Organisations are already impacted by climate change. And these impacts will increase as climate hazards multiply and worsen. OK, but HOW exactly are they going to be affected?
To answer this question, we need to consider 3 essential principles. First principle: think value chain. Climate change won’t just affect the business operations, but the entire value chain.
All upstream and downstream activities. Here's a cotton t-shirt produced and distributed by a company we're going to call . .
. Fashion 2050. Fashion 2050's entire business model is centred on the sale of this t-shirt.
So, how will climate change threaten this business? Firstly, by impacting its supply chain. To produce this t-shirt, we need cotton.
And growing cotton requires certain conditions: a lot of water, but also a specific climate, with a very precise temperature and humidity level, etc. Due to climate change, cotton yields and quality are under serious threat. And that impacts prices.
In the United States in 2022, Texas experienced an exceptional drought which dramatically reduced the yield of cotton. As a result, the price of American cotton soared. Clearly, climate change means rethinking our supply chains.
Then, the t-shirt has to be manufactured. Fashion 2050’s factories need water here too. Just to dye fabrics, 100 to 150 litres of water are needed for 1 kilo of cotton!
If a drought happened, the plant would have to slow down. . .
or even close. Another key point is employee productivity. Let’s look at heatwaves.
A 2017 study showed that, in just that year, 150 billion hours of labour were lost worldwide because of high heat. . .
. A figure that has risen by SIXTY PERCENT in twenty years! And of course, it doesn't stop at productivity: loss of alertness, heatstroke, accidents in the workplace.
. . the risks are numerous.
Overall, employee health is threatened. . .
and so must be protected. That's a lot for Fashion 2050, isn't it? But.
. . it's not over yet.
Now that the t-shirts have been produced, well, it's time to sell them. And climate change may also have an impact on demand. In other words, on your market.
Longer summers and shorter winters will change clothing habits. You’ll have to anticipate this. .
. It will impact your sales, but it also means new opportunities! An opportunity to rethink your offerings.
. . and even your business model.
Well, as you have just realised, some sectors are directly and immediately vulnerable. . .
Like those which heavily depend on natural resources, such as water. This includes textiles, but also agri-food and energy. In other sectors, the effects of change are less direct.
. . but still significant.
In fact, NO sector is immune. This is the second message to remember. To help you reflect on this, we're going to talk to an expert, Arnaud Vanon.
Hello Arnaud, Hello! You are a risk management consultant. How can you tell if an organisation and its value chain are at risk from climate change?
There are three key questions to ask. The first question is: do the buildings and the infrastructures I need depend on the climate? Buildings can be affected by flooding, hail, snow and wind, etc.
As far as external infrastructures are concerned, take the example of railway tracks, which will expand and break under the effect of intense heat. The second question is about equipment, machinery and materials. Do they depend on the climate?
Look at the example of a computer or server room that has to operate within a specific temperature range. If this temperature range is exceeded, the servers shut down. It's the same for materials.
Take meat, for example, which must be stored at four degrees, or even medicines in the pharmaceutical industry. And then you mentioned a third question? Yes, and this might be the most important: the question of people and workers within the company.
Heat, for example, will have a major impact on factory working conditions. Add humidity to the mix and things get very complicated. In conclusion, the more you know about your organisation and climate-related impacts on it, the stronger you are in the face of climate change.
Thank you very much Arnaud! Thank you! Let's move on to the final key message of this video: climate change sometimes has indirect impacts that are harder to anticipate.
And in particular, cascading impacts. Let's take an example. Here we are in London, in summer 2022.
The British capital was gripped by an unprecedented heatwave. . .
Some cooling systems failed, particularly those in the Google and Oracle data centres. The servers shut down. This had CASCADING consequences.
. . Online services such as Wordpress and Atom Bank were unavailable for several hours in parts of Europe.
So what should you remember here? First of all, you won't be able to plan for everything. But the more you anticipate, the more you can limit the risks for your organisation.
Now, you understand why it's essential to start thinking about adapting your organisation to climate change now. . .
whatever your sector. In the next video, we're going to look at how to launch YOUR adaptation strategy.
