Essay Example on Global Warming Impacts on Business: Regulatory, Reputational & More

Introduction

Global warming is the most common type of climate change that results as a result of greenhouse gas (GHG) emissions. The impacts of climate change affect businesses and firms in various ways. In addition, firms are faced with various types of risks as a result of climate change impacts. Some of the risks firms face includes reputational, regulatory, litigation, supply chain, as well as physical risks.

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Regulatory Risk

Regulatory risk refers to the risk that a change in the regulations and laws within a particular country is likely to materially impact a firm, business, as well as the market. The impacts of climate change can lead to regulatory risks since regulations to help curb climate change can cause losses to a firm. Due to the increased impacts of climate change on the environment, governments put in place legislation to help reduce or prevent the emission of greenhouse gases (Stanwick, & Stanwick, 2013). As a result, such environmental laws are likely to affect the operations of a firm and thus lead to low profitability. For instance, some countries place a ban on the use of plastics, which hinders the operations of companies that use plastic as raw materials or for packaging. Therefore, as countries, especially those in Western Europe, continue to legislate on environmental issues, firms are likely to be affected.

Physical Risk

Physical risks are hazards that companies may face as a result of the impacts of climate change, such as floods and earthquakes. Climate change may cause various disasters such as rising sea levels, floods, and droughts, as well as hurricanes (Winn et al. 2011). As a result, such disasters may damage the physical premises of a firm or even lead to the death of employees. Therefore, such impacts of climate change are likely to cause huge damages to a firm.

Supply chain Risk

Supply chain risk refers to the eventuality that a firm's supply will be interrupted as a result of various issues such as challenges with suppliers, disruption in production, as well as shipment problems. Impacts of climate change lead to reduced production of products, thus causing a disruption in supply within the global supply chain (Stanwick, & Stanwick, 2013). As climate change continues to affect the world, there is a reduction in raw materials which impacts on the supply chain. In addition, the process of manufacturing becomes expensive due to observing the climate change laws and the cost transferred from producers to suppliers and to consumers at the end.

Reputational Risk

Reputation risk refers to the potential loss of clients and financial capital as a result of damaging of a firm's image. Firms that emit greenhouse gases create a bad reputation for their clients as well as the government and therefore are at risk of losing their market share (Stanwick, & Stanwick, 2013). Firms that emit a lot of carbon and greenhouse gases are perceived by customers as insensitive to the environment and may lead to the elimination of the organization's competitive advantage.

Litigation Risk

Litigation risks are the chance that legal actions can be taken against a firm due to continued emission of greenhouse gases as well as environmental degradation. Organizations that violate environmental laws put in place will face the risk of being sued in a court of law, which may lead to its closure. Therefore, the impacts of climate change could lead to a litigation risk for a particular firm.

References

Stanwick, P., & Stanwick, S. D. (2013). Understanding business ethics. Sage. Retrieved from https://books.google.co.ke/books?hl=en&lr=&id=SpPUrOhQ7I4C&oi=fnd&pg=PR1&dq=Understanding+Business+Ethics+3rd+edition+by+Peter+Stanwick+and+Sarah+Stanwick&ots=NHR4FG3NwT&sig=GLD4QmPYAubAstREkZCEdrPIWaE&redir_esc=y#v=onepage&q=Understanding%20Business%20Ethics%203rd%20edition%20by%20Peter%20Stanwick%20and%20Sarah%20Stanwick&f=false

Winn, M., Kirchgeorg, M., Griffiths, A., Linnenluecke, M. K., & Gunther, E. (2011). Impacts of climate change on organizations: a conceptual foundation. Business strategy and the environment, 20(3), 157-173. Retrieved from https://onlinelibrary.wiley.com/doi/abs/10.1002/bse.679