Corporate Sustainability Management: Climate Change Impact Report

This report examines the multifaceted impact of climate change on corporate sustainability, with a specific focus on the insurance industry's challenges and responses. It begins by outlining the core issues related to climate change, including rising global temperatures, extreme weather events, and t...Read More

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Corporate Sustainability Management

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Table of Contents
Introduction................................................................................................................................2
Issues..........................................................................................................................................2
Business Interface......................................................................................................................3
Conclusion..................................................................................................................................5
References..................................................................................................................................6

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Introduction
The world and industries are facing various challenges in different dimensions of
sustainable development and there is a growing focus on the corporate role in contributing
and confronting sustainability problems, specifically in relation with Sustainable
Development Goals (SDGs). This essay aims to identify business impact and role in one of
the major sustainable issue i.e. climate change. Furthermore, the necessary information is
being drawn on how insurance industry is getting affected with this sustainable issue and the
way they respond to overcome the issue. Ultimately, necessary recommendations are also
being presented in relation to the future responses to the issue and potential implications for
business.
Issues
Alam (2017) describes climate change is the increasing occurrence and force of risky
weather events comprising floods, droughts, heat waves and typhoons and caused by the
world-wide upsurge in temperatures triggering numerous negative impact on the earth. Such
effects are interrelated with one another and upturn their fierceness, knocking various species
living on the earth including human. It is one of the most significant challenges to attaining
sustainable development and it put risks to push millions of people into unending poverty.
Climate change is not just a long terms concern or challenge, it is happening currently and it
comprises of various uncertainties for policymakers putting significant in developing the
future. In terms of facts, from 1880 to 2012, there is an increase in average global
temperature by 0.85o C. Global emission of carbon dioxide has raised by nearly 50 per cent
since 1990 and the amounts of ice and snow have diminished with rising of sea level
(unenvironment.org, 2020).
The impact of climate change is universal in scope and unparalleled in scale.
Deprived of extreme action these days, acclimatising to these impacts in the future will be
extra challenging and costly. From legal perspectives, various instruments had been used
such as Krypto protocol wherein 1995, nations introduced negotiations to strengthen the
worldwide response to climate change and with the policy, it binds developed nations to
emission reduction targets and its initial period started back in 2008 and ended in 2012
(un.org, 2020). Following to this, the second period was started in 2013 and same will finish

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in 2020. To this convention, there are now nearly 192 nations jointed to this. In terms of the
regulatory and legal context, Paris Agreement was another step introduced in 2015 to the
parties of UNFCC (United Nations Framework Convention on Climate Change) as a first
pace in confronting the issue of climate change. At present, there is a universal membership
to this agreement as it aims to stop “dangerous” human interference with the climate system.
In a societal context, it can affect the community through impacts on a diverse cultural, social
and natural resources. It can also be called as a social problem as small farmers will sense the
effects, rural and urban poor are the greatest hit, leading to unfit capability for adaption and
communities will be enforced to relocate (Hackmann, Moser & Clair, 2014). However, there
is also a significant impact on the businesses and different industries which will directly
cause loss to the economy.
Business Interface
Climate change is not just the environmental concern as it is inextricably associated to
nearly everything present in the society and it also has started to have an impact on
businesses around the world in terms of changes in resource availability and cost, increased
risk of operations as of weather, changing regulations and rising public pressure (Hernandez
et al, 2014). Taking example of 2011, when drought hit the Great Plains in the U.S., various
meat-processing plants were enforced to end or reposition their productions (sealedair.com,
2020).
The major impact of climate is on the insurance industry and insurance companies
face the dual challenge of addressing escalating related risks and shifting industry
regulations. The rising frequency and sternness of extreme climate and weather change from
US wildfires and to record heat waves in Europe, to floods in Japan – have stood out an
optimistic legal focus on climate change and insurance threats. Climate change is making
insurance sector to much expensive for businesses and people and it can be seen next to the
world largest provision firm accused global warming for $24bn of fatalities in the Californian
wildfires (Neslen, 2019). The industry division is worried that enduring global rise in
temperature could make it’s progressively challenging to present the reasonable financial
security to the individuals, businesses and community needs to function effectively.
In other terms, climate change is not just making impact on the environs but it also
disturbing the insurance sector costs and in 2018, ACCC (The Australian Competition and

