By: Louie Woodall, Editorial Lead at Manifest Climate

Businesses around the world are recognizing the importance of climate change as a catalyst for innovation and long-term growth. In the wake of the 2015 Paris Climate Agreement and subsequent United Nations (UN) Climate Change Conferences, companies want to capitalize on evolving consumer preferences and new technologies to cut costs and increase profits.

Many companies have started by switching to or ramping up their use of renewable energy. However, more climate-advanced organizations are taking advantage of emerging sustainability-driven solutions, such as green buildings, energy efficient industrial equipment, and climate scenario analysis tools. These can help reduce businesses’ environmental impacts, save money, improve efficiency, and strengthen customer loyalty.

For example, Apple has made sustainability a core part of its operations, investing in renewable energy sources and expanding the use of recycled content across its products. By producing more climate-friendly goods, Apple is aligning with the preferences of an increasingly environmentally conscious consumer base and reinforcing its brand values. It’s also pushing the company to diversify its supply chain and experiment with new manufacturing processes, which could produce spillover benefits beyond the positive climate impacts.

Meanwhile, Unilever has pledged to zero out the emissions in its own operations by 2030, to eliminate all greenhouse gases across its supply chain by 2039, and to ramp up investment in sustainable agriculture. Not only have these initiatives helped the company lower its climate impact, they’ve also contributed to improved efficiency and lower costs.

To make the most of emerging climate opportunities, businesses should integrate climate risk planning (CRP) into their operations and strategies. CRP is a structured approach to understand, manage, and communicate organizations’ climate-related financial risks and opportunities. It can be harnessed to identify the many ways in which a company can benefit from the climate transformation. For example, businesses can use CRP to understand how stricter climate policies could alter the flow of capital across jurisdictions and economic sectors. They could also use it to assess how climate-focused goods and services could lower business costs and raise efficiencies.

CRP may also help businesses to create new opportunities to differentiate themselves in the market and to tap into the growing demand for sustainable products and services. For example, IBM has developed a number of sustainability-focused technologies, including a water management platform that uses AI to optimize water usage in agricultural operations.

How should companies pursue climate opportunities? First, they should identify the climate risks and opportunities they face now and in the future. This requires a top-to-bottom review of their own operations and value chains, including their suppliers and end consumers.

Once the relevant climate risks and opportunities have been identified, companies should map these to their internal processes — such as their manufacturing cycles — and financial drivers, including sales and investments. This way, companies are able to understand material climate opportunities that could make a substantive difference to their growth and profitability.

Next, companies should analyze industry peers and climate leaders in other sectors to understand how they are approaching similar climate opportunities. This allows firms to learn the pros and cons of different strategies and to apply the findings when implementing their own climate strategies.

In addition, companies need to consider the broad sweep of climate policy and regulation and how it may impact their climate risk and opportunity calculus. Some climate policies may change the relative attractiveness of particular climate opportunities. For example, the Korean solar company Hanwha QCells recently announced a plan to make solar panels and components in the US state of Georgia. The firm cited the tax credits made available through the Inflation Reduction Act, which was passed by the US Congress last year.

The wealth of climate opportunities may seem overwhelming. By taking a structured, methodological approach, companies of all sizes can identify ones that make the most sense for their businesses, use them to reach new heights of innovation, and spur sustainable growth.

About Manifest Climate:

Manifest Climate is the leading Climate Risk Planning solution provider. We embed intelligence to guide organizations to understand, manage, and communicate their climate-related financial risks and opportunities. Our proprietary software and in-house climate experts help businesses build internal climate competence, better align their disclosures with global reporting frameworks, and stay on top of market developments and peer actions. Get in touch with our team here.

The post Guest Post: Companies Turn to Sustainability for Long-Term Growth and Cost Savings appeared first on ESG Today.