Risks and Opportunities Associated with Climate Change
Our business relies on our people rather than on physical assets or energy-hungry processes, which makes us resilient and adaptable to changing situations. However, like every company, we need to evaluate and manage the risks associated with climate change.
Through our wide range of services, climate change also represents an opportunity for SGS, as we help our customers with climate change mitigation and adaptation.
As a multinational company, our operations are locally exposed to various types of risks – regulatory, physical or socio-economic risks – to different degrees. The same applies to our business opportunities. Please see our 2014 Sustainability Review for more detail. Due to the nature of climate change, the potential impacts are difficult to predict accurately. The following risks are those which are the most tangible to our operations and are assessed on a regular basis as we monitor our sustainability projects and report to the Carbon Disclosure Project.
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Of the regulatory risks we may face as a company, those relating to the increase in energy and fuel prices following the implementation of eco or green taxes are potentially quite significant. For our risk analysis, we have assumed that potential tax rises could increase our vehicle and non-transport fuel costs by 5% in the medium term. In terms of our operations, this represents an increase of more than CHF 3 million. In order to reduce our risk exposure and increase efficiency, we are currently running energy efficiency projects and a number of Green Cars projects, which tackle our fuel and energy consumption. Investment in these projects is currently difficult to compile on a global level.
Another possible regulatory risk is legislation mandating the greater use of renewable energy, which we have estimated could mean energy prices rise by 5%. This represents an increase of almost CHF 1.9 million in our electricity costs. Anticipating future regulation, we chose to purchase renewable energy certificates equivalent to electricity consumption from our European trend countries in 2013 and 2014.
We believe that a greater incidence of extreme precipitation events, flooding and cyclones is the most significant physical risk to SGS from climate change. In May 2014, our operations in the Balkans were affected following serious flooding. Such events can have an impact on business continuity. In order to manage this, SGS has developed business continuity guidelines which include planning for natural disasters. Costs relating to the management of such issues are linked to establishing contingency plans and systems, increases in insurance premiums and potential loss of revenue from business interruption.
Helping our customers to tackle climate change also represents a business opportunity for SGS. Examples of our services include carbon foot printing and supporting the eco-design of buildings and products to minimize energy consumption.
These opportunities are developed by each relevant business line. For proprietary reasons we are not in a position to disclose any financial figures to indicate the scale of these opportunities.
See our 2014 Sustainability Review for more insights into how we are managing risks and opportunities linked to climate change.