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Is your business transforming for climate change?

A survey reveals how top companies are combatting climate change in their approach to sustainable transformation. Businesses must act more quickly as cybersecurity and environmental concerns rise.

By

Amy Haddon

Is your business transforming for climate change?

Traditionally, organizations have evaluated the health of their business based on how much profit they generated and how much value could be delivered to shareholders. As the threat and impacts of climate change escalate for organizations and communities, stakeholders are demanding an immediate change to this mindset.

The world is seeing increased impacts from extreme weather events, from devastating drought and wildfires in Canada, the U.S. West and Brazil, to severe flooding in Europe and China. Human lives are being lost, business supply chains are being severely disrupted, and dramatic energy supply and pricing volatility can be seen in many markets.

Taking action on climate change is more urgent than ever. We also know that the challenge of climate change is not something that can be addressed by a single organization, industry, country, or government. For many businesses, effectively responding to the urgent call for climate action and the transition to a net-zero economy will require a fundamental transformation of their way of doing business.

To better understand corporate progress towards sustainable innovation and rapid decarbonization, we surveyed 100 global business leaders about how climate change is impacting their business today and how they intend to transform their business to combat the threat of climate change.

Businesses are already feeling the pain of climate change

Climate change-related business risks and mitigation plans are on the minds of almost all business leaders, according to our research. Of the senior leaders who responded to Schneider Electric’s survey, coming from organizations around the world with over $250 million in annual revenue, 63% said that their organization has already identified where they are exposed to potential climate change risks and begun developing an action plan. In addition, 30% said that they are becoming aware of these risks and impacts.

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The threats that these organizations are assessing and building plans to mitigate and adapt to are diverse, but rising to the top of our respondents’ minds were cybersecurity, extreme weather events, insurance costs and lack of insurability, supply chain issues, and natural resource scarcity.

The intersection of climate change and cybersecurity is particularly interesting and continues to rise in relevance to businesses based on our research. The impacts from climate change act as a destabilizer for societies and economies, and have a trickle-down effect for most businesses.

As such, the critical physical and digital infrastructure that enables cybersecurity is also affected by climate impacts such as sea level rise and water scarcity. As electrical grids struggle to maintain resilience in the face of extreme weather events, large digital infrastructure energy users, like datacenters and supercomputers, will struggle to maintain cybersecurity as volatility to their energy supply and available water for cooling adds additional risk to their operations.

The outdated electric grid in North America, for example, has become increasingly vulnerable to both climate change and cyber threats. Several instances of this grid vulnerability, which manifested just months apart in 2021, demonstrate the importance of this risk:

• In February 2021, during a climate change-exacerbated bout of extreme cold in Texas, the unprecedented temperatures tripped more than half of the ERCOT power grid at one point, leading to a humanitarian and financial crisis that left millions of people without access to power or fresh drinking water.

• In May 2021, the largest successful cyberattack on oil infrastructure in U.S. history shut down a fuel supply line, which provided nearly half of the East Coast’s gasoline, diesel, and jet fuel. This crippling attack led to panic buying and gas shortages at the pump, sent prices spiking, and arose questions around how to secure supply to keep business operations running smoothly.

Business model transformation is not moving quickly enough

While the results show that most leading organizations are identifying climate risks and making plans to mitigate those risks to their business, the results also indicate that businesses need to accelerate progress on concrete actions. Only 21% consider their organization to be significantly advanced in the adaptation of their business model to be more environmentally or socially responsive, and only 7% have already completely transformed their business.

To meet the levels of decarbonization required to avoid the worst impacts of climate change, companies will need to go beyond making changes to individual products or processes, as the largest subset (36%) of respondents say they have begun to do. True transformation requires cross-functional, enterprise-wide collaboration on reduced emissions production and resource consumption, innovation, and design for a sustainable future.

The tools to reach this level of decarbonization exist and are available for organizations to take advantage of today. However, our research indicates that although business leaders are familiar with sustainable business concepts, such as purpose-centered business and sustainable development, their awareness of practical solutions to actually transform and mitigate climate related risks is more mixed. For example, microgrids, onsite and offsite renewables, Energy as a Service, and circular economy practices were among the topics respondents reported they were least familiar with.

As customers, investors, and regulators demand greater action on climate change, this research validates that organizations need to rapidly increase their knowledge about practical climate solutions and actions towards transforming their business to be climate change resilient. Decarbonization of operations and building a business that is resilient to climate change are not only required to meet the demands of your stakeholders, but also to ensure your business can stand the test of time.

Download our research to dive into these findings, and more.

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