Climate Change: Impact to business operations

Climate Change: Impact to business operations

REPORT • Apr 2022

To celebrate Earth Day 2022 – we look at the impact of climate change to businesses and how this will affect risk to all organisations around the world.

Executive Summary

In the six months since the opening addresses of the COP26 Climate Change conference, despite some progress and meaningful announcements during the convention, climate goals have continually not been met. Globally, we have failed to implement the drastic and necessary measures required to cut carbon emissions. Carbon dioxide in the atmosphere continues to rise, and, therefore, temperatures are also warming at an alarming rate.

However, the sentiment around climate change has shifted drastically in recent years. Thanks to the efforts by both activists, and by governments, opposition parties and companies, the awareness of the very real danger that everyone, globally, faces is now clear. Two key questions remain unanswered, however. The first being, is it too little too late? Secondly, is all the talk by governmental leaders and businesses of climate action and goal setting simply ‘hot air’?

These questions are vital, given the immediacy of the threat we are facing. In California, the Mediterranean and Australia, millions of acres of land have been lost to wildfires. In northern Europe, Africa and India, thousands have died from flash flooding. Countries globally are dealing with droughts and floods simultaneously, while tropical storms are both more frequent and more intense. The next decade is set to see the entire global community face some form of natural disaster as a result of climate change, while some countries will also see concurrent disasters, placing additional strain on global recovery efforts in the wake of the Covid-19 pandemic and ongoing military conflicts worldwide.

Climate Change

The earth is now about 1.1 degrees Celsius warmer than it was in the late 1800s with  2011-2020 being the warmest decade on record. Despite continued arguments in politics and elsewhere, the US fourth national climate assessment estimates human activity to be responsible for between 93-123 percent of observed global warming since 1950. Despite the significant increase due to human contribution, some have questioned how it is possible that over 100 percent of climate change is possible. Researchers have cited that natural climate change, such as volcanoes and solar activity, may have offset some of the effects which could  have resulted in a slight cooling of the planet over the past 50 years.

The National Aeronautics and Space Administration (NASA) states that “direct observations made on and above earth’s surface show the planet’s climate is significantly changing. Human activities are the primary driver of those changes.” As a direct result of human activity, and in particular the release of carbon dioxide, the atmosphere, ocean and land have all warmed and there have been widespread and rapid changes to the atmosphere, the ocean, to sea ice, glaciers and the wider biosphere.

IMPACT ON REGIONAL INSTABILITY

Drought, wildfires, desertification, natural disasters and other extreme weather events will disproportionately affect certain regions of the globe and will almost certainly lead to a commensurate collapse of the internal and regional security environment in the affected areas.

Competition for increasingly scarce resources, exacerbated food insecurity, mass-migration of people and the mounting pressure on national governments to provide for their populations will only serve to stimulate a rapid deterioration in regional security.

For most of human history, the geography of northern Africa has been shaped by periods of extreme weather. This, in turn, has dictated the distribution and behaviour of peoples across the Sahel region.

The Sahel comprises a 6000km long corridor south of the Sahara Desert, connecting the Gulf of Guinea in the west of the continent with the Red Sea in the east, including territory from as many as 14 African nations. This region has experienced a considerable decrease in stability over the past decade, with Islamic extremism on the rise, ethnic tensions exacerbated by arbitrary borders, Western military intervention and neo-colonialism all contributing to the rapidly decreasing security situation in northern Africa. Land is becoming increasingly unsuitable for grazing livestock or growing food, meaning the resultant migration of nomadic peoples is bringing them into direct confrontation with populations in both rural and urban environments. The increasing proximity of shifting population centres increases the potential for reigniting historical grievances and overlaying them onto contemporary competition for resources and territory.

Map of Sahel region

Figure 1 – The Sahel Region of northern Africa

African coups are becoming increasingly frequent and difficult to predict, driven by the inability of national governments to defeat cross-border Islamist insurgencies or provide access to basic human needs such as water and food. As populations become increasingly dependent on failing governments to provide for them, the prospect of violent civil unrest, security force crackdowns and even civil war becomes more apparent.

As regions become increasingly ungovernable due to the changing climate, security vacuums will inevitably become filled by criminal and Islamic extremist organisations, as has already become apparent in much of northern Mali and many other countries in the region. Terrorist freedom of movement in the cross-border regions and ungovernable areas of states impacted by climate change will almost certainly manifest as an increase in attacks on local populations, indigenous security forces and, increasingly, international business interests in-country. Similarly, the risk to travel in this region posed by terrorism, including violence and abduction, would increase exponentially. The transnational aims of these organisations also likely indicates the potential for terrorist activity to spill over into Europe, exploiting existing migration corridors and the absence of any local security deterrent.

Governments in the Sahel face an increasingly desperate balancing act: combat the spread of violent extremism and ideology, manage the internal ethnic tensions bequeathed upon them in the post-colonial era, coupled with safeguarding their respective populations from unprecedented levels of food insecurity, water scarcity and lack of opportunity. The undoubted impact of climate change on all of these issues indicates that the security situation in the region is highly unlikely to improve in the short to medium term. Without proper governance, effective internal security and substantial international support, the long term forecast for regional security in north Africa is likely to remain poor.

Whilst the impact of climate change noted above will be particularly pronounced in Africa, which has been historically susceptible to the effects of changing climates, there exists real potential for similar impacts to also manifest in much of the Middle East and Asia.

