Climate Change as a Strategic Opportunity: Adaptation and Eco-Responsibility for Businesses

The seriousness of the current climate crisis is no longer up for debate. It is clear that the consequences will be serious for nature, our businesses, our fellow citizens, and our governments.

However, these important changes also represent strategic opportunities for businesses that know how to anticipate and adapt. Besides adjusting, organizations that have developed eco-responsibility will benefit from an increased competitive advantage.

The Adaptation

In order to adapt, a company must first accurately assess the specific hazards that lie ahead. In general, the main threats will come from the increasing frequency of severe weather events around the globe, such as storms, droughts, floods, and forest fires. However, there are other risks as well, such as increased legislative pressures.

Increased weather events will certainly cause disruptions in supply chains, for instance. As such, sea freight could be slowed down and more expensive, and land freight could be disrupted or delayed.

These phenomena will also accelerate the depreciation of companies' assets. For example, increased precipitation might erode their buildings and transportation fleet more quickly and significantly. Thus, with the increasing risk of unpredictable weather affecting these assets, insurance premiums might increase.

From a legislative perspective, the state will likely continue legislating to reduce greenhouse gas emissions and encourage sustainable practices. These changes will force businesses to adapt to legal thresholds.

Once the risks are identified, businesses will need to develop strategies to prevent the "hidden" and unexpected costs of the various events resulting from climate change. In other words, organizations will need to develop a plan to adapt to climate change. For instance, this plan could include strengthening structures and assets, rethinking the supply chain, organizing emissions reductions, initiating changes in products and services, etc.

While these adaptations may seem costly at first, they will be necessary to gain a competitive advantage:

• On one hand, companies reacting to climate change will be in for a nasty surprise if a risk materializes. These unanticipated expenses could jeopardize their operations, profits or - worse - their long-term survival.
• On the other hand, companies that are more "forward-thinking" will have a plan of action and will spread their costs over several years. Being able to invest in sustainable solutions, these organizations will be much more agile and resilient to change. They will be able to continue their operations and take advantage of the opportunity to get a head start on their competition.

Becoming Eco-Responsible

Businesses certainly play a role in climate change. As "corporate" citizens, they have a social conscience duty to minimize their environmental impact. It is clear that eco-responsible organizations will benefit from multiple gains.

To become greener, a business must first identify and meticulously evaluate all its value chain components. This analysis will provide a clear understanding of their choices in their operations. Wherever an organization takes a decision, there is a potential for a greener alternative.

For example, organizations could reduce their greenhouse gas emissions by:

• Using renewable energy;
• Promoting biodegradable packaging;
• Using recycled materials;
• Encouraging telecommuting to reduce consumption during transportation; or
• Training its employees on sustainable practices.

Choosing your suppliers or other business partners by paying particular attention to their environmental awareness is also possible.

Becoming - or being - environmentally responsible opens the door to many potential business gains. For this exercise, we will limit ourselves to the following three gains that can offer a competitive advantage.

1. Reputation gain and brand image

Being environmentally responsible has a positive impact on an organization's reputation. Ethical business practices have been proven to directly impact on the attachment of current customers to a company's brand, thereby building loyalty.

Moreover, when looking to make a difference, a future client hesitating between two or more alternatives will tend to opt for the one with an environmentally responsible reputation. It is important to note that to reap the benefits of its reputation, the organization must ensure that its efforts are known to the public and put forward.

2. Cost savings 

While adapting to climate change and going green may seem expensive, it could pay off in the long run.

Think of businesses with more efficient processes requiring fewer resources or renting smaller premises due to their employees’ telecommuting. Some will also be able to significantly reduce their energy bills by installing solar panels and implementing a fleet of hybrid vehicles.

3. Innovation

Some organizations may go so far as to invest in research and development to find new green processes, products, or services. The new discoveries may serve as an active revenue stream.  

Towards the Future

Future events attributable to climate change will certainly impact current and future businesses. These events may have a dramatic or beneficial impact on organizations, depending on how quickly they can prevent risks and seize opportunities that arise.