Climate change is real, it’s happening now, and it’s our responsibility to slow it down. We know this, and if you’re reading this, there’s a good chance you know it too, but does your business?
Businesses have to grow and make money – that’s why they exist. Because of that, business leaders can often be focused on short-term goals and meeting the bottom line. So, how can you get them to see the bigger picture? You have to show them that there is a cost to ignoring climate change. You have to show them that other businesses have already been impacted.
In this blog, we’ll explore how climate change impacts businesses to help you make your case for sustainability engagement.
Physical Risks: Disruptions to Operations and Supply Chains
When we talk about climate change, we’re referring to both the warming global temperatures and the weather events that are caused by this shift. As the earth warms up, the ice caps melt at a faster rate. As this happens, the water from the ocean evaporates to become moisture in the air. Consequently, extreme weather events, such as hurricanes, floods, wildfires, and heatwaves are becoming more frequent and severe. This leads to operational disruptions, supply chain delays, and financial losses.
In 2024 alone, climate catastrophes resulted in global losses of $320 billion. This prompted retailers to rethink their approach to risk management. For example, the fashion industry is reassessing store locations and logistics networks. Climate-related disasters lead to mounting costs.
The agricultural sector is also experiencing first-hand disruptions. In France, excessive rainfall in 2024 led to a 22% drop in cereal production. This illustrates how unpredictable weather patterns threaten both food security and supply chains. Extreme weather events, therefore, are quickly becoming a material risk for all businesses. It’s worth considering then, how and where these global shifts will impact your supply chain.
Educating and engaging your team around the effects of climate change can help your business prepare for the future, and mitigate these risks.
Transition Risks: Climate Change Regulations and Market Expectations
Already within the first months, the Trump administration is making efforts to roll back climate regulations. While this might suggest that it’s not worth pursuing climate targets, it also shows how quickly administrations can change policies. It’s worth noting that this government will be replaced one day. The next administration may implement radical targets to undo the delays to progress caused by Trump.
On the other hand, at the state level, legislature such as New York’s Climate Change Superfund Act is a $75 billion law that seeks to hold fossil fuel companies financially accountable for climate-related damages. This law has the potential to drive up energy costs, highlighting the financial and legal risks businesses face as climate accountability measures intensify.
Meanwhile, in the EU, climate reporting requirements were set to apply to businesses with over 250 employees or €50 million in turnover. Despite pushback, these laws will still be enforced on larger companies. This gives smaller companies a chance to prepare.
By having a sustainability engagement plan in place, you’re preparing your business for this change in legislature.
Financial Risks: Rising Insurance Costs and Investor Concerns
Climate-related disasters are increasing the financial strain on businesses, particularly through rising insurance costs. Companies in high-risk regions face soaring premiums, making it more expensive to protect their assets. Since 2017, insurance premiums for commercial real estate in the U.S. have increased by an average of 7% per year. This reflects the growing financial risk. As more regions suffer extreme weather events, it becomes more likely that your business could be placed in a high-risk region.
At the same time, investor sentiment is shifting. Businesses that fail to account for climate risks may struggle to attract funding and talent. Financial institutions now prioritise resilience over traditional ESG strategies. Banks such as Standard Chartered and BNP Paribas are refocusing on investments that support climate adaptation.
Reputational Risks: Meeting Stakeholder Expectations around Climate Change
Businesses that fail to take meaningful action on climate change risk damaging their reputations. Consumers, employees, and investors are all demanding transparency and accountability, making sustainability a key factor in long-term success.
Aviva’s CEO, Dame Amanda Blanc, recently reaffirmed the importance of addressing climate risks. This is despite growing resistance to net-zero policies in the financial sector. This highlights the fine line companies must walk between economic interests and environmental responsibility.
Strategic Opportunities: Innovating to Prevent Climate Change
Setting aside the risks associated with being unsustainable, businesses that proactively address climate change can unlock new opportunities. Investing in renewable energy, improving supply chain resilience, and motivating your team to become more sustainable at work and in their lives can provide a competitive edge.
In the EU, the Clean Industrial Deal and the Industrial Decarbonisation Bank aim to support businesses in lowering their carbon footprints. There is funding available for industries seeking to transition towards greener operations. Forward-thinking companies that align their strategies with these initiatives will be well-positioned for the future.
At Jump, our mission is to motivate teams to take action for a sustainable future. Our rewards programmes incentivise sustainable action to prepare your business for the future. Find out how we can support your organisation in building a climate-conscious future—request a demo today.
