Climate change: India Inc's New Single Biggest Business Risk
Climate change is emerging as a significant business risk for companies in India, impacting various sectors such as car manufacturing, skincare, and beverages. Unseasonal showers during summers, erratic weather patterns, and diverse rainfall patterns associated with climate change are beginning to affect the financial performance of these businesses.
For Hindustan Unilever Ltd (HUL), India”s largest FMCG company, weather has become the “single biggest business risk.” Other prominent firms, including carmaker Hyundai, skincare company Emami, and PepsiCo bottling company Varun Beverages, are also facing similar challenges due to climate change. It is observed that the weather situation remains “erratic,” and the company must monitor the impact of the monsoon and weather- risks, especially with the early arrival of El Nino.
The unpredictability of weather pertains not only to the quantity of rain but also to its distribution and timing, making it the only single business risk. These uncertain weather patterns have far-reaching consequences, affecting rural demand and farm incomes.
Nestlé India, has expressed concerns about the current monsoon deficit of almost 30% and the potential influence of the El Nino effect on rural demand. Rural sales are a significant factor for companies, with HUL relying on rural areas for about 40% of its total sales. Unseasonal rains, heatwaves, and a delayed monsoon have further complicated matters. These extreme weather events are impacting crop yields, particularly for crops like rice and pulses. These disruptions are causing companies to rethink their strategies and prepare for the effects of climate change.
The impact of climate change extends beyond agriculture. Dabur”s beverage portfolio was affected by unseasonal rains in North and West India during the June quarter. People tend to stay indoors during heavy rains, leading to lower consumption of beverages in outdoor locations. Such disruptions significantly impact businesses, especially when a substantial portion of annual consumption relies on specific seasons.
Climate change has emerged as a substantial business risk for companies in India, affecting diverse sectors such as car manufacturing, skincare, and beverages. Unseasonal showers, erratic weather patterns, and unpredictable rainfall associated with climate change are now impacting the financial performance of these businesses. For major companies like Hindustan Unilever Ltd (HUL), weather has become their “single biggest business risk.” Prominent firms including Hyundai, Emami, and several beverage companies are grappling with similar challenges due to climate change.
The influence of climate change extends beyond weather- uncertainties. It affects agricultural yields, rural demand, and even consumer behavior. Companies need to adapt to this new reality by monitoring weather- risks and developing strategies to mitigate the impact of climate change on their businesses. Climate change is reshaping market dynamics and emphasising the need for businesses to address environmental sustainability and resilience in their operations. As the world grapples with the consequences of climate change, India Inc. must navigate these challenges and seek innovative solutions to thrive in an ever-changing climate landscape.
