While the activities of businesses are among the top producers of GHG emissions, they can also make major contributions to the reduction of GHG emissions. Businesses are creating innovative solutions to prevent, adapt, and mitigate the effects of climate change. These solutions have the potential to benefit both people and our planet.
Companies recognize that climate change poses financial risk and opportunities to their business, primarily in the form of physical risk and transition risk.
Physical risk refers to the economic costs and financial implications resulting from climate change, such as increasing extreme weather events, severe climate shifts, and other indirect effects of climate change.
There are two types of physical risk:
Transitional risks are related to the process of transitioning away from reliance on fossil fuels toward a low-carbon economy, including shifts in climate policy, regulation of certain industries, and demands from consumers and investors.
There are four types of transitional risk:
Not just businesses and governments play a role in making a difference, but individual action is crucial to change. The first thing any responsible consumer needs to be aware of is greenwashing.
Greenwashing is a marketing tactic that businesses use to convey a false sense of how environmentally conscious a product may be. This can be done intentionally or on accident — some companies may be unknowingly greenwashing.
Kenton, Will. “What Is Greenwashing? How It Works, Examples, and Statistics.” Investopedia, Investopedia, 18 Oct. 2022.
A shoe company may claim that there is “50% more recycled content” in their new shoes. But the manufacturer only increased the recycled contents by 2% to 3%. Though their claim may be true it conveys a false impression of significant amounts of recycled material added.
A company may brand themselves as “eco-friendly” for using recyclable packaging, meanwhile increasing water waste during production.
[W]arming of the climate system is unequivocal, and since the 1950s, many of the observed changes are unprecedented over decades to millennia. The atmosphere and ocean have warmed, the amounts of snow and ice have diminished, and sea level has risen.
The Intergovernmental Panel on Climate Change (IPCC)
Given your current industry, what are some potential climate risks that could affect you and how might this affect your business?
Software platforms like Persefoni have been developed as cutting-edge tools to calculate GHG emissions. Companies' emissions can be easily benchmarked to enable comparability between other companies, geographies, and sectors.
Persefoni can also help organizations model reduction commitments in line with the goals of the Paris Agreement.
You’ve completed the introductory module on climate change. For more information, check out our module on carbon accounting!