Climate change and its impact on business

The impact of climate change on the way people work and people live is directly and indirectly affecting the business sector. The impacts are sometimes minor with disturbances in service delivery due to climate change, induced weather conditions to major impacts, such as financial implications due to climate crisis.

Cumulative Impacts

The business fraternity ranging from the mining industry to the hotel and service sector is impacted

The Chair of Hotel and Restaurant Association of Bhutan (HRAB), Jigme, said, “There are disturbances in the operations of the hotels and travel plans for the guest. There is also a reduction in the number of the tourists because of extreme weather conditions. Besides these, there are also bigger impacts such as the effects on the lives and livelihood.”

Tourism in Bhutan is one of the highest revenue earners before the pandemic, and tourism mainly depends on Bhutan’s bio-diversity and its beautiful landscape. However, with climate crisis, it will impact the biodiversity of the country, which can hamper the number of tourists coming in, especially eco-tourism.

One of the biggest industries in the country, the mining industry is also affected by climate change. According to the CEO of State Mining Corporation Limited, Kesang Jamtsho, although long-term impacts could be none, there are short-term impacts. “The impacts are basically felt in the mining operation, in terms of disruption of the operation due to flash floods, road washout, and rain.”

As the mining operations are impacted, he pointed out that it causes financial implications, increasing the cost of operations due to many days lost in the mining operation. He also added that as the cost of production and supply chain cost would increase, efficiency would decrease and the net impact will be reduction in return per ton of any minerals traded.

Similar sentiments were also shared by the construction sector of the country. According to the Executive Director to the Construction Association of Bhutan (CAB), Tshering Yoenten, there are financial implications due to disruption in the works. “The impact is felt in terms of procuring goods, resources and also time. As we cannot complete our works on time due to disruptions, there are also cases of penalties for the contractors. And there are also cases of having to reorganize the works and workers due to erratic weather conditions.”

He also pointed out that although they have insurance, the climate induced weather conditions are considered Act of God, and the insurance does not cover it.

He also added that climate resilient technologies are very expensive, however, to adapt to the climate crisis in the future, such technologies will be needed.

Other business sectors are also impacted by the climate crisis. According to the President of the Bhutan’s Chamber for Commerce & Industry, Tandy Wangchuk, climate change impact is very visible in the business sector and the economy.

“It has an unprecedent impact on the economy. It costs additional finance due to climate induced crisis and budget to mitigate climate induced hazards. In terms of industrial input, there are impacts, and also cross-border trade, and production capacity.”

He also pointed out that in the agriculture sector, due to climate induced weather conditions, drought contributes to poverty and famine.

As climate change impacts almost every sector of the country, the impact felt on the economy at large and the people is huge. Globally, climate change induced weather has the potentials to weaken economic growth through damage to capital stock and labor supply, and labor productivity due to growing temperature will weaken, weakening the world economy.

As business fraternities get impacted, the economy will get impacted too. As employment gets affected, it will affect the income generation and purchasing power of the people. And as cross-border trade gets affected, the price of imports will likely increase which will contribute to high inflation.

In 2019, the United Nation’s (UN) International Labor Organization (ILO) report titled ‘Working on a Warmer Planet: The Impact of Heat Stress on Labor Productivity and Decent Work’ warned that increasing heat stress due to global warming will result in huge job and economic losses in 2030, with poor countries being the biggest losers.

The report also stated that rising temperatures and increasing heat stress at work will lead to loss of 80 million full time jobs and to global economic losses of USD 2.4 trillion in 2030.

The report also stated that the people from agricultural and construction sectors will be most affected by the rising temperatures. It also stated that although workers in the wealthy countries will be affected by excessive heat, it will be on a lesser extent than those in the poorer countries which will widen the inequality gap between low-income and high-income countries and result in worsening working conditions.

Carbon neutral/negative status

Bhutan enjoys a carbon neutral/negative status, which means that Bhutan absorbs more carbon dioxide than it produces. Bhutan’s Constitution also mandates for a more than 60 percent forest coverage for all times to come, having more than 70 percent of the country being covered in trees, more than the mandated coverage.

This carbon neutral/negative status arises the question of whether Bhutan is sacrificing its economic growth. According to the Minister for Industry, Commerce and Employment, Lyonpo Karma Dorji, remaining carbon neutral/negative has both demerits and merits. “Being carbon neutral/negative has several implications for the economy, both positive and negative. Overall, there are long term economic benefits of achieving carbon neutrality/negativity including job creation, investment opportunities, improved competitiveness, and reduced environmental risks. Economic and employment opportunities from greenhouse emitting industries will be refrained from creating a huge opportunity cost.”

He also added some benefits for remaining carbon neutral/negative. “Environmental fund, conservation fund, climate fund accessibility can be better availed with carbon neutrality commitment. There are job opportunities in industries like renewable energy, energy storage, green construction, and electric mobility. And we can also gain a competitive advantage in the global market. Additionally, being carbon neutral/negative can improve trade relations and attract international investments.”

Additionally, Lyonpo Karma also added that while transitioning to carbon neutrality while maintaining a strong and thriving economy requires a comprehensive and coordinated approach involving business, industries and government, more focus has to be on environment friendly, more digital, clean energy, and biotechnology for development and for the economy.

This story is supported by the BMF and GEF Small Grants Program of UN in partnership with RGoB

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