UK private sector resilience and market opportunities for climate products and services

Submitted by Will Bugler | published 13th May 2016 | last updated 13th May 2019
London Skyline

Image: "London Cityscape" by Davide D'Amico - Own work. Licensed under CC BY-SA 3.0

Introduction

Over the past few decades in the UK, temperatures have increased, sea levels have risen, and we have experienced more heavy winter rainfall. December 2015 saw record breaking weather, with UK mean temperatures over 4°C warmer than average, exceptionally high rainfall in the north and west and a new record set for the UK highest rainfall in 24 hours. The extreme and persistent rainfall caused devastating flooding and huge amounts of disruption, particularly in the north of the country. This is the latest in a series of severe weather over the past few years, including drought in 2012, a storm surge on the east coast in 2013 and flooding in winter 2013/14.

Businesses across the country have been counting the costs, experiencing direct impacts on their products, services and supply chains (see Figure 2 below for a sector by sector view of the magnitude of climate risks). Because of these events, more businesses are recognising climate change as a major risk which could significantly affect them now and in the future.

This report is a ‘call to action’ to all UK businesses. It describes and provides case study examples of UK businesses who are already responding to climate risks and identifying and taking opportunities that come with it. It shows how building climate resilience doesn’t necessarily require additional expenditure. In fact, taking action makes good business sense and can have immediate benefits. The report, commissioned by the Environment Agency and produced by Acclimatise, further combines evidence from Carbon Disclosure Project (CDP) surveys of UK firms with new insights from a series of interviews with leading UK businesses. It asks and answers the following questions:

  • What are the potential financial impacts for business? 
  • What actions are companies taking to manage their climate risks?
  • What are the benefits for companies taking action to build resilience?
  • Where do the market opportunities lie?
  • How big is the market for climate-related products and services?
  • Do UK businesses have the necessary skills?
  • What actions are companies taking to capitalise on market opportunities?
  • Which companies are responding to market opportunities?

The report* also provides details of tools and guidance provided by The Environment Agency's Climate Ready Support Service, which provides advice and support to businesses, the public sector and other organisations on adapting to a changing climate. 

*Download the full report from the right hand column or via the links provided under further resources.


Figure 2 from page 13 of the report: Sector by sector view of the magnitude of climate risks. Source: CDP 2014 data

Key findings: Risks & Opportunities for business

Key messages

  • Flooding and heatwaves are set to become more common as the climate changes.
  • Companies recognising that the risk landscape is changing and are taking action to increase their business resilience.
  • Planning now for the impacts of severe weather and a changing climate makes good business sense.
  • Businesses are managing the costs of severe weather like any other business risk.
  • Market opportunities are being recognised across a wide range of sectors and there are businesses who are gaining a competitive advantage.
  • There is a significant export potential for UK businesses offering adaptation products and services.
  • Support is available for businesses seeking to build resilience and take advantage of the opportunities from a changing climate. 

Risky business

When it comes to climate risks the vast majority (86%) of the companies have already identified one or more climate-related risks to their businesses. This apparently high-level of awareness is, however, not matched when it comes to taking action to adapt.

Many of the identified risks (34%) are being managed through low-cost, “business-as-usual” approaches. The report also shows that 44% of companies do not know the financial costs of climate impacts. This suggests that far more needs to be done for UK businesses to understand the most cost-effective adaptation options.

The report also highlights the types of climate risks that UK businesses are currently aware of. Companies were more likely to identify direct climate risks (climate impacts directly affecting business operations) than indirect risks, such as reputational impact, and risks to employee retention.

With companies reporting that over a third of identified climate risks (36%) have a ‘high cost’ to their operations it is imperative that more action is taken to increase the resilience of business operations along the entire value chain.

Climate opportunities

The study also shows that UK businesses see market opportunities from climate change adaptation. Respondents identified 1 opportunity for every 3 risks from climate change and its impacts. Emphasising the importance of taking early action to adapt to climate change, 33% of identified opportunities are expected to arise within 3 years.

The landscape of climate opportunities identified by UK businesses is also markedly different from that of climate risks. Where climate risks were identified in a wide variety of sectors and right along companies’ value chain, around 2 thirds (62%) of the market opportunities relate in increased demand for existing and new products and services.

As the report shows, UK businesses are already exploring opportunities that might arise from planning for climate change. The range of potential benefits goes from effectively protecting vital assets, to maintaining business continuity and gaining competitive advantages.

Finally, the world-class expertise of the UK in this field is evident in sectors such as manufacturing, finance and insurance, environmental and engineering consultancy, and construction. These sectors are already exporting globally products and services to help clients manage climate change impacts. Demand for these products and services will continue to grow, the report concludes.