The world is standing at a critical juncture. The urgency of climate action has never been more prominent as scientists and global leaders emphasise the difference between limiting global warming to 1.5°C and allowing it to rise to 2°C or more compared to pre-industrial levels. While this may seem like a small gap, the consequences for businesses, economies, and ecosystems are profound. To thrive in this climate-conscious era, businesses must develop strategies that mitigate risks and leverage opportunities.

This blog aims to delve into the impact that can be seen with this 0.5°C temperature increase on a global scale, business level, and actions we can take to mitigate it.

 

Global Climate Impact: The Stakes of 1.5°C vs. 2°C

Though half a degree sounds modest, this small difference escalates the severity and frequency of extreme weather events, impacts biodiversity, and threatens vulnerable populations. Here are some of the key areas where we see sharp differences between a 1.5°C and a 2°C rise in global temperatures:

 

• Extreme Heat Exposure: An article written by the NASA Science Editorial Team stated that at 1.5°C warming, about 14% of the Earth’s population will be exposed to severe heatwaves at least once every five years, while at 2°C that number jumps to 37%, resulting in widespread health risks and societal challenges. The Intergovernmental Panel on Climate Change (IPCC) projects that at 2°C, the likelihood of once-in-a-decade extreme weather events would rise by over 100% compared to at 1.5°C.

 

• Drought Risks: Limiting warming to 1.5°C is expected to substantially decrease the probability of drought, especially in vulnerable regions like the Mediterranean and Southern Africa. In a 2°C warmer world, around 61 million more people in urban areas would face severe drought conditions.

 

• Biodiversity Loss: A warmer climate impacts biodiversity dramatically. At 1.5°C, 6% of insects, 8% of plants, and 4% of vertebrates will see significant reductions in their geographic range. At 2°C, these figures soar to 18%, 16%, and 8%, respectively, threatening ecosystems and food security.

 

• Sea Level Rise: The potential for multi-meter sea-level rise becomes more pronounced as temperatures increase. The IPCC reports with medium confidence that warming between 1.5°C and 2°C could lead to instabilities in major ice sheets, resulting in significant long-term consequences for coastal regions.

 

These climate scenarios illustrate the urgency of limiting global temperature rise and highlight the interconnectedness of human health, biodiversity, and ecosystem stability.

 

Negative Impacts on Businesses Due to Temperature Increase

The differences between 1.5°C and 2°C warming presents distinct challenges that could negatively affect businesses across various sectors:

 

• Increased Operational Risks: As climate change exacerbates extreme weather events, businesses may face disruptions in their operations. Higher temperatures can lead to increased energy demand for cooling, driving up operational costs and straining resources.

 

• Supply Chain Vulnerabilities: A warmer climate can significantly disrupt supply chains, particularly in agriculture and manufacturing. Droughts and flooding associated with a 2°C increase could lead to raw material shortages, impacting production timelines and costs.

 

• Market Instability: Climate-induced disruptions can create volatility in markets, leading to uncertainty in pricing and availability of goods. Investors may shy away from sectors heavily impacted by climate change, making it harder for companies to secure financing.

 

• Reputational Damage: Businesses failing to address climate risks may face backlash from consumers and investors. A perceived lack of action can damage brand reputation and lead to decreased market share, especially among environmentally conscious consumers.

 

• Stricter Regulatory Compliance: A 2°C scenario may prompt governments to impose more stringent regulations on emissions and environmental practices. Companies may face increased compliance costs and penalties, further straining financial resources.

 

Business and Investor Relations Impact: Preparing for a Changing Landscape

Although this difference in global warming has clear implications on the future of our planet, there are many ways in which businesses can help prepare for this changing landscape and work towards reducing their environmental impact. Some challenges and opportunities for companies and investor relation teams are the following:

 

Adapting Business Strategies

• Sustainability Integration: Companies need to embed sustainability into their core strategies. The Science-Based Targets Initiative (SBTi) provides frameworks for businesses to align their operations with climate-safe goals.

 

• Innovation and Resilience: In a 1.5°C scenario, businesses can expect a more stable climate that fosters innovation. However, a 2°C scenario could lead to drastic shifts, necessitating diversified supply chains and localised sourcing to enhance resilience against climate impacts.

 

Investor Expectations and Engagement

• Clear Communication of Climate Strategies: Investors increasingly demand transparency regarding how companies address climate risks. A strong climate strategy can build trust and attract investment.

 

• Emphasising ESG Initiatives: Sustainable investing is gaining traction, with an estimated $50 trillion opportunity tied to the 1.5°C trajectory. Investor relations teams should highlight how climate actions enhance long-term resilience and performance, particularly when targeting ESG-focused funds.

 

Regulatory Preparedness

• Proactive Compliance: As regulations evolve, businesses must stay ahead. In a 1.5°C scenario, regulatory measures may incentivise renewable energy adoption, while a 2°C scenario may impose stricter compliance requirements on high-emission sectors.

 

• Building Reputational Value: Companies with strong climate action plans enhance their reputations and attract consumers and investors. Conversely, those failing to address climate concerns risk damaging their brands.

 

Conclusion

The consequences of reaching a 2°C global warming instead of limiting temperatures to 1.5°C are vast, affecting global climate systems and business landscapes alike. Companies that proactively engage with these challenges can not only safeguard their futures but also contribute to the collective effort against climate change. The path forward requires a commitment to sustainability, transparency, and innovation—an investment in a resilient future for both businesses and the planet.

 

Sources:

BBC “Climate Crisis: The 1.5C Global Warming Threshold Explained” –  Article

Forbes “The Stark Difference Between Global Warming of 1.5C and 2C” – Article

IPCC Special Report on “Global Warming of 1.5°C” – Full report

NASA Climate Change News “A Degree of Concern: Why Global Temperatures Matter.” –  Article

Science Based Targets Initiative (SBTi) “1.5°C vs 2°C: A World of Difference” – Blog

UN Environment Programme (UNEP) “Emissions Gap Report 2022” – Report

World Bank “Climate Change and Business: A New Agenda for Business Action” – Report

World Economic Forum “What Does Keeping to the 1.5C Threshold Mean?” –  Article