Nairobi, 21 June 2013 – The future
of the private sector will increasingly hinge on the ability of businesses
to adapt to the world’s rapidly changing environment and to develop goods
and services that can reduce the impacts of climate change, water scarcity,
emissions of harmful chemicals, and other environmental concerns.
From extreme weather events, to rising pressures
on finite natural resources, changes in the global environment will increasingly
impact operating costs, markets for products, the availability of raw materials,
and the reputation of businesses, from finance and tourism, to healthcare
While the risks are significant, such environmental
changes also represent major opportunities for businesses that successfully
manage them, and seize the demand for sustainable technologies, investments
These are among the main findings of a new
report released by the United Nations Environment Programme (UNEP) and
SustainAbility today, entitled GEO-5 for Business: Impacts of a Changing
Environment on the Corporate Sector.
“GEO-5 for Business is in many ways
a prospectus for the 21st century company—one that internalizes
how rapid and accelerating environmental change will shape risks, but also
the need and demand for new sustainable products and market opportunities,”
said UN Under Secretary-General and UNEP Executive Director Achim Steiner.
“The report speaks to the reality of climate
change and natural resource scarcities and outlines how more creative decisions
by the private sector with longer term horizons may assist in meeting these
challenges. It makes the case that whether it be in water saving, or climate-proofing
infrastructure, the world is going to look for solutions that in turn will
drive corporate competitiveness, reputational risk and a transition to
an inclusive green economy,’ added Mr. Steiner.
The new report is based on UNEP’s Global
Environment Outlook (GEO-5); the UN’s most comprehensive assessment
of the state of the global environment. According to that report, human
pressures on the global environment mean that several critical environmental
thresholds are approaching, or have already been surpassed, beyond which
abrupt changes to the life-support functions of the planet could occur.
Through a detailed analysis of the construction,
chemicals, mining, food, and other industries, GEO-5 for Business
outlines the specific risks of such changes to each sector, and how businesses
can adjust to create long-term competitive advantages.
The report shows that the rising frequency
of extreme weather events, often linked to climate change, poses risks
to all sectors. Severe floods in Australia in 2010-11, for example, resulted
in more than US$350 million in claims to re-insurer Munich Re, which contributed
to a 38 per cent quarterly drop in profit for the company. The same period
of extreme weather in Australia contributed to a loss of US$245 million
in earnings by mining group Rio Tinto.
Rising temperatures are challenging the future
viability of tourism businesses, says the new report. A study cited in
GEO-5 for Business states that fewer than half of the ski resorts
operating in the US northeast are likely to remain economically viable
in 30 years, if average winter temperatures increase between 2.5° and 4°F.
The UNEP study says that more than 80 per
cent of the capital needed to address climate change may come from the
private sector. This can bring about significant ‘green economy’ investment
opportunities in the finance sector for green buildings, energy-efficiency
technology, sustainable transport and other low-carbon products and infrastructure
In cities, around 60 per cent of the infrastructure
needed to meet the needs of the world’s urban population by 2050 still
needs to be built, presenting significant business opportunities for greener
urban construction and retrofits. Over 1.5 million square feet of building
space are being certified with green standards each day.
Water scarcity remains a critical challenge
for all sectors profiled in GEO-5 for Business.
Companies in the tourism, chemicals
and other sectors could face increased operational costs. In South Africa,
platinum mines in the Olifants River system are expected to face water
charges ten times their current value by 2020 due to water scarcity. Competition
with local communities and other water users could potentially lead to
negative impacts on reputation.
Findings by Sector from GEO-5 for Business
The sector remains vulnerable to volatility
in energy markets and rises in energy prices due to the energy-intensive
nature of producing steel, concrete and other materials. Concerns about
low water availability in certain regions may limit potential development
opportunities. The sector could come under increasing consumer pressure
to reduce waste generated during construction.
Urbanization and economic development in
emerging economies can translate into substantial demand for new, greener
housing and infrastructure. Demand for coastal and flood defenses, and
structures that can withstand extreme weather, may also rise.
Chemical production is often water intensive.
Consequently, the sector will face increasing consumer pressure to
be more water-efficient, and to better manage emissions of chemical waste.
Increased regulations may phase out, or restrict the use of, certain chemical
products. Such regulations can open up market opportunities to provide
more sustainable alternatives.
Demand is set to rise for chemicals used
in high-performance insulation, energy-efficient lighting, renewable energy
technologies, as well as products linked to water-saving technologies,
such as purification and desalination. Greater use by companies of more
sustainably-produced chemicals, coupled with efforts to minimize adverse
impacts, can enhance reputation and brand value.
