- Climate change is a risk amplifier that compounds the impact and complexity of other risks that businesses and governments face around the world.
- Businesses in Canada are already feeling the impacts of climate change through extreme weather events, employee health, and business and supply chain disruptions.
- Businesses must consider their climate change risks and incorporate it into their risk assessment process. Through understanding climate change risks, businesses can enhance their resilience and be better prepared for future uncertainty.
Climate change is not just an environmental issue, it is also an economic issue. It poses critical challenges to businesses in the Greater Toronto Area (GTA) that will only worsen if we let human-caused, heat-trapping greenhouse gas (GHG) emissions continue to increase. Climate change also offers significant opportunities to businesses to be innovators in adaptation to protect themselves (coping with impacts of climate change) and their communities and make a positive difference through mitigation measures ( reducing GHG emissions).
According to Allianz Global, climate change continues to rank among the top risks for businesses in Canada and across the globe (Figure 1). Considering how climate change contributes to and amplifies risks associated with business interruption, natural catastrophes, and pandemic outbreaks, addressing climate change reduces risk across many categories.
In recent years, concern for climate change-related risks has grown and it is reflected in many business risk assessments. This is in large part due to the increasing number and severity of climate-related disasters that are happening in Canada and abroad every year, leading to material impacts on businesses. Aviva Canada’s Risk Insights Report also highlights public health, employee mental wellbeing, and business and supply chain interruptions as top risks, all of which will be worsened by a warming climate.
Though many organizations understand that climate change is happening, many are not aware of their personal climate change-related risks, or how their organizations will be impacted. Assessing these risks is vital to understand how a business is vulnerable and to identify strategies to reduce those vulnerabilities.
In addition to assessing these risks, businesses should consider how they contribute to climate change and what they can do to reduce their impact. From a mitigation perspective, businesses have an opportunity to support the transition to a clean energy future through energy conservation, fuel switching, heat recovery, carbon capture and storage, investing in low-carbon transportation, and inspiring behaviour change . Green investments are an investment in a brighter future for business and the environment, alike.
Why Should Businesses Care About Climate Change Impacts?
Climate change is already affecting businesses in Canada and around the world to different extents. From acute shocks to chronic stresses, climate change is:
- Hurting businesses’ bottom lines
- Affecting workers’ productivity, health, and safety
- Increasing the cost of labour and materials
- Increasing the cost of insurance and uninsured costs
Small and medium-sized businesses are particularly vulnerable. Approximately 25 percent of businesses in the U.S. do not reopen following a disaster, according to the Federal Emergency Management Agency. Small and medium-sized businesses made up 98% of the Canadian economy in 2021.
Even if all human-caused GHG emissions were to stop tomorrow, the climate will continue to change as the vast majority of the heat-trapping GHGs we have already emitted are stored in the oceans, which slowly releases them back into the atmosphere. So, while businesses in North America need to continue to reduce GHG emissions, it is also imperative that businesses take actions to adapt and prepare for current and future impacts.
Building Business Resilience by Reducing Vulnerability
Building business resilience requires understanding an organization’s climate change risks. Each business’ risks will depend on their exposure and vulnerability to climate change impacts, which are highly context specific. Exposure refers to the degree of risk in a particular context, such as a business situated in a floodplain and be at risk of flooding during severe storms. Vulnerability is the extent to which said business is prepared for a flooding event. Consider two businesses located in the same area that is prone to flooding. If one business has features that reduce the flow of stormwater like blue roof, impermeable paving, and rain gardens, they are less vulnerable to the risk of flooding.
The climate change risks include risks to human health, buildings, infrastructure, supply chains, and the financial and agricultural systems communities depend on. Regions and businesses will experience these risks differently., Incorporating climate change scenarios and data into the business risk assessment process can help businesses identify potential risks that should be addressed. Exactly which ones a business prioritizes will be based on their individual risk appetites and coping capacities. Utilizing tools like a risk matrix can help compare different risks to determine which ones require more urgent action. Once they are identified, appropriate strategies can be taken to address them, including strategies that focus on current vulnerabilities or account for potential future impacts.
The Path Toward Business Climate Change Resilience
While each business will need to examine their own operations to create specific roadmaps to resilience, there are key factors that provide the foundation for a climate resilient business:
- Aggressively pursue mitigation efforts – the closer an organization is to net-zero, the less vulnerable it is to financial and regulatory risks or adverse market developments
- Create adaption plans for climate related physical risks throughout your operations and supply chains, and the communities in which you operate
- Connect with expert organizations that can provide knowledge sharing, capacity building and networks to accelerate your journey towards climate resiliency
Partners in Project Green’s Building a Climate Resilient Business Resource Kit provides a foundation in the basics of current climate science, the impacts of climate change on businesses, and mitigation and adaptation strategies. Please explore these resources and connect with us to advance your organization’s climate resiliency.
 Allianz Risk Barometer 2022. 2022. Allianz Global Corporate & Specialty SE. Accessed October 15, 2022. URL: https://www.allianz.com/en/press/news/studies/220118_Allianz-Risk-Barometer-2022.html
 DiSabatino, A. 2022. Canada’s 3 Top Business Risks. Canadian Underwriter. Accessed September 2, 2022. URL: https://www.canadianunderwriter.ca/insurance/canadas-3-top-business-risks-1004216498/
 Aviva Canada. 2022. Risk Insight Report: Analyzing the risk facing Canadian businesses. Accessed July 7, 2022. URL: https://www.aviva.ca/content/dam/aviva-public/ca/pdf/Reports/aviva-canada-risk-insights-report-2022.pdf
 FEMA. 2018. Stay in Business after a Disaster by Planning Ahead. Accessed September 2, 2022. URL: https://www.fema.gov/press-release/20210318/stay-business-after-disaster-planning-ahead
 Statistics Canada. 2022. Small and medium businesses: driving a large-sized economy. Accessed October 27, 2022. URL: https://www.statcan.gc.ca/o1/en/plus/1253-small-and-medium-businesses-driving-large-sized-economy
 Cardona, O.D., M.K. van Aalst, J. Birkmann, M. Fordham, G. McGregor, R. Perez, R.S. Pulwarty, E.L.F. Schipper, and B.T. Sinh. 2012. Determinants of risk: exposure and vulnerability. In: Managing the Risks of Extreme Events and Disasters to Advance Climate Change Adaptation [Field, C.B., V. Barros, T.F. Stocker, D. Qin, D.J. Dokken, K.L. Ebi, M.D. Mastrandrea, K.J. Mach, G.-K. Plattner, S.K. Allen, M. Tignor, and P.M. Midgley (eds.)]. A Special Report of Working Groups I and II of the Intergovernmental Panel on Climate Change (IPCC). Cambridge University Press, Cambridge, UK, and New York, NY, USA, pp. 65-108.