NewsAnalysis: risk and opportunity of climate change?

FOUR TIMES as many businesses and households could be at risk from flooding in 20 years’ time. On the flipside, businesses are also being warned about water use. Droughts have already affected parts of the UK this year and they are set to become the norm rather than the exception.

 

Most food businesses are aware of the issues that a changing climate could bring. Seasonal changes have caused disruption to services – for example, heavy snow last year delayed some deliveries to pubs and hotels, while flooding this year caused damage to a number of businesses. It’s not on the scale of, say, Queensland (where 30% of one chain’s restaurants flooded), but businesses are being affected.

 

For those in the food industry, the major concern, however, is supply. This year’s wheat harvest is a case in point, but businesses are preparing for the frequency of shortages and market fluctuations to increase.

 

But does a changing climate only bring risks? Are there opportunities for food businesses too? New crops, new products and new services, perhaps?

 

According to a new government study: yes. Commissioned by the Department for Environment, Food and Rural
Affairs (DEFRA), “Climate Change Adaptation: Risk and Opportunities for Businesses in the South East of England” is based on interviews with leaders of global Fortune 500 blue- chip companies and smaller, UK-based companies across the south-east in five target sectors, each identified as particularly vulnerable to climate change effects. Interviewees included a number of foodservice businesses ranging from global fast food restaurants, international hotel and coffee house chains to UK-based contract catering companies with public-sector and business clients.

 

Many of these businesses are already experiencing change, says Belinda Miller, the director of insight at Corporate Culture, the agency commissioned to carry out the study.

 

“Rising crop prices have led most to actively seek new sources of ingredients and build new supply chains for the future,” she explains. “This includes moving away from barley or wheat to hardier crops less affected by the weather and price sensitivity.”

 

Risk is the key driver to act – especially among food businesses. The report concludes: “Food and beverage companies were more likely to see risks than opportunities as the impact on natural resources and rising commodity prices is an immediate threat that has the potential to severely affect their bottom line. Many companies are adapting by finding new sources of raw materials and developing new supply chains to ensure business continuity.”

 

There is nothing wrong with couching adaptation in financial language. Miller’s team found that “every food business is doing something in terms of adaptation to climate change as a risk”. However, her concern is how few are doing anything to take advantage of the opportunities.

 

“Few businesses are realising opportunities at the moment and most are focused on risk mitigation,” she explains. There are examples of some product sales increasing, including a new range of iced teas and cold drinks that has been really successful. There is also a perception that there may be future opportunities for hospitality from increases in tourism as a result of longer summers, but this is yet to be realised.

 

New product development from food businesses in response to changing weather is, so far, limited to substitution. An increase in sales of ice-cream during long periods of warm weather is very often coupled with a fall in hot desserts, for instance.

 

However, some are working on new crops. “In the supply chain, the opportunity is to identify new raw materials,” one business told Miller’s team. “By fully understanding the cocoa genome, we can find that some strains of cocoa are better adapted.”

 

This kind of opportunism isn’t yet anywhere near as prevalent in the food sector as it is in others. Those working in the built environment, for instance, are actively developing new consultancy programmes and resources specifically based on climate change adaptation to help drive new product development and differentiate from competitors.

 

Miller says businesses need to see a clear commercial opportunity from adaption to provide an imperative to take action now. However, cost is a barrier. “Adaptation is seen as expensive and it can be hard to convince business leaders that it’s worth investing in. I was surprised that the majority of UK businesses still prioritise short-term profits over fundamental existence in the long-term, and don’t see commercial opportunities. There is too much focus on risk and this should be reversed,” she adds.

 

In the UK it is only really businesses with public-sector customers seeing demand for adaptation who are realising any benefits. Change therefore has to be driven, says Miller.

 

DEFRA will be using the insights to launch a behaviour change campaign. The environment minister, Lord Taylor of Holbeach, says the smart firms which take action now will be able to ensure the resilience of their business and supply chain. But they will also be the ones that “explore avenues for new products and markets that will open up as the world’s climate changes”.

 

From her research, Miller is in no doubt that adaptation needs be made easy, focusing on “what companies can do now without the need for lots of expensive consultants [and additional resources]. The advice also needs to be sector- specific.”

 

In its green growth report, the CBI defined a green business as one that is working towards reducing environmental impacts or adapting to environmental changes. Its head of energy and climate change, Matthew Brown, says businesses should be including their climate exposure in corporate reports – and this includes the risks and opportunities presented.

 

The climate will change, however hard we work to mitigate it, and that means businesses need to adapt. If that brings commercial benefits, then it is nothing to be ashamed of, adds Miller.

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