International Business The Effect of Climate Change

The Effect of Climate Change on International Business

Climate change is currently a critical issue sparking heated debates in society because of its effects on international business. The definition of climate change is quite complex as it refers to changes in average weather of a region or city (Ssusman & Freed, 2018). Numerous reasons cause climate change, but the major cause is the increasing emission of greenhouse gases. On the other hand, climate change not only impacts the environment but also impacts businesses. Fortunately, climate change has some upshots in the business area as it has some positive impacts. The reason is that businesses can adopt environmentally friendly practices that can help reduce the cost of operation and production. International businesses can also penetrate the competitive business environment by creating a sustainable image that makes them appear trustworthy. Conversely, climate change also impacts international businesses because extreme weather conditions can disrupt the supply chain. Therefore, the essay discusses the effects of climate change on international business and ways of addressing the challenge.

Many environmental discussions revolve around climate change, receiving greater public attention. Climate change has been dubbed a terrible difficulty and an expected surprise since it comprises open, complicated, and poorly understood processes. The increased demand to cut greenhouse emissions is being met with resistance due to climate change's perception, complexity, and uncertainty (Winn et al.,2010). Corporations' answers to public expectations to actively engage in environmental issues vary. Some openly oppose caps and laws. Others are cautious, yet others claim that companies must take action while profiting favorably from their efforts.

The major international business affected by climate change is the tourism business. Tourist is a service sector that primarily entails tourists moving from their home country to international countries primarily for leisure. However, tourists mainly decide to travel based on the climate and natural environment. As a result, climate change impacts the demand for tourists because when the weather is favorable, the majority of tourists travel. In contrast, tourists fail to travel to international countries when extreme weather conditions. Therefore, when the demand is high, the businesses in the tourist sector make profits. In contrast, when the demand is low, businesses incur losses.

Another effect of climate change is increasing capital expenditure on international businesses. The reason is that countries across the globe are mitigating the effects of climate change, and they have strict guidelines, particularly for international businesses. For these businesses to adhere to the climate guidelines of climate change set in the countries they are established, they have to spend a significant amount of money upgrading their polluting facilities. The businesses also spend money installing emission control systems to comply with the regulations set to reduce the emission of greenhouse gases. Therefore, international businesses spend more capital expenditure to comply with emission policies.

Another impact of climate change is that it affects the prices of goods and services. The reason is that international businesses of the energy regulations aim to reduce the emission of energy. When these organizations change their utilities and methods of transport, they pass the charges to the suppliers. These costs are later passed to consumers, resulting in high prices of goods and services. When the prices of goods increase, international businesses face stiff competition from local businesses adapted to the regulations. Lowering the prices also results make them incurring losses; hence international companies are left in a dilemma.

Another effect of climate change on international business is caused by changing weather patterns. When climate change occurs, it affects all countries across the globe. When there are adverse weather conditions, international businesses are affected because shipping is affected because of raging storms. Infrastructure is also affected because traveling is not allowed, and flights cannot take off when the weather is not stable. As a result, international businesses incur losses because they cannot transport to other regions. Businesses, particularly those that manufacture perishable goods like agricultural products, have to stop their operations because weather conditions destroy farms. They cannot outsource raw materials from other countries as transport is also affected. Therefore, climate change affects international businesses by disrupting their supply chain.

Consumer behavior changes are based on various factors, and climate change is among them. Another effect of climate change on international business is changing demand for goods. For instance, during cold seasons, there is an increase in demand for products that keep them warm and vice versa. Diversification is a challenge for international businesses because there is a long procedure to follow. Therefore, the demand for their products reduces due to a lack of agility.

Conversely, businesses also benefit from climate change. The reason is that international businesses are forced to adhere to climate change laws and regulations. Failure to which their operations are halted and their business permit revoked. However, using energy-efficient methods to reduce carbon footprint saves costs because of operation and production. The reason is that increasing energy efficiency reduces the cost of utility; thus, businesses earn more profits. Therefore, climate change positively impacts international businesses by increasing energy efficiency.

Climate change also impacts international businesses by fostering innovation and inspiring new products and services. The business environment is highly competitive; thus, businesses must develop strategies to retain their position or improve their performances. For instance, it is challenging for international businesses to penetrate the business environment in foreign countries. However, suppose they are innovative enough to develop products and services that improve the climate. In that case, they can attract environmentally cautious customers. They can also innovate methods of improving climate, such as recycling their products to avoid wastage and using advanced technology not to harm the environment, leading to climate change.

Climate change can also lead to the supply chain's resilience among international businesses. The reason is that organizations are shifting toward renewable energy sources, intending to reduce their carbon footprint. As a result, businesses are not affected by the changing prices of fossil fuels. This will enable them to retain their customers because they do not have to change the prices of products regularly. Therefore, climate change improves international businesses because it leads to resilience in the supply chain.

It is becoming increasingly hectic for international organizations to handle the pressure from the governments and the community they serve. It is entirely up to the governments and the organizations who have a large part of the accountability for climate change. The social contract that climate change has forced upon the organizations to fulfill the society's expectations of battling climatic changes have put them in hardship (Unsworth, Russell & Davis, 2016). It no denies that climate change occurs due to human activity, either individually or on an organizational level. However, convincing society about corporate responsivity and perceptions has become more difficult than before as customers are more aware than before due to the internet technological advancements.

The World Resources Institute has cited in its 2015 report that sea waters are rising due to global warming, including the challenges of preserving coastal freshwater reserves and sea animals' population (Allen & Craig, 2016). There could be a severity in flooding risks, and serious harm to coastal living populations as a major part of the world's population lives near the seashores. Moreover, food production requires a vast and systematic mechanism of water irrigation that would necessitate the abundance of water, for which companies have to be vigilant with the use of water. It is projected that food scarcity could worsen, other than food insecurity in a few countries and geographic regions, most likely resulting in a war for water and food.

Therefore, the corporate environment has changed dramatically in recent years, thanks to increased rivalry and a wave of globalization that has swept the globe. Many businesses are branching out beyond their native countries to meet the changing wants of other countries. This tendency has made businesses aware of the necessity to operate effectively in a competitive market with clearly defined business practices that significantly emphasize the public interest (Human, 2018). Many businesses with a track record of decreasing emissions are shifting their focus from risk management to new business opportunities. They have adopted market-based approaches, presenting economic prospects as businesses strive to enhance resource efficiency by boosting energy efficiency and lowering expenses. Many of these businesses have discovered that reducing their environmental footprint influences their efficiency, reputation, and overall business environment. Many companies foster invention, which leads to fewer goods and less carbon-intensive activities, or they help businesses reduce their carbon footprint. Climate change symbolizes an approaching market shift for the corporate sector, which may either establish and modify existing businesses or generate new ones. Adopting measures to minimize greenhouse gases is a lengthy strategy to meet growing possibilities and restrictions, not just a morally acceptable obligation. Through active engagement with non-governmental groups, authorities, organizations, and the broader population, businesses can play a part in co-creating an environmentally responsible economy.