Climate: The ultimate industry disruptor
In brief
In brief
Grasping the opportunity
Reducing risk, increasing reward
As every year makes the urgency of the climate crisis clearer, many organizations are seeking new ways to cope with record temperatures and extreme weather. Yet relatively few recognize what it really means to do business in a way that minimizes environmental harm—and how the transition may unlock enormous growth opportunities. The key? View climate change not just as an operational threat but, more immediately, as a force disrupting entire industries. Taking this perspective helps generate internal momentum for a strategic response, allowing leaders to drive the organizational shifts and investments necessary to not only safeguard at-risk operations but also gain powerful competitive advantages.
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Taking climate change seriously is not just a matter of adapting to the physical threats posed by extreme weather, or even reducing or offsetting carbon emissions. It demands rethinking what your organization does—and how it does it. That’s because the shift to a sustainable economy will cause some industries to shrink, others to expand, and still more to change profoundly (as in mining, where companies are racing to secure critical-minerals assets). The good news for businesses is these changes can open up all sorts of exciting prospects. Consider that for the world to reach net zero by 2050, trillions of dollars will have to be spent on the energy transition, including carbon-light equipment, materials, buildings, and infrastructure. Enterprises getting ahead of these trends by transforming their portfolios and operating models stand to reap major gains.
Reimagine the future. You can’t respond to every operational threat or market shift resulting from climate change and other environmental pressures, such as nature loss. But which dynamics could affect your company’s value most? Consider a car manufacturer: in high-emissions scenarios, sales of gas-powered vehicles may remain relatively stable, but severe temperature increases would heighten climate hazards, raising supply costs and disrupting operations. By contrast, in low-emissions scenarios, carmakers may see swelling demand for electric vehicles and shared-mobility services, along with fewer operational threats from global warming. Understanding how the long-term financial outlook may change under different scenarios will help you prioritize reinvention efforts with the most potential to create value.
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Global concern about climate change is reaching emergency levels. Yet no less pressing is the need for leaders to make aggressive strategic moves to capture opportunities as the world mobilizes to stop global warming and adapt to its effects. Industry disruption is inevitable and calls for the kind of considered but forceful actions demanded by any seismic shift in the business landscape.
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How CFOs further value creation by leading on sustainability
How climate adaptation can both protect and grow your business
State of Climate Tech 2023: How can the world reverse the fall in climate tech investment?
Climate leadership wanted: How CEOs can better meet investor expectations
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Jon Chadwick
Energy Transition, Partner, PwC Australia Email
Wendy van Tol
Sustainability Transformation, Partner, PwC Netherlands Email
Will Jackson-Moore
Global Sustainability Leader, Partner, PwC UK Email
Nadja Picard
Global Reporting Leader, Partner, PwC Germany Email
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Bridging the gaps: Setting the stage for an orderly energy-system transition
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—Johan Rockström, director of the Potsdam Institute for Climate Impact Research
Ecological sustainability is moving away from being something that you do just to have a little green label, to increasingly [putting] your whole value chain in a much more competitive, robust, and resilient positioning.”
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Bridging the gaps: Setting the stage for an orderly energy-system transition
The CSRD is resetting the value-creation agenda
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Estimated global cost of extreme weather attributed to climate change from 2000 to 2019
Note: This is a work derived by PwC from IEA material and PwC is solely liable and responsible for this derived work. The derived work is not endorsed by the IEA in any manner.
Build climate resilience, but grab quick wins. Nearly every company taking a careful look at its use of energy and other resources finds ways to reduce costs and cut carbon emissions (and don’t forget government incentives for energy efficiency or emissions reduction projects). Another crucial move to create value is building climate resilience. After being caught off guard by this year’s record-high temperatures, executives need detailed plans for maintaining operations in extreme conditions. For example, a mine operator anticipating rising temperatures at a key site would prioritize cooling efforts to keep workers safe.
Develop leadership savvy. Long-term financial success depends on the ability to manage key aspects of nonfinancial performance: think of R&D productivity in pharma and tech, supply-chain efficiency in manufacturing, or customer conversion in retail. All of these are enabled not just by their direct function but by other functions across the business. Yet relatively few functional leaders have the know-how to manage sustainability factors well. There are two especially important roles:
CFOs can ensure key finance activities include relevant indicators of sustainability performance, along with guidelines for how to balance these with other considerations. This role will only become more important as the European Union’s far-reaching Corporate Sustainability Reporting Directive (CSRD) mandates more extensive disclosures.
Accurate, timely information is the lifeblood of effective management. To help executives fuse climate considerations with strategy, CIOs can extend their digital-transformation mandate to develop systems for collecting sustainability data and embedding it into decision-making processes. And this doesn’t have to be a chore: the necessary tools can often piggyback on existing platforms, such as enterprise resource planning (ERP).
Emma Cox
Global Climate Leader,
Partner, PwC UK Email
It’s not as if those preparing to gather in Dubai for the 2023 UN Climate Change Conference—better known as COP28—need a reminder of the urgency to take climate action. But the planet is providing it anyway: the warmest June on record gave way to the warmest July; the warmest August preceded a record September. And globally we’re on track for the hottest year since records began. For corporate leaders who often view climate change with less urgency than investors, this year’s record temperatures have made it painfully obvious global warming causes serious disruption to business.
It’s a pivotal moment to reframe the challenge. Many of the corporate leaders about to gather in Dubai for COP28 currently view climate change with less urgency than investors. This year’s record temperatures may serve to sharpen their focus on the issue, revealing how much stress it can place on a company—and what might be required to adapt.
Dive deeper:
How climate adaptation can both protect and grow your business
©2023 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details. Strategy+business is published by certain member firms of the PwC network. Articles published in strategy+business do not necessarily represent the views of the member firms of the PwC network. Reviews and mentions of publications, products, or services do not constitute endorsement or recommendation for purchase. Mentions of Strategy& refer to the global team of practical strategists that is integrated within the PwC network of firms. For more about Strategy&, see www.strategyand.pwc.com. No reproduction is permitted in whole or part without written permission of PwC. “Strategy+business” is a trademark of PwC. Cookie Policy
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