Climate change is too low on business leaders’ list of concerns

Authored by Aviva

When world leaders assembled in Glasgow to try and turn the tide on the climate emergency, businesses as well as governments were in the spotlight. COP26 underlined the close relationship between climate change and corporate action, from unlocking private finance for the green energy transition to slashing the UK’s greenhouse gas emissions.

However, Aviva’s second Risk Insights Report, published earlier in November, reveals that climate change is still struggling to make it on to firms’ list of priorities. In a survey of 1,251 UK business leaders about the key risks they faced, climate change failed to make the top 10 for the second year running.

Climate change, including natural catastrophes and extreme weather, ranked 14^th on the list, with only 8% of businesses saying that it was a top risk to their business. When it comes to awareness about environmental, social and governance (ESG) matters, 40% of business leaders admitted to knowing hardly anything or nothing at all, and just a third (34%) said they were reasonably or well informed.

This is a problem. For one thing, we need business leaders on board to deliver drastic cuts in global emissions. And for businesses themselves, a failure to deal with climate risks could be costly. Many of the risks that do make it on to business leaders’ top ten list this year, including the economy, business and supply chain interruptions, and changes in legislation and regulation, are increasingly connected to climate change.

Extreme weather is already taking its toll on UK businesses and their supply chains. Aviva’s Building Future Communities report, published in July this year, revealed that almost a third of UK commercial properties are at risk of flooding and heatwaves. In the past year, we’ve seen wildfires in the US, floods in China and Europe and harsh droughts in South America disrupting international food supplies. And the UK Government has now announced a raft of proposed regulatory changes to tackle the climate crisis, including a requirement for most big UK firms to show how they will hit emissions targets. For some, that will require a radical rethink of how they do business.

Climate change is no longer a distant threat. Business leaders need to take it seriously – for their own sake, as well as for their employees, business partners and other stakeholders, and the communities in which they are located. That means doing everything possible to cut greenhouse gas emissions. And it means taking steps to measure and reduce the impacts of climate change on their workforces, operations, supply chains and business reputation – now and in the coming decades.

How do we achieve this? Firstly, Aviva is calling for greater government and cross-industry support to help all businesses better prepare for extreme weather events. This should include initiatives that address common barriers to action, such as financial costs, not knowing how to implement protective measures and being unsure where to start. This can only be delivered by matching the precise impacts of climate change on our varied UK landscape and urban environments with clear, practical steps to help businesses put preventive measures in place.

Greater focus is also needed to help small to medium enterprises (SMEs) recognise and respond to environmental risks. SMEs account for more than 99% of UK enterprises and are vital to the wellbeing of local communities. However, Aviva research found that only a fifth (22%) of SME leaders report knowing a great deal or fair amount about ESG issues, compared to 50% of corporates. Through a new partnership with Enterprise Nation, a small business support network, Aviva has launched a Plan It with Purpose free educational hub to provide SMEs with advice on how to protect their business and reduce their environmental footprint. But the scale of action required will not come from single projects. SMEs need sustained and consistent support from the public and private sector to help them prepare for a future that will be marked by climate change.

Finally, we need expert voices – including policymakers, researchers, industry leaders and those businesses that already consider climate change a significant threat – to help business leaders to recognise the tangible link between environmental and economic risks and treat both with the same rigour and attention.

None of us will be left untouched by the climate emergency. If business leaders want to guard against the risks that worry them the most, they must give climate change the attention it needs too.

Aviva Risk Insights Report, 2021 - top risks facing businesses

Aviva Risk Insights Report, 2021 - business attitudes to climate