By 2035, global electricity demand could
be over 70 percent higher than 2009 levels. More frequent heat waves associated
with climate change may impact the reliability of the grid. In 2012, blackouts
in Northern India, which were caused by higher demand due to high temperatures
and low monsoon rains, left hundreds of millions of people without power
for several hours. Power companies will need to harden, or relocate, infrastructure
vulnerable to extreme weather, and better prepare for supply interruptions.
Coal’s global share of total power generation
is expected to decrease from two-fifths to one third by 2035, while renewables
are set to increase from 20 to 31 per cent. The ‘decarbonisation’ of
electricity will present opportunities for the sector to advance renewable
Extreme weather events associated with climate
change are influencing operational costs in the sector in many parts of
the world. Legislation to extend protected areas that support marine and
terrestrial biodiversity may limit the areas available for future exploration
Opportunities may come through an increased
demand for certain minerals and metals used in renewable energy and energy
efficiency technologies. Warming temperatures may open up previously inaccessible
areas for exploration, although potential environmental impacts will need
to be assessed.
Insurers may experience severe capital losses
and reduced profitability if they fail to adequately identify and plan
for climate-related risks. Property and casualty insurers will likely see
increasing claims due to severe weather. On the other hand, the capital
needed to address climate change will result in a greatly-expanded market
Financial institutions will need to enhance
coordination with the scientific community to ensure access to environmental
data and analysis that can inform better planning.
High levels of water use and heavy reliance
on ecosystem services render this sector especially vulnerable to environmental
change. Growing zones for food crops will shift as local climates
change. Marine fish stocks are increasingly overexploited or depleted,
while ocean acidification and higher water temperatures are thought to
be major factors in the degradation of coral reef ecosystems, which provide
nursery grounds for some commercially important fish species.
New markets are set to open up for more climate-resilient
food varieties. Markets for organic food and beverages expanded on average
by 10 to 20 per cent per year during parts of the last decade. Companies
certified as sustainable food producers can also tap into growing customer
Biodiversity loss will limit the discovery
of natural compounds used in new medicines or traditional remedies. One
estimate suggests that extinctions of certain species mean the Earth is
losing one major drug every two years.
Approximately one quarter of the global disease
burden can be attributed to environmental factors. Demand for healthcare
services could rise further, especially due to conditions linked to air
pollution, and water-borne diseases.
and Communication Technology (ICT)
Datacentres use up to 200 times more electricity
than standard office buildings, making ICT companies’ operating costs
vulnerable to increases in energy prices. Electronic waste (e-waste) is
the fastest-growing waste stream in the world. Its proliferation, as well
as concerns about the environmental impacts of the sourcing of key materials
in developing countries (eg. heavy metals), may lead to increasing consumer
and regulatory pressure on the industry,.
The ICT sector is likely to see growing demand
for collecting and processing environmental data. Growth markets will also
lie in ICT products that enable environmental improvements in other sectors
(eg. building energy management systems).
Extreme weather events, impacts of climate
change, water scarcity, and declining biodiversity can make particular
destinations more or less attractive to consumers, thus impacting market
demand for businesses operating in these locations. Stricter regulations
on some practices (eg. fishing and snorkeling on coral reefs) may impact
Overall, tourism demand is set to grow globally,
especially the market for nature-based tourism and eco-tourism – for which
customers are often willing to pay more.
Extreme weather could disrupt supply chains
and infrastructure more frequently. Increasing extreme weather and water
scarcity could disrupt supply chains and infrastructure more frequently.
Regulations in many countries to reduce greenhouse gas emissions, can increase
costs, shift consumer demand, and influence product design. Such
regulations will grow more restrictive and widespread as climate concerns
increase. Complying with regulations to reduce levels of air pollution
(soot and particulate matter) from vehicles could also add to operational
At the same time, governments are introducing
regulations and incentives to stimulate demand for cleaner transportation
options. Businesses in the sector can take advantage of new and expanded
markets for low-carbon and fuel-efficient technologies.
Notes to Editors
The full report, GEO-5 for Business: Impacts
of a Changing Environment on the Corporate Sector, is available at:
UNEP’s Global Environment Outlook
report (GEO-5) – launched in 2012 – is available at: http://www.unep.org/geo/geo5.asp
For more information, please contact:
Nick Nuttall, Director, UNEP Division of
Communications and Public Information on Tel. +254 733 632 755 / +41 795965737,
Bryan Coll, UNEP Newsdesk, on Tel. +254 731
666 214, E-mail: email@example.com