Half (48%) of all UK businesses have reported being impacted by the effects of climate change, with 52% of those reporting that their ability to do business has been impacted by extreme weather events, according to new research by global risk management and insurance broker, Gallagher.
The study of more than 1,500 UK business decision-makers reveals that climate change is already a challenge for British businesses, with nearly three quarters of business leaders concerned about the impact over the next 10 years. Two thirds of those surveyed said a rise in global temperatures of 2°C – the upper limit set by the 2015 Paris Agreement – would have a “significant” impact on their business.
The most common effect of climate change on British business are disruption from extreme weather events, including flooding, storms and heatwaves (52%), followed by climate change related increased operating costs (47%), supply chain issues (39%) and physical damage (35%). The research by Gallagher found that 15% of businesses have already moved premises due to climate change, while 16% have been forced to change their business model.
The sectors facing the greatest pressures from climate change include hospitality and tourism (57%), banking and finance (53%) and retailers / FMCG firms (50%), demonstrating a significant threat to the UK’s service-based economy.
Despite the concern among businesses, with climate change ranked behind only the cost of living and the energy crisis as a priority issue, more than half of all business leaders (53%) have not taken steps to mitigate against the risks, with a third failing to include climate change on their risk registers. This perfect storm raises concerns that British businesses are poorly placed to handle the likely impacts of more frequent extreme weather events.
Of those affected by climate change, almost a quarter (23%) have already claimed against their insurance due to damages, yet only 38% of business leaders were able to say that their current insurance policy covers damage caused by climate change and natural disasters.
While one in seven (73%) are concerned about how climate change will impact their businesses within the next decade, the consensus (51%) is that it is government’s responsibility to ensure businesses are adapted to meet the challenge. Only 16% think the onus lies with businesses.
Neil Hodgson, Managing Director of Risk Management at Gallagher, said: “Climate change clearly poses a serious threat to British businesses – and the damage is already being done. The country is committed to reducing our emissions and reaching net zero by 2050 but, with half of businesses reporting impacts, it seems we are already on the backfoot.
“Despite the widespread concern, many business are failing to act to protect themselves from the potential impacts of climate change, whether that is investing in risk management measures in their premises, buying more green equipment or ensuring they have appropriate insurance. What is perhaps most concerning is that businesses do not believe themselves responsible for protecting themselves against climate change – instead believing government should prepare them. It is time businesses begin to act.”
A third of British companies have taken some steps towards mitigating the impact of climate change, with three in team (30%) having spent between £100,000 and £500,000, and 10% have spent over a £1 million. Over half (56%) plan to spend over the next two years, however, 14% warn that these costs will be substantial and go beyond their current budgets.
Of those businesses planning to protect themselves against climate change, the most common strategies are committing to reduce carbon emissions (44%), reviewing their insurance policies (32%), setting a net zero target (32%) and investing in environmentally friendly technologies (32%). The most popular methods already employed by business decision makers are reducing paper use (63%), using automatic lighting (60%), sourcing renewable energy (58%) and deploying LED lighting (58%).