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Impact Of Paris Agreement On Global Business

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Impact Of Paris Agreement On Global Business

The primary responsibility of the Board of Directors and the CEO is to determine and mitigate the effects of the company`s future climate risks. Companies are adept at assessing their financial performance, but too many people are afraid to look in the mirror and face potential risks that could harm their business. Managers want to know that a company will be as competitive in time as it is in the short term. To do this, we need to look beyond the quarterly results. Financial information naturally allows you to understand only a certain portion of a company`s actual market capitalization. Think of Coca-Cola: 20% of its market capitalization can be attributed to its book value, i.e. its hard assets. 80 per cent of its value is invested in intangible values – brand, research and development, risk management, innovation capacity in a globalized and resource-limited world – all things that are not accounted for in a financial statement. Sustainability reports focus entirely on areas that traditionally did not understand well and did not manage businesses well. Internal carbon footprint reduction programs are increasingly being expressed among consumer-focused companies: Clif Bar, Patagonia, Timberland, Google and Bank of America, to name a few. But is there a commercial reason why such an initiative could benefit a company that cannot reap dividends for consumer loyalty? Which companies will gain and who will lose if governments and businesses start taking climate change seriously? Company balance sheets provide some clues: if greenhouse gas emissions become more expensive, the relative value of assets such as natural gas, which produces less carbon dioxide than coal during combustion, will increase. Other indicators are companies` current efforts to reduce emissions: a company`s ability to analyze the communication measures inherent in initiatives, such as reducing all transportation routes, is becoming very important in a world where the right to greenhouse gas emissions is limited. Indeed, the weak systems created by climate change can turn into “systemic opportunities” for companies to develop new partnerships with governments, other players in the supply chain and even traditional competitors, for example in the preparation of the infrastructure needed for emergency restoration.

By helping regions anticipate climate change and reduce risk, companies can promote their interests while developing goodwill in the communities where they do business. Coca-Cola`s recently announced partnership with the World Wildlife Fund to protect global water resources and improve its own water management is a good example of a company`s efforts to address climate change directly in its own businesses and more broadly in the society it serves. Coke`s actions will likely help both the company and local communities, while improving the company`s image around the world. The Paris Agreement is the first legally binding universal global agreement on climate change adopted at the Paris Climate Change Conference (COP21) in December 2015. Companies need to anticipate the direct impact of climate change on their businesses, including supply chain failure, staff migration, increased disease and even reputational impact (multinationals can be blamed for climate-related environmental problems). But they also need to assess their risks more widely and determine whether the environments in which they work are vulnerable to catastrophic and climate-related disturbances. In this case, they should systematically assess the vulnerability of these environments to floods, droughts and storms, with particular focus on areas with limited capacity to anticipate and adapt to climate change.

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