This Earth Day, Take Control Of Climate Risk
Each year, Forrester tracks the top systemic risks — external events that impact your firm and customers but are out of your control — facing organizations. The impacts of climate change are both short-term, in the form of severe weather, drought, and heat waves, and long-term, in the form of biodiversity loss, sea-level rise, and rising temperatures.
Climate risks are everywhere, and consequential climate events occur frequently. For businesses, Earth Day is a reminder of the risks of climate inaction. Not only are climate events more frequent, but they are also becoming more costly. For example, the US National Oceanic and Atmospheric Administration’s National Centers for Environmental Information reported 18 weather and climate disasters in the US, costing at least $1 billion in 2022 — a three-way tie with 2017 and 2011 for the third-highest number of billion-dollar disasters in a calendar year. In 2021, the US experienced 20 of these disasters, and according to NASA, 2020 was a record year for devastating wildfires on nearly every continent.
Companies of all sizes are starting to realize that climate risk isn’t just an existential crisis for consumers and governments to deal with — it tangibly threatens their business, operations, people, and assets. In 2021, the world became aware that semiconductor chip manufacturing required water, and lots of it, when droughts in Taiwan strained production. Companies underestimate systemic risk because it feels vague and far off, but this is far from the truth when we look at the real impacts of climate risk.
While it took decades to raise global awareness about climate risks, it only takes a day for businesses to consider how climate risk impacts their customers, employees, and bottom line. Treat this Earth Day as a call to action, and add climate risks to your systemic risk purview.
Want to see where climate risk ranked on the list? Read The Top Systemic Risks, 2023. To learn more about systemic risks, schedule a guidance session or inquiry with me and Alla Valente, and look for upcoming research on systemic risk and sustainability.