Mass migration and social destabilisation from climate change present enormous business risks, but the vast majority of companies are overlooking these and focusing exclusively on physical risks, warns Forum for the Future’s Will Dawson
In his 2017 book, Storming the Wall, journalist Todd Miller delivered a sobering account of how climate change-induced migration was leading to increased border militarisation around the world.
Filled with evidence-backed insights and stark warnings, one line stood out to me in particular:
“More dangerous than the drought are the people who can’t farm because of the drought.”
Miller touches on a worrying blind spot that we at Forum for the Future (Forum) continually see in our work with companies on climate risk: most businesses focus on the forthcoming physical impacts of climate breakdown, and don’t consider the human responses to those impacts.
Already climate change is undermining communities’ life-support systems, leading to conflict, economic instability and societal unrest
Miller’s warning coincides with every business accepting the climate crisis as a reality. Not only has the increased regularity, volatility and severity of super-storms, droughts, heat waves and floods become too much to ignore, but businesses are also starting to respond to pressure from investors to be resilient to climate change risks – largely due to the Task Force on Climate-related Financial Disclosures (TCFD).
As a result, businesses are better equipped to understand and respond to these physical impacts than they were a decade or less ago. But the way I see it, that’s not enough.
Earlier this year, Forum’s Future of Sustainability report identified mass migration in response to climate breakdown as one of seven interconnected megatrends we see as having a very significant role in shaping the future – and which will likely be made even more explosive by the rise of nationalism, another of the megatrends.
Already climate change is undermining communities’ life-support systems, leading to conflict, economic instability and societal unrest, prompting people to flee in droves. And this is just the beginning – some predictions indicate up to a billion climate refugees by 2050.
Despite the warnings, many companies – even those considered to be climate action leaders – have so far failed to include social destabilisation in their reporting on climate-related risk disclosures. They presume that the supply of raw materials may be affected by changing weather patterns, but that their markets and ability to trade won’t. This demonstrates a lack of systemic consideration to the reality of climate-related risks, and is affecting investment decisions with potentially grave consequences.
This failure in consideration leaves businesses and investors dangerously under-prepared for the full impacts of climate breakdown.
The likely consequences of climate breakdown are fundamental changes to political, market and cultural norms, which businesses need to be addressing now
To help our partners better understand the full spectrum of climate-related risks they are exposed to, we use futures techniques to develop scenarios that combine economic, technical, behavioural, cultural, political and physical dimensions. These scenarios are not predictions or favoured futures, but rather an exploration of different plausible futures.
To illustrate this in more detail, I will draw on the <2°C Futures work we did with the Aditya Birla Group. We developed a set of four scenarios to explore societal responses to climate breakdown, as well as the efforts required to limit warming to less than 2C by 2040, designed to enable businesses to appraise the direct impacts of climate breakdown, as well as the impacts of climate action itself. This in turn helps them make better decisions today.
The likely consequences of climate breakdown are fundamental changes to political, market and cultural norms, which businesses need to be addressing now. They must be ready to operate in whatever scenario, whether governments push new legislation or leading companies pull their value chains forward.
So in reading about the different scenarios, ask yourself: “How might my current business model fare in this world? What legislation and tax levels might apply? What might be the role of business in society? What might this world mean for our workforce, infrastructure, product or service offerings and where and how we invest?”
In the <2°C Futures scenario “New Protectionism”, the world in 2040 is divided into protectionist blocs, where climate action is driven by national security interests, and characterised by its draconian responses to a huge influx of climate refugees. Governments rely on hard policy to change how business operates and how people live their lives, at the price of individual liberty. Large, state-sanctioned “national businesses” dominate the economy and work hand-in-hand with their “host” states. To survive, businesses have to cooperate with the state, letting go of their strategic freedom.
One possibility in this scenario is that some countries, such as Singapore, maintain liberal policies. Any businesses that are likely to struggle under draconian rule would be prudent to keep track of where these liberal hotspots start to emerge if society does head towards greater protectionism – and consider relocating.
When considered in the context of America's Donald Trump, Brazil's Jair Bolsonaro, Rodrigo Duterte in the Philippines and the rising far right in Europe, plus the intensifying US/China trade disputes, I find this future dauntingly plausible. I’m sure I’m not alone.
In response to the climate crisis, businesses tend to focus on what is easily quantified. In doing so, they miss out powerful forces that can create unseen problems
In contrast, the “Redefining Progress” scenario sets out a digitally connected, yet highly localised world in 2040 where priorities in many countries shift from rapid growth to healthier expansion. In this world, political ideals have slowly aligned with sustainability, wellbeing and quality of life, partly driven by the increasing impacts of climate breakdown. Supply chains have shortened and simplified in the quest for greater transparency and local value creation. Only companies aligned with these value drivers – and which strive to boldly use their influence to advance the betterment of society – stand the chance of long-term success.
Sadly, I’d say less than 1% of businesses are actually in this space right now, although I do believe many company bosses would welcome the opportunity to connect with a sustainability-driven customer base.
To me, the “cooperative” world in Redefining Progress presents a far more preferable future to New Protectionism, but it is still plagued with problems. Water availability, excessive heat and drought still pose insurmountable challenges to a number of regions. This results in significant migration, with influxes posing challenges to recipient regions and communities despite international cooperation to support “in-migration hotspots”.
Both issues are particular sources of tension – both regionally and internationally – increasing the economic and political divide between regions that are coping successfully with the impacts of climate breakdown, and those that are struggling. More often than not, migrants are seen as the culprits.
In response to the climate crisis, businesses tend to focus on what is easily quantified – such as temperature change and rainfall. But in doing so, business leaders miss out numerous interconnected and powerful forces that can combine rapidly and unpredictably to create unseen problems – and opportunities.
Decision-makers would do better to consider quantitative factors affecting their business’s future alongside richer, multi-factor qualitative scenarios, which research like <2°C Futures affords. Being closer to the whole picture, they will be able to better understand and test their business strategy, operating models and supply chains, while also being able to identify and take action on the risks and opportunities ahead of them.
Will Dawson is associate director, climate and energy, at international sustainability non-profit Forum for the Future. Find out more about the <2°C Futures scenarios and the Future of Sustainability report.