Business & Environment | Climate Crises impacting the Business in terms of Finance and Regulations

Business & Environment | Climate Crises impacting the Business in terms of Finance and Regulations

Supply Chain Disruption, Climate Risk Impacts, and Interconnections, Price Risk, Emission Control Systems, Cap and Trade Rules, Changing Demand for Goods

With the proliferation of high-tech industries, the world is on the edge of the “Climate Crises”’ where authorities are mitigating with various laws and regulations on energy and trade while it would combat the loss which is going on for years on Earth.

Climate & Catastrophe report described in 2018, the economic loss of $215Bn was detrimentally impacted due to weather disasters, compared to $438 in 2017. Not only it deteriorated the economic costs but also stated that 60 percent of the loss was not covered by insurance. And the increasing amount of cruses are escalating the insurance premiums unaffordable for ordinary people to survive.

Climate change is not just an environmental problem but its impact has reached business, and it’s affecting on a larger scale such as.,

  • The events like storms, floods, etc will disrupt the operations of the business and will lead to the extreme financial impact, and because of these, insurance costs for many companies will rise as well.
  • The Fluctuating patterns of weather will affect the crops used for food.
  • Regulations are mitigating the pollution by putting the laws on companies who produce high levels of emissions will have to invest substantial funding into upgrading their facilities to reduce, capture or eliminate pollution level.

Supply Chain Disruption:

Physical risks involve the damage inflicted on infrastructure and other assets, like supply-chain operations and factories by the proliferation of extreme weather events.

This can affect the company at their core level, for example, Cargill- the world’s largest food and agricultural company, was shaken up by US Drought.

For all the business, the supply chain plays a vital role to drive the business, and the efficiency of the supply chain depends upon the "Environmental Factor", so the business is at a major loss when any hazards are executed, For instance, Thailand's severe floods on 2011 impacted over 14,500 companies reliant on Thai suppliers and talking about globally, it affected losses of between US$15 billion and US$20 billion. Western Digital, with one-third of the global hard drive market, lost 45 percent of its shipments, HP lost US$2 billion, and NEC cut 10,000 jobs due to a global shortage of hard disk drives.

Climate Risk Impacts and Interconnections:

Climate change can shake up both economical and social abilities creating an emergency. For example, In 2018, Australia has suffered a wildfire emergency with more than 5 million hectares burned which caused over $22 billion in direct property damages, bankrupted a local utility, and left that state to suffer routine blackouts to protect infrastructure and reduce liabilities. Also, the shit in temperature is damaging the crop yields increasing the stress on countries dependent on agricultural output.

Price Risk:

It refers to the price volatility of raw materials and other commodities. Drought can increase the prices of water; climate-related regulations can upscale the cost of energy goods; High tech industries risking the production of computer hard drives, televisions, wind turbines, solar photovoltaic systems, and electric vehicles.

Emission Control Systems:

The businesses which are mostly responsible for climate change are energy and utility companies that operate refineries and power plants. Therefore, companies that are hinted at as the "polluting factor" have to pay a significant amount of money on upgrading the polluting facilities and on the installation of emission control systems in order to comply with regulations on greenhouse gas emissions.

Cap and Trade Rules:

The Cap and trade policies aim to lower the carbon emissions by placing the upper limit amount on the pollution a company is responsible for, but these have mixed outcomes, has many richest and big get away by paying big allowances and impacting the environment with the same amount pollution again and again.

Changing Demand for Goods:

The impact of climate change has also detrimental effects on the fluctuating prices due to the changing weather patterns, demand also changes dramatically with it.