industry
Let’s say you run a small restaurant or cafe or catering business. You’re not a fancy restaurant with tonnes of accolades but you have great customers and a good reputation locally.
- Where do your supplies come from? Staples such as rice and pasta are likely to be dependent on global trade prices. For example did you know that the cost of rice is due to increase by around 35% over the next 30 years and global yields will reduce by 10-15%? [Source: IRRI] Additionally, as discussed above, the price of food is expected to rise by 5% in the UK over the next 18 months.
- Can you absorb price hikes without raising your own prices?
- If you have to raise your prices, will that turn-off your customers?
- What other ingredients that you use are being impacted by climate change?
- Can you alter some of your dishes to be more resilient to price hikes?
Having a solid understanding of the origins of the ingredients you use can help you predict changes in wholesale prices. This can, for example, help you prepare an altered menu so that you’re not caught off guard. If you have your finger on the pulse of abundant and scarce ingredients you could even make a name for yourself as a business that is consistent in its prices and varied in its menu.
Planning and architecture
Now let’s say you’re a town planner, an architect, a landscape architect, a developer, or you support any of those businesses as a consultant or adviser.
- Are your developments resilient to extreme weather events?
- Do they provide adequate shade for those super hot days, both internally and externally?
- Is the landscaping water thirsty? Will the water demands cost building users with meters?
- Does the building collect and recycle water?
- Can the development cope with excess water in a way that reduces on-going drainage costs?
- What about the materials that go in to building that development? Where are they sourced from?
With extreme temperatures resulting in the deaths of large numbers of vulnerable and elderly people, the built environment is increasingly vital to the fight against the effects of climate change. By understanding the base issues it is possible to design in mitigation, where appropriate and economical, to deliver a resilient development that is both desirable and valuable in the long term.
These questions, and many more, set out the type of approach that you can take to developing and designing a business that is more resilient to climate change. By asking your business a series of questions such as these, you can manage your risks in an integrated manner. In some cases you may even be able to avoid those risks entirely. And in avoiding those risks you may even find yourself identifying opportunities for expanding your business in a new direction.
The good news is that if you know how to approach it there are simple methods for embedding this type of risk management in to your strategy, no matter what your business is. The great news is that increasing your business awareness of climate change can help you in growing your business sustainability in the future.
I am a sustainability coach with 10 years experience in the sustainability sector. I can help you and/or your business understand how to identify your environmental dependencies and start mapping out a path to a more resilient strategy. Contact me at email@example.com for more information.