Coastal regions will also feel disproportionately severe impacts of climate change. Combinations of flooding and drought, long-term changes from rising sea levels, shifts in rainfall patterns and increasing temperature will almost certainly lead to mass-migrations away from littoral population centres, placing further strain on urban centres elsewhere and providing opportunities for political opposition or extremist groups to apply pressure to regional governance structures. In such a scenario, the lack of a credible security guarantor is likely to lead to certain elements of a population to consider their alternatives. Countries such as Indonesia, with a large coastline and an existing Islamist insurgency, are most likely at risk of further instability in the short term.

The result of the above will likely manifest in increasing rates of migration from affected areas to areas less prone to the effects of climate change – and Europe in particular. In recent years, migration has become a sensitive topic for western democracies amid concerns over the export of dangerous individuals and ideas from conflict zones. Mass-migration, secondary to climate change, would likely increase the prevalence of civil unrest and political tension in European capitals in the short to medium term, in addition to worsening criminality associated with human-trafficking and modern slavery.

Risk categories

Figure 2 – climate change risk categories

 

IMPACT TO BUSINESS OPERATIONS

As businesses recover from the impact of COVID-19 and return to business-as-usual operations, the biggest risk that many will face comes from climate change. This risk ranges from the obvious physical threats, such as extreme weather events or supply chain disruption, in addition to increased risk to business operations, personnel and installations by extremism and civil unrest, to more opaque threats such as the transition risk posed by technological changes, increased business cost of waste reduction and more expensive energy bills. Navigating this future is going to be difficult for many companies, even the most innovative and forward looking.

The principal risks to business operations as a result of climate change can be broken down into three broad categories, noted above.

Physical risks are the most immediate and obvious concerns for businesses, and will feature extensively in thorough climate risk assessments and business continuity planning, but these must also be considered through the prism of liability risk. Those operating in coastal areas or areas at risk of flooding will see insurance prices increase in the coming years, on top of the physical risk posed by floodwaters themselves. Physical damage to commercial infrastructure, supplies and equipment as a result of flooding or other extreme weather events is likely to be costly.

For companies operating in coastal areas in the US, Asia and the Indian Ocean, insurance against tropical cyclones will likely increase as a result of increased frequency of category-5 hurricanes and Super Typhoons.

Heavy rainfall from Storms Dudley, Franklin and Eunice in February 2022 saw widespread disruption across much of the UK. Roads were blocked by flood water and landslides. Anticyclone Hartmut (dubbed Beast from the East by British media) brought a prolonged cold wave and heavy snowfall to the UK and Europe during 2018. That weather event resulted in 1.2 billion GBP in damages and 17 fatalities in the UK, as a total of 94 people died across wider Europe.

Secondary, indirect, or down-stream impacts can also affect business operations, such as flooding in a town that a business relies on for the production of a vital component causing delays and disruption to manufacture in a second, unaffected country. Disruption to ports from cyclones will also result in delays, whilst heavy rainfall can disrupt transport networks and may prevent employees from commuting. Even if your business is not heavily reliant on a global supply chain, or operate in regions prone to adverse weather events, your partners or suppliers might be.

There are also other indirect risks to businesses. Resources like food, water and energy are all at risk due to climate change, whilst a disruption of essential goods or services can result in civil unrest. Protests over climate change have already seen many cities grind to a halt; Protests over a lack of food and water have seen governments collapse and periods of sustained, violent unrest.

Business opportunities

The biggest risk to businesses, however, is the failure to adapt. Companies that do not convert to green energies in the coming years will be left behind. Electric car companies are all seeing massive investment, while Tesla has become the most valuable car maker in the world despite less than one-tenth of the revenues of the second-most-valuable company. It is now expected that by 2030, over a quarter of the global passenger car sales will be electric vehicles.

The green economy is growing more than 20 percent per year in the United States. Consumer packaged goods have seen more than 50 percent of its recent growth from sustainable products. Sales of plant-based foods have grown at five times the market rate. It is clear, that now, for companies and countries, not investing in sustainable practices will now put businesses at risk.

Solace Global Support

Solace Global Risk are able to offer a range of security solutions tailored to your specific activity/threat profile, as well as providing bespoke support to climate change risk assessments and business continuity planning. We are able to support security managers and on-the-ground staff with:

  • Integrating the Solace Secure system with GPS tracking data to ensure traveller locations are always available, even if mobile communications are unavailable.
  • Reporting modules which can pull relevant data for travellers quickly.
  • Near-real time intel alerts on weather warnings, disruption, and instability in their location.
  • Medical assistance from our partners organisations.
  • Emergency evacuation and repatriation to extract travellers or in-country staff during an emergency situation.security support diagram

Conclusion

A zero-emission economy is now inevitable. There is a long way to go, but businesses now need a strategy to embrace what is coming. Failure to adapt now will almost certainly lead to considerable financial and security implications for business operations and travel plans. The transition will be difficult for many companies, and some businesses will not survive. However, it is imperative that commercial enterprises begin to seriously consider the impact of climate change on business operations, as the failure to implement robust business continuity and risk management plans around climate change now will likely lead to significant competitive disadvantage in the longer term.

Supporting global operations

Solace Global Risk helps corporations, governmental organisations and NGO’s mitigate risk with expert guidance for the global risk landscape. Our team of intelligence analysts create bespoke location risk assessments, bespoke intelligence and trigger documents, tailored to your organisation’s needs.

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