Business on the Edge 2024

Companies can face heavy losses and damage from climate hazards. When multiple businesses are hit simultaneously - a common occurrence during extreme weather events - the ramifications extend far beyond individual organizations, cascading through entire industries and regions. The interconnected nature of the global economy means volatility ripples across markets and sectors. This threatens economic downturns and instabilities in financial markets that could culminate in broader economic and financial global crises. These economic impacts are underpinned by social and natural structures, which climate hazards influence both directly and indirectly. Although the cascading economic and societal risks for business are complex and interconnected, they can be understood in three ways to guide appropriate and credible responses: –Direct operational costs: The impact of climate hazards on fixed assets (property, plants and equipment) is the most direct risk businesses face. This report explores the scale and magnitude of associated fixed asset losses in the period 2025-2055. The knock-on impact on company earnings is already alarming, but may well be a conservative estimate given the analysis focuses on fixed assets only and did not incorporate emerging Earth system tipping- point science (see Annex 2: Limitations to the approach). –Supply chain disruption: Climate hazards disrupt every stage of supply chains, from sourcing to processing, distribution and consumption patterns. The section on value chain and societal losses explores the broader business risks through the lens of five key socio- economic systems. This section also illustrates how companies are addressing these risks and offers concrete recommendations for building supply chain and societal resilience. –Instability in nature and society: The vitality of businesses and economies is closely tied to the stability of societies and the natural environment in which they operate. Figure 2 illustrates how the impact of climate hazards on people and nature at local, regional and global levels can disrupt business operations, for example, via working hours lost due to employee health issues or resource shortages. These systemic risks should be incorporated into company resilience solutions. The pace of the climate crisis today means the current temperature statistics in this report will likely be outdated in a year or two. It is critical, therefore, as climate hazards become more frequent and more severe, that business leaders recognize risks not as isolated incidents but as integral components of a complex and moving system that can disrupt economic stability on a macroeconomic scale. Direct and indirect consequences of climate hazards on economies and societies FIGURE 2 Sources: Accenture analysis, World Economic Forum Global Risks Report 2024. Climate hazards hit businesses in three ways: direct operational costs, supply chain disruption and instability in nature and society. Local Regional GlobalClimate hazardsStrain on company earnings Higher repair or replacement costs Stranded assets Higher operational costs Lost revenues Decreased productivity Labour shortages Natural resource shortages Workforce health decline Civil disorder Human rights violations Unemployment Misinformation & disinformationEconomic downturn Reduced economic output Falling retail sales Changes in consumer behaviour Loss of competitiveness Salary freezes Rising unemployment Supply chain disruptions & supply shortages Inflationary pressure Forced migration Deepening social inequalities Unequal access to resources resulting in conflicts Food insecurity Water insecurity Infectious diseases Humanitarian disastersFinancial market instability Declining GDP High market volatility Reduction of investment expenditures Decreased investor confidence Lower stock prices & reduced capital inflows High loan defaults Reduced credit rating Strained insurance sector due to increased insurance losses Biodiversity loss & ecosystems collapse Chronic health conditions Societal polarization Breakdown of trust in institutions Loss of intellectual property Geoeconomic confrontation Geopolitical risks Cyber insecuritySocietal and naturalEconomic Business on the Edge: Building Industry Resilience to Climate Hazards 9