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Consumer Commission) presented its head document into its Northern Australia insurance
analysis, as an outcome of increasing household protection expenditures i.e. “an area where
insurance firms go to lose money” purchasing home insurance in Northern Australia by
idealistically expensive as said by native residents. Further inquiry also reported that
insurance premiums in northern Australia have increased by 130 per cent in the last time
span, significantly highest to the rest of the nation (Koster, 2019). Hence, the insurance
industry is expected to be most affected as they required to pay for the damage occurring in
other sectors.
Where many insurance companies are starting to withdraw altogether from offering
insurance in relation to certain catastrophic markets, there are some companies who is
responding well to this situation like they are investing in the shift to a low carbon economy
with allotting investments into assets that lessen greenhouse gas emission (such as energy
efficiency, power generation – renewable energy) and there is also a major role of regulators.
For instance, Deloitte Centre for Financial Services has conducted a survey and it was found
that majority of US state insurance regulators believe on all kinds of insurance firms climate
change risks to raise over the medium to long term – including physical transition and
liability risks (deloitte.com, 2020). The insurance sector is also playing major role by
showcasing itself as an advocacy group in encouraging preventive measures, like land-use
plans, developing codes that enhance resilience counter to the impacts of disaster events.
There are several key areas where the insurance industry is giving adequate response
to the climate change such as raising the profile of climate risks in the organisation,
improving assessment of climate risks using advanced analytics, working with policymakers
and holders to alleviate exposure of climate risks and at last, building climate-resilient public
policies (deloitte.com, 2019). These actions helping them to form a more level playing field
and a stable marketplace for the stakeholders involved. Insurers also know this that one of
their vital function is to price risk and hence, they know how much to charge in premiums to
unsure their consumers. Ultimately, insurant industry devoting significant resources to
evaluating several risks and they have an effective idea than most of the financial effect of
changes in climate.

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Conclusion
In the limelight of above discussion, it can be said that global climate is changing and
this change is ostensible across a wide range of observations. In terms of trends in climate
change, the global warming of the past 50 years is mainly due to human activities. It is also
projected that global climate is anticipated to continue to change over this century and there
have been some variations in different types of extreme weather events over the last several
decades. For instance, heat waves have become more intense and frequent, particularly in the
west. There is also have been regional trends in droughts and floods. From future
perspectives, industries, government and society required to understand climate sensitivity as
it will help in identifying that how much warming might be likely for a specified increase in
the amount of heat-trapping gases.
The potential implications of climate change on businesses can include increasing
burden to act from a wide array of stakeholders and there is also a creation of series of new
business risks. Furthermore, there can be also increasing liability for releasing greenhouse
gases (GHG) and the sum of legal cases can be increased against fossil fuel businesses and
firms, holding them to responsible for the damaging impact of climate change. On the
contradictory side, there can be various opportunities also enabling businesses and industries
to improve their resource productivity and thereby reducing their costs. It can also lead
companies to facilitate innovations like stirring new products and services which are not as
much of carbon intensive or which aid in carbon reduction by others. Lastly, businesses can
improve the elasticity of their supply chains and together, such practices can nurture
competiveness and reveal several marketplace opportunities.

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References
Alam, M. E. (2017). Impact of Climate Change on Agro-Economy of Eritrea,
Africa. Transactions, 39(2), 211.
deloitte.com. (2019). Climate risk: Regulators sharpen their focus. Retrieved from
https://www2.deloitte.com/content/dam/Deloitte/us/Documents/financial-services/us-
fsi-climate-risk-regulators-sharpen-their-focus.pdf
deloitte.com. (2020). How insurance companies can prepare for risk from climate change.
Retrieved from https://www2.deloitte.com/us/en/pages/financial-services/articles/
insurance-companies-climate-change-risk.html
Hackmann, H., Moser, S. C., & Clair, A. L. S. (2014). The social heart of global
environmental change. Nature Climate Change, 4(8), 653-655.
Hernandez, R. R., Easter, S. B., Murphy-Mariscal, M. L., Maestre, F. T., Tavassoli, M.,
Allen, E. B., ... & Allen, M. F. (2014). Environmental impacts of utility-scale solar
energy. Renewable and sustainable energy reviews, 29, 766-779.
Koster, A. (2019). Climate change isn’t just affecting the environment, it’s also affecting the
cost of insurance. Retrieved from https://www.finder.com.au/climate-change-
insurance
Neslen, A. (2019). Climate change could make insurance. Retrieved from
https://www.theguardian.com/environment/2019/mar/21/climate-change-could-make-
insurance-too-expensive-for-ordinary-people-report
sealedair.com. (2020). Why leading businesses today are focusing on climate resiliency.
Retrieved from https://sealedair.com/insights/leading-businesses-focusing-climate-
change
un.org. (2020). Climate Change. Retrieved from https://www.un.org/en/sections/issues-
depth/climate-change/
unenvironment.org. (2020). GOAL 13: Climate action. Retrieved from
https://www.unenvironment.org/explore-topics/sustainable-development-goals/why-
do-sustainable-development-goals-matter/goal-13