In theory, adapting to climate change sounds like a good thing for companies to do. But a lack of understanding of the costs of inaction, unclear performance indicators and unreceptive organizational cultures often prevent businesses from taking concrete action on environmental issues. The bottom line is that climate change adaptation makes business sense — so seize these five opportunities to improve your bottom line:
- Improve employee performance: A study by Lawrence Berkeley National Laboratory shows improvements to indoor environments through building upgrades can reduce health care costs by nine to 20 percent, asthma and allergies by 18 to 25 percent, and non-specific health and discomfort effects by 20 to 50 percent. Further research shows that offices with improved ventilation saw absenteeism fall by 35 percent.
- Reduce building costs: A two percent increase in upfront costs for an energy-efficient building can yield an average life savings of 20 percent of construction costs, according to a 2003 study by the California Sustainable Buildings Task Force. So an initial upfront investment of $100,000 of green building features onto a $5 million project, for example, can result in $1 million saving over the life of the building.
- Realize long-term savings from energy retrofit: A typical retrofit yields a return on investment of eight to 20 percent (five to 12.5 years). After you recoup the investment, says a report by HB Lanarc and Shaun Martin Consulting, the reduced energy spending will provide your company with greater fiscal flexibility.
- Protect against financial, hazard, operational and strategic risks: Companies are being required to disclose climate risks in their MD&A. Firms that identify, analyze and act on emerging risks earlier than their peers will be better positioned to avoid or mitigate potential damages.
- Attract investors: Some global institutional investors are beginning to use climate change management and disclosure as a proxy for good management. To take advantage of this opportunity, firms must demonstrate the outcomes of climate change adaptation strategies in metrics and indicators that are familiar to financial analysts.
With such concrete benefits to climate change adaptation, it is no wonder companies are starting to integrate climate change adaptation into their strategies. For a better understanding of the business risks and opportunities associated with climate change adaptation and practical steps for companies to implement, take a look at “Managing the Business Risks and Opportunities of a Changing Climate: A Primer for Executives on Adaptation to Climate Change”.