Why Is the Green Economy Growing Twice as Fast as the Rest?

World Environment Day falls on 5^th June and this year’s theme is Climate Change.  Host country, Azerbaijan, in collaboration with the United Nations Environment Programme (UNEP), will lead discussions between business leaders, governments and community groups to address climate action and sustainability more generally. Climate change is no longer a distant threat and the need for businesses to mitigate and build resilience is becoming increasingly urgent.  This blog will help you understand the impacts, risks and explore potential opportunities.

Effects of Climate Change

Whilst scientists may not be able to categorically link individual weather events directly to climate change, what is clear is that these events are becoming more frequent and impactful. The UK for example has suffered four named storms so far this year. Storm Goretti brought rare thundersnow to Wales in January and resulted in travel chaos: trains were cancelled and snowploughs and gritter were unable to operate at times due to the extreme conditions. There were school closures, power cuts and exams and football matches were postponed.

Storm Ingrid created more travel disruption in south-west England especially as parts of the reinforced seawall in Dawlish collapsed impacting rail services to/from the Southwest.  Just a few days later Storm Chandra resulted in widespread flooding with the Department for Infrastructure reporting over 1,000 incidents.

In April Storm Dave wreaked havoc throughout the UK with high winds and blizzards resulting in flooding, travel disruption and many homes losing power.

Conversely, in 2022 the UK experienced its highest temperature on record of 40.3°C prompting a Level 4 Heat-Health Alert for the first time. Climate scientists have warned that heatwaves are becoming more likely which can also lead to travel disruption and affect critical infrastructure including energy, IT and water. Indeed, despite this year’s storms and associated flooding, parts of England remained designated drought areas until March 27th.

Extreme weather events are not just an inconvenience.  Hundreds of families have been forced to vacate their homes rendered inhabitable following this year’s storms. Shocking statistics from UK Health Security Agency reveal that there were over 2,000 cold-related deaths in the UK in January alone. It is also estimated that there were 2,985 excess deaths linked to the 2022 heatwaves.

Risks to Businesses

Risks depend upon the sector that each business operates in. However, disruption from storms, floods and heatwaves are already impacting UK businesses’ ability to operate increasing costs, disrupting supply chains and causing physical damage to infrastructure. There are mounting health and safety concerns for those repairing infrastructure in freezing conditions. Heatwaves can result in reduced productivity and affect the health and wellbeing of staff through dehydration, heat exhaustion and even heatstroke.

Weather related insurance claims are rising, impacting the industry and increasing premiums more widely.

The Human Connection

Humans have been contributing to climate change for the last 250 years or so through the production of greenhouse gases. The industrial revolution was powered by the combustion of fossil fuels which produces carbon dioxide. Continuing to rely on fossil fuels and the industrial felling of trees has led to an increase in atmospheric carbon dioxide of over 50% since pre-industrial times.  Other greenhouse gases include the production of methane in dairy farming and decomposing food waste; F-gases used in refrigeration and air conditioning and nitrous oxide from chemical fertilisers.

Whilst carbon dioxide is the most prolific greenhouse gas, methane, F-gases and nitrous oxide are far more potent.

Mitigation

To mitigate the impact of climate change, the emissions of greenhouse gases must be reduced and carbon sequestration measures including the protection of rainforests, tree planting and rejuvenating peat bogs need to be implemented at pace. Many UK businesses are subject to legislative requirements to consider carbon savings.    

For example, quoted companies must publish their carbon footprint with their director’s annual report to include greenhouse gas emissions from the combustion of fuel and the operation of any facility.

Large undertakings with at least 250 employees and an annual turnover in excess of £44 million and an annual balance sheet total exceeding £38 million are subject to The Energy Savings Opportunity Scheme (ESOS). These businesses must consider how participants can improve their energy efficiency through various means such as energy management practice; behaviour change intervention; training and capital investment.

In addition, large companies, LLPs and groups may be subject to Streamlined Energy and Carbon Reporting (SECR). To be applicable, at least two of the following three criteria must apply: 250(+) employees; annual turnover £36million or more; balance sheet of £18million or more. Qualifying organisations must calculate their scope 1 and scope 2 emissions and publish their findings if they have consumed 40MWh or more that year.

These schemes provide opportunities to consider the source of emissions and how they can be reduced through energy efficiency savings and a switch to renewables, which in turn will reduce greenhouse gas emissions and mitigate climate change. Organisations not subject to these legislative requirements should still consider their carbon footprint as reducing emissions can also make economic sense.

Adaptation

If organisations have not already done so, it is recommended that an asset level damage assessment be conducted to highlight specific climate related vulnerabilities which is then fed into crisis and recovery plans. Climate adaptation should be embedded within organisations with full C-suite engagement and hotspots identified. Diversification of supply chains and policies to support employee wellbeing should result. Contingency planning can lead to new commercial opportunities and help prepare staff in addition to managing climate risks.

Opportunities

Mitigating climate change will reduce future impacts. However, businesses still need to build resilience and consider opportunities available to them. Azerbaijan, this year’s host of World Environment Day, is an oil-rich country but recognises the need for climate mitigation and is pursuing “green growth and renewable energy at pace”. Its President is also backing a transition to green energy.

Furthermore, the World Economic Forum has found that the global green economy is worth $5trillion and will exceed $7trillion annually by the end of the decade.  As the green economy is deemed to be growing at twice the rate of traditional industries, it makes economic as well as environmental sense to invest in renewables, especially given the cost of solar photovoltaics, lithium batteries and wind energy has fallen dramatically since 2010. Energy efficiency measures should also result in cost-savings.

Structural damage caused by adverse weather has led to a surge in insurance claims highlighting the economic impact of climate change on the insurance industry with some areas becoming more difficult to insure. The Climate Change Committee has urged UK businesses to understand their exposure both at home and in their supply chains as traditional methods of insurance are reconsidered.

The Government of Jamaica has put such contingency plans in place as part of its National Natural Disaster Risk Financing Policy. Last October the Island was devastated by Hurricane Melissa, the strongest storm to hit Jamaica in modern history.  The Policy includes a catastrophe bond where a payout is triggered by pre-agreed parameters regarding the strength of the hurricane rather than the traditional insurance policies which value the damage caused. The Hurricane met the pre-agreed criteria resulting in an immediate payout enabling disaster recovery to begin at speed rather than wait for an assessment of the economic damage wreaked by the hurricane.

Conclusion

The impacts of climate change are being felt globally. This year on World Environment Day the UNEP is calling for international action for us all to step in, move further and steer a world already in motion. Tackling climate change requires full-scale collaboration between countries, industry, social groups and individuals. We know what needs to be done and the 5^th June could be a good time to step up.  

Build the skills to lead your organisation’s climate response. Understanding climate risk is the first step; acting on it with confidence is the next. Astutis offers accredited environmental and sustainability training to help you and your teams mitigate impacts, build resilience and seize the opportunities of the green economy. Get in touch with our team today to discuss the right training for your organisation or browse our full environmental course library below.