Business on the Edge 2024

3.1 Five socio-economic systems: building blocks of a prosperous and inclusive world This section illustrates the direct consequences of seven climate hazards across five socio-economic systems that businesses globally contribute to and depend on. The consequences are clearly visible in the value chain of any business engaged in each of these systems and extend beyond fixed asset losses. The five socio-economic systems are: –Agriculture, food and beverages –Built environment –Technology –Health and well-being –Financial services The societal implications of climate hazards are far-reaching, affecting economies, businesses and communities on a global scale. Climate hazards disrupt operations and essential services, damage infrastructure, increase costs across industries, trigger jobs and income losses, and threaten workforce health and productivity. These disruptions extend beyond businesses, undermining societal well-being by causing direct physical health impacts and jeopardizing essential services such as healthcare, housing, food and water. The mental health toll is significant, as communities face the stress of environmental instability, displacement and the uncertainty of future climate risks. As ecosystems degrade and climate risks escalate, social inequalities widen, with marginalized communities often facing the worst impacts. The compounded effects of climate hazards make it clear that business resilience and long-term economic prosperity are deeply intertwined with the health and well-being of the communities in which they operate. Businesses large and small will face growing consequences from climate hazards in the form of supply chain costs and reduced financial performance, economic instability, and risks to societal well-being and cohesion. A recent study quantifying the impact of global heatwaves on health, labour productivity and other indirect supply chain losses, including crop failures, projected net economic losses of between $3.75 and $24.7 trillion by 2060, depending on the emissions scenario studied.51 Extreme heat is expected to lead to decreased worker productivity in heat-stressed zones, with certain occupations especially vulnerable due to outdoor exposure and significant physical exertion – for example, growing and harvesting crops, hauling and building with heavy materials for construction, and unloading crates for shipping.52 In 2022, heat exposure resulted in an estimated 490 billion lost labour hours, nearly 42% higher than losses in the 1990s.53 This corresponded to $863 billion in potential loss of income, with agriculture most severely affected.54 The World Economic Forum estimates that heatwaves alone will depress productivity by $7.1 trillion by 2050.55 Investing in climate adaptation not only protects business assets but also helps sustain the societal systems that underpin stable and thriving economies. The following sections in this chapter provide high- level recommendations for each of the five socio- economic systems, building on the framework introduced in the Forum’s January 2023 white paper, Accelerating Business Action on Climate Change Adaptation. Climate hazards disrupt operations and essential services, damage infrastructure, increase costs across industries, trigger jobs and income losses, and threaten workforce health and productivity. 26 Business on the Edge: Building Industry Resilience to Climate Hazards