The Price Tag of Inaction: Climate Change's Toll on Businesses

By Sarah Hill, July 11, 2023

The outsized negative impacts of climate change, including but not limited to rising costs and decreased worker productivity, should push businesses to be proactive in tackling climate change and adopting sustainable practices.

Climate change is well-known as a serious threat to our planet. Many people today are deeply concerned about the effects of climate change and are actively trying to address them and prevent worse. However, for many, it can feel like businesses are unaware of the dangers they personally face because of climate change. This can make it hard for businesses to see a need to reduce their environmental impact. However, it can be a big tool for people, as consumers and employees, to be aware of the effects of climate change on business, so society can raise its voice and call for climate action to be taken by businesses. Particularly, being aware of the most important variables of and impacts on business is key, such as expenses and production.

One way climate change affects business is through rising costs, because of insurance and diminished supplies. Insurance costs are increasing because climate change is exacerbating extreme weather events such as storms and flooding. As a result, premiums for protection against these events are rising to counter insurance companies’ rising risk, and in some cases insurance is no longer being offered. This results in higher costs for businesses, as even businesses need to be protected against these weather hazards, and will negatively impact their bottom lines. Bottom lines will also be negatively impacted due to diminished supplies, including food and water but also the raw materials businesses need to produce goods. On top of these raw materials existing in smaller quantities, difficulty for businesses in obtaining them may also come from countries’ protection over their (now threatened and diminished) natural resources, in part to avoid overexploitation countries have historically witnessed and continues today to some extent. Focusing on businesses though, in order to get the raw materials needed to produce the goods they sell, they’ll now have to pay a higher cost (and perhaps compete with each other) to persuade countries to let go of some of their own natural resources, or suffer from reduced sales due to limited production of goods. Through these two primary ways, climate change is increasing costs for businesses, but this is not the only way it is impacting them.

Another adverse impact due to climate change is again related to the production of goods, due to decreased worker productivity. Studies have shown that extreme weather events can induce psychological stress amongst workers, resulting in decreased productivity and efficiency. To expand on this issue of stress decreasing worker productivity, the American Institute of Stress has reported that businesses in the United States lose up to $300 billion annually as a result of stress in the workplace, and about one million workers miss work every day because of stress. Stress caused by climate change is not only limited to extreme weather events either, but can be more general, simply because of people becoming anxious about the future, a phenomenon now termed ‘eco-anxiety’. In this way, an increasing number of workers, if not all, face greater stress and, as a result, businesses suffer from decreased worker productivity and aren’t able to be as efficient as in previous years.

By viewing the dangers of climate change through the lens of its negative impact on business, society can mobilize a greater number of people to support climate action, through both adaptive and mitigative initiatives. The outsized negative impacts of climate change, including but not limited to rising costs and decreased worker productivity, should push businesses to be proactive in tackling climate change and adopting sustainable practices. This will be especially motivating for certain industries, including agriculture and energy, but no business can avoid the impacts of climate change and all must contribute to reducing greenhouse gas emissions so society can mitigate it. Now is the time for climate action, from consumers and business alike, in order to have a brighter future.

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