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Understanding Climate Change Impacts on Non Agricultural Companies

Introduction It is widely acknowledged that climate change affects agricultural companies severely. Because climate change leads to rainfall and temperature changes, agricultural productivity has been directly affected significantly. Although there is enough evidence that agricultural companies have been negatively influenced, there is a raising question whether non agricultural companies are also negatively affected. Understanding climate change impacts on non agricultural companies can help us to understand the impacts and help us to find appropriate solutions. Thus, this essay describes climate change definition, climate change risks and how climate change may determine non agricultural companies. There are many ways that climate change may affect existing business. For example, Chase and Schuchard (2009) describe how an extended drought in Australia led Heinz, a food company, to stop manufacturing tomato paste and planned to shift its production out of the country. Some other companies have faced issues of higher operating costs due to limited raw or intermediate materials due to climate change (Chase &Schuchard, 2009). In short, climate change could decrease enterprises revenues as it may reduce availability of raw materials and increase operating costs. Thus, climate change is likely to be a real threat for some companies. In terms of business, a lot of business people believe that climate change is one of the important aspects that would affect their existing enterprises (Agrawala et al., 2011; Chase & Schuchard, 2009; Pappis, 2011; Sussman & Freed, 2008). For instance, companies are more aware some issues that are influenced by climate change, namely, water availability, transportation and electricity consumption. Again, a lot of enterprises believe that droughts and extreme rain are destructive weather events that may push enterprises to start climate change preparedness (Agrawala et al., 2011; Chase & Schuchard, 2009; Pappis, 2011). It seems that climate change is a critical issue for many enterprises.

Due to its wide impacts, climate change may affect supply chains. Pappis (2011) suggests that climate change is likely to affect all business sectors since climate change could threaten supply chain stages including manufacturing, transportation, warehousing and distribution. As climate change impacts are occurring within supply chain stages, business is likely to face some risks such as physical damages, economic and market risks (Pappis, 2011). For example, due to extended floods, factories could experience physical deterioration and lose business opportunities as floods may postpone trade transactions. It is widely acknowledged that climate change associated with changes in rainfall, temperature and extreme events. Owing to a higher greenhouse emissions time by time, global temperature is projected to increase at approximately 0.20C per decade (IPCC, 2007). Moreover, increasing global temperature also leads to frequent heat waves and hot days and nights. In case of precipitation, there will be less rainfall in tropical areas and more precipitation in higher latitude areas. Climate change also tends to increase frequency of extreme events such as heavy rain, extreme wind and floods.

Climate change could affect business sustainability. Some business systems such as industrial processes, transportation, energy and infrastructure, have been developed under stable climate conditions (Agrawala et al., 2011; Chase & Schuchard, 2009; Pappis, 2011; Sussman & Freed, 2008). In turn, climate change could influence business systems due to changing climate. For example, due to extended floods, factories could experience physical deterioration and lose business opportunities as floods may postpone trade transactions. Another example is climate change is likely to threaten enterprise asset and material supply as extreme weather could stop transportation and drop company assets. There are many ways climate change could affect non agricultural companies. At least, there are two ways that climate change influence non agricultural companies. Firstly, it can disturb non agricultural companies in the terms of operational terms. For instance, climate change may increase maintenance costs as it could raise machine breakdowns owing to frequent heat waves or heavy rain (Agrawala et al., 2011). Secondly, it could affect the companies in the terms of strategic terms. Due to governmental policies to reduce greenhouse emissions, companies are asked to provide environmentally friendly products. In turn, the companies should change product specification that follows the policies in a mid or long term. Climate change can affect business stability as the business systems have been operated under stable climate condition. Because climate change tends to change climate conditions, it can severely affect both company types, agricultural and non agricultural based companies. TAMPILKAN IN TEXT AND END TEXT CITATION LEBIH BANYAK.

process and resource availability. For example, because of flood in 2011, a quarter of total garment production delayed in Thailand. Another instance is Bunge, an agribusiness company, experienced severe droughts of 2010 in its main growing areas that caused potential loss of $56 million of raw materials (David Gardiner & Associates, 2012). These events lead to a conclusion that climate change impact on enterprises operation is based on robust evidence. Possible impacts of climate change on both service and manufacturing companies can be seen in the figure 3. From the figure, we can see that climate change seems to influence almost all business issues including supply chain. For example, climate change is likely to threaten physically enterprises asset and material supply as extreme weather could stop transportation and drop company assets. As climate change is the scourge of asset and material supply, it is likely to disrupt supply chain and logistics result in increasing the cost of intermediate goods. Moreover, Roeder (2010) suggests that climate change has economic impacts such as price increases, increase of input costs and limited availability of resources. It also means that climate change could determine supply chain. In detail, repercussions of climate change can be described in the figure 4.

Figure 4. An illustrative framework of business components and possible climate change impacts on service and good sectors (from Agrawala et al., 2011, p.14).

Figure 5. Potential climate change risks within subsectors (from Agrawal et al., 2011, p.15).