How Climate Change Affects Business (and How Leaders Can Respond)


Some business leaders believe that the only reason to care about climate change is that consumers care about climate change. With this mindset, these leaders might do the bare minimum to convince their audience that their organization utilizes sustainable practices.

Yet, there are plenty of important ways that climate change directly impacts business performance. Changing weather patterns, government regulations, consumer behavior and other efforts of climate change promise to disrupt previous methods of doing business. The sooner business leaders learn how their organizations will be affected by climate change, the sooner they can enact significant and lasting sustainable practices.

Emission Control Systems

Organizations that rely on refineries or manufacturing facilities to create their product will likely face increasing pressure to install emission control systems to comply with government regulations on pollution. Emission control systems limit the discharge of pollutants, especially greenhouse gases, to keep the surrounding environment cleaner and safer. However, emission control systems can be costly to integrate into existing facilities, and their ongoing maintenance will be another business expense.

Business leaders interested in developing a green corporate image might get ahead of government regulation and install emission control systems before it’s mandatory. This can help curb pollution rates and perhaps slow climate change to prevent more extensive government interference.

Cap and Trade Rules

A system for limiting pollution that has gone into effect around the world, Cap and Trade could be more stringently enforced in the U.S. as climate change escalates. Cap and Trade works by a government agency setting an upper limit on an organization’s production of a particular type of pollution. Companies can buy and sell unused pollution allowance to one another, which adds expense to those organizations most involved in manufacturing, transportation or other emissions-heavy industries.

Currently, a handful of states have their own local Cap and Trade rules, but as climate change intensifies, the U.S. Federal Government could enact wide-reaching Cap and Trade regulations. This has the potential to limit business growth and cut into corporate budgets in negative ways.

Weather Patterns

Climate change isn’t a matter of slightly warmer summers and cooler winters; it is a marked shift in weather patterns around the world. Every element of the Earth’s natural environment is inextricably linked, so when the average ground temperature changes by even half a degree, it can cause cataclysmic natural disasters like hurricanes, wildfires, tsunamis and mudslides.

Weather patterns matter to businesses because unexpected weather phenomena risk valuable business assets. Businesses could lose access to natural resources because changing weather prevents those resources from flourishing or thwarts access to regions where those resources can be found. Businesses could also suffer extreme losses from damage due to weather events.

Changing Demands

A changing climate will change consumer demand for certain goods and services, which could endanger some business markets. For example, as temperatures rise, the need for cold weather goods might start to decline. Business leaders who closely track market demand from their target audience should be aware of the risk that climate change poses.

Savvy business leaders might take advantage of shifting consumer demand if they can adequately predict how climate change will affect their target audience. Already, consumers are showing a preference for sustainable products, so business leaders might want to invest in making their products more durable, more natural or otherwise more environmentally friendly.

Public Perception

A business’s reputation is of utmost importance to its success. Businesses need to win consumer support, and amidst the climate crises, organizations should focus on building a reputation for sustainable practices.

Increasing numbers of consumers demand that corporations take responsibility for combating climate change, so business leaders should put effort into developing a more sustainable business strategy.

Leaders can learn more about building a sustainable business plan by taking a business sustainability management online course. Sustainable development involves economic sustainability, social sustainability and environmental sustainability, which should keep a business operating productively for decades to come.

Climate change is real, and climate change really affects businesses in every industry. Business leaders can benefit by proactively developing sustainable solutions for practices and products, which should help organizations avoid many of the costs associated with running a business in a climate crisis.