This review brings together and analyses the most important research into the effects of climate change on the corporate world, in order to identify the specific risks and economic impacts at sector level that businesses must address. Its purpose is to contribute to the debate, to stimulate further research and, most important, to help companies better understand and respond to the issues at stake.

Climate Changes Your Business is the most comprehensive analysis of its kind to date. Its findings, summarised below, are based on a review of 50 reports from a variety of reputable sources, mostly from the financial sector, addressing the business risks and economic impacts of climate change at sector level. The analysis of these 50 reports both aggregates their findings and quantifies the levels of climate-related risks facing a wide range of business sectors, providing what is effectively an “aggregate view” of the total risk to business of climate change.

In addition, with the help of observations from 11 external experts, the review assesses the degree to which that aggregate view is realistic. The end result is both an overview and a critical appraisal of climate-change risks as they are currently perceived.

Business risks and economic impacts remain underestimated

The nature and extent of the risks from climate change to business remain far from clear. Overall, there is a shortage of hard data, of quantitative projections, and also of consistency in the risk-assessment methodologies applied. The review suggests that many reports, while emphasising the opportunities arising from climate change, underestimate the risks faced by specific sectors. This focus on opportunity over risk is striking in the light of a growing consensus on the significant macroeconomic costs of climate change, which inevitably have implications for companies.

Four types of climate-change risks identified

The review finds that climate change can expose companies to four types of risk: regulatory, reputational, physical and litigation risks, and that these risks are likely to increase in the future. The level of importance attached to each type of risk differs considerably both across sectors and regions.

Furthermore, these risks are materialising regardless of the actual rate of climate change, gaining a dynamic and pace of their own.

Regulatory risk most commonly cited

Of the four, regulatory risks were the most commonly cited in the reports surveyed, with 72% discussing the regulatory risks that businesses face. Companies and sectors that fail to adjust to a changing business environment created by new laws and regulations face competitive disadvantages, while regulatory uncertainties make it difficult for companies to plan ahead.

Physical risk: full analysis of impacts lacking

Half of the reports analysed address the physical risks of climate change. However, the majority of these refer exclusively to the direct impacts of weather-related events. The potential indirect and longer-term risks are little discussed.

Risks to reputation and of litigation underestimated

Relatively few of the reports pay attention to reputational and litigation risks (28% and 14% respectively). Although the scale and scope of such risks seem to be growing, they do not yet seem to be considered substantial. However, the review highlights a growing risk of litigation to companies in the United States and also identifies a bigger risk to corporate reputations than the reports suggest. ...(Executive Summary)

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Climate Changes Your Business
KPMG’s review of the business risks and economic impacts at sector level

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KPMG International

Climate change no longer needs an introduction. It is now widely regarded as one of the most serious challenges the world faces, with consequences that go far beyond its effects on the environment. Climate change has reached a tipping point in global awareness. In a relatively short period of time the dynamics have changed drastically: media coverage and public awareness are growing rapidly, and government and corporate action indicates that the issues have clearly entered the political and economic sphere.

Businesses are also increasingly confronted with the implications of climate change. We observe among our clients around the world that the subject is steadily moving up their agendas. They recognise that climate change poses both risks and opportunities, with strategic and financial implications for their businesses. Companies that confront these challenges should take three steps. First, they should assess the direct implications of climate change to their businesses, such as the impact of extreme weather on their physical assets, and take corrective action. Second, they should consider how indirect effects, such as environmental regulation, may influence the way they operate. Third, they should seek to benefit from the opportunities brought by climate change, such as market demand for energy-efficient technologies.

At KPMG, we are committed to addressing climate change, first and foremost by acting as good corporate citizens. KPMG member firms around the world have set out ambitious climate-change programmes, ranging from reducing our energy consumption through energy-efficient buildings and finding alternatives to business travel, to working with our business partners in energy-conservation programmes, and supporting selected not-for-profit organisations and climate-change initiatives.

Furthermore, we have always sought to be at the forefront of developments that shape business behaviour. On the one hand, we provide services that help our clients both to meet challenges and to respond to opportunities.

Our professionals have over 15 years’ experience of offering sustainability and climate change-services to a wide range of clients, from global organisations to national businesses and government agencies.

On the other hand, we regularly provide analysis and industry insight into the role of business in relation to some of the most pressing societal issues. I commend KPMG in the Netherlands for taking the initiative of carrying out this review on the business risks and economic impacts of climate change. This publication comes at an important time, having recently decided to step up our efforts in addressing climate change as a global firm.

I believe the review will give you an insight into the current understanding of business risks resulting from climate change and that it will stimulate further debate on how to tackle these challenges.

Timothy P. Flynn
Chairman, KPMG International
Chairman and chief executive of KPMG LLP in the United States

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KPMG China has eleven offices (including KPMG Advisory (China) Limited) in Beijing, Shenyang, Qingdao, Shanghai, Chengdu, Hangzhou, Fuzhou, Guangzhou, Shenzhen, Hong Kong and Macau, with more than 7,000 professionals.

In 1992, KPMG became the first international accounting firm to be granted a joint venture licence in China, and our Hong Kong SAR operations have been established for over 60 years since 1945. This early commitment to the China market, together with our unwavering focus on quality, has been the foundation for accumulated industry experience, and is reflected in our appointment by some of the China's most prestigious companies.

As China businesses join the global economy and international companies seek to enter the China market, KPMG's blend of international experience and local knowledge makes us well-positioned to serve our clients in this increasingly complex, but exciting market.

Our single management structure for all our China offices allows efficient and rapid allocation of experienced professionals wherever the client is located in China. The flexibility of this single structure allows us to effectively serve companies across China - and we have many projects where professionals from different offices work together on a project under the supervision of a single nominated client partner, who has operational control of all resources.

Our business in China has established industry groups, enabling targeted, industry-specific experience and solutions to be delivered where needed. For our clients, this focus on industry and country specific knowledge means we can deliver exceptional people with an intimate knowledge of your specific business issues, as well as an overriding commitment to strive for the highest quality services.

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