The Real Cost of Climate Change on the Global Economy

The impact of climate change has shifted the seasons and changed the physical landscape of the planet. It's also acted as a warning sign for future environmental problems if it's not addressed in a lasting, meaningful way globally. Although the effect on bank accounts and wallets may be more subtle, particularly in the short term, it's definitely a problem in the present.

While most people only think of more intense weather patterns when they hear the term climate change, the truth is that the changes caused by this worldwide problem are having a huge impact on manufacturing, retail and logistics. That, in turn, is causing serious impacts on household budgets, job security and even the availability of popular products.

Here are three ways climate change impacts the global economy, particularly in terms of the consumer.

Headaches in Logistics

The multimodal system that transports goods from manufacturer to seller is called logistics, and climate change affects it. Over-road trucking is particularly vulnerable to changes in the ecosystem as flash flooding closes bridges, wildfires shut highways down and storms prevent safe transport. Prolonged cold and ice can damage or even destroy roads, making them impassable or difficult for truck drivers to navigate.

In mountainous areas, mudslides and rock slides can wipe out entire sections of vital infrastructure in moments, taking weeks or months to repair. Other popular transport methods, including boat and air shipments, are similarly affected. Simply put, if the weather is too harsh, products can't get to where they need to be.

Jamming the Supply Chain

Raw materials are necessary for far more than agriculture and food. Droughts and unseasonable flooding can ruin crops of cotton used for cloth and thread. Forest fires can significantly impact consumer paper goods, as wood pulp becomes harder to obtain. Natural disasters and storms can also force migrant labor to other areas, which means finding labor for necessary tasks such as harvesting, stocking and shipping is much harder.

Store-Level Costs

On-shelf prices absorb a great deal of the climate change-induced costs. When raw materials, transport and labor costs all creep up in response to climate change, the price tags for everything from food to home goods reflect the struggle. Real estate costs and storefront rents are also affected in areas adjacent to floods, fires and intense weather conditions. Not only do these skyrocket to adjust for an influx of businesses, but operational utility costs also continue to climb as heating and cooling are needed earlier and earlier each year.

How Can Businesses Mitigate Climate Change Costs?

To combat the effects of climate change, businesses need to embrace a local mindset as much as possible, sourcing from nearby manufacturers to cut back on material and logistics costs rather than importing. More research into eco-friendly manufacturing methods, including recycling, packaging reductions and minimizing waste, will also help ease the sting of getting goods produced and on shelves. At the store level, smart order planning will prevent the high cost of overages or stagnant stock, smoothing out the flow of availability versus demand for consumers.