ICAEW.com works better with JavaScript enabled.

Climate change: from slow burner to raging fire

31 January 2020: environmental risks occupy all five of the top spots for likelihood in the latest ‘Global Risks Report’ from the World Economic Forum. “Climate change is striking harder and more rapidly than many expected,” the report warns.

The showdown between Greta Thunberg and Donald Trump provided a compelling backdrop to the Forum’s 50th anniversary conference in Davos, which focused on “stakeholders for a cohesive and sustainable world”.

“The planet will not be destroyed ... What will be destroyed is our capacity to live on this planet,” is how UN chief Antonio Guterres summed up the ongoing threat. And his stark warning reflected findings in the Forum’s annual Global Risks Report, which charts the shifting landscape of risk perception worldwide.

“This is the first time in the history of the report that all of the long-term major risks by likelihood are now natural risks, with the top three being climate crisis issues,” says Richard Spencer, ICAEW’s Head of Sustainability. The 2020 top five are:

  • extreme weather events;
  • failure of climate change mitigation and adaptation by government and business;
  • major natural disasters, such as earthquakes and tsunamis;
  • biodiversity and ecosystem collapse; and
  • human-made environmental damage, including oil spills.

“We’ve got to look at the interconnectivity of these too,” stresses Spencer. “While the big issues are presenting as green, these have huge economic, societal and geopolitical consequences.”

Climate change mitigation and adaptation failures come second in the likelihood list. But they are the number one risk by impact, sounding the alarm across government, business and wider society. Although climate risk has been creeping up the global agenda since 2010, these warnings have too often gone unheeded.

“The impact in the past was largely on the poorest and developing economies, and mitigation has been seen as harmful for the wealthier economies,” suggests Francesca Sharp, Sustainability Manager at ICAEW. “So inherent inequalities in the global economic system mean these agenda items have been standing for 10 years now and no one has really dealt with them.”

But climate change can no longer be passed over as a slow-burn issue. “This report is based on a survey,” emphasises Spencer. “So it’s really the market’s perception of what its challenges are.”

As well as being the decade of delivery for the Sustainable Development Goals, the report calls for the 2020s to be the resilience decade. “Concerted action is required not only to reduce emissions,” it states, “but also to develop credible adaptation strategies, including climate-proofing infrastructure, closing the insurance protection gap and scaling up public and private adaptation finance.”

Spencer believes businesses and society are already ahead of governments in this sphere. “Businesses are saying clearly that the house is on fire,” he argues. “They might be saying they don’t know where to begin, but there’s no doubt anymore that it’s a critical issue. What we’ve seen in the last year in terms of citizen action has sealed the argument. Now people are focused on asking: what can we do?”

The skillsets of accounting professionals put them in an ideal position to be the problem-solvers for many of these issues, believes Sharp. “So we’re asking members: are you professionally ready?” she explains. “Do you have the skills to guide the businesses you advise or work in, so that they can become more resilient?”

Key areas of risk include supply chain disruption, infrastructure and insurance, as well as impacts on staff health and wellbeing, business continuity and reputation. On the flipside, there may be opportunities in terms of new products, technologies and services, and novel ways of living and working.

Instead of being added on to an already busy business agenda, climate change needs to become part of the language of business. And one of the first steps in tackling the growing risks is to better understand them.

For further information, resources and inspiration, visit the ICAEW Climate Hub.