WEF Report: Telcos Face Major Climate Risk Exposure

Telco and energy utilities are facing the most vulnerability to climate risks compared to other industries, according to a new World Economic Forum (WEF) report. 

Examining the financial impact of climate change on global businesses, the analysis comes as weather-related disasters have caused US$3.6tn in damage since 2000.

The WEF report, 'The Cost of Inaction: A CEO Guide to Navigating Climate Risk', produced in partnership with Boston Consulting Group (BCG), identifies telecommunications companies as among the most vulnerable to physical climate risks due to their extensive infrastructure networks.

Significantly, the report finds that fixed assets could sustain annual losses of between US$560bn to US$610bn for listed companies by 2035, on account of extreme heat and other climate hazards.

For telecommunications providers, climate-driven losses could lead to a drop in earnings of 8.1% to 10.1% per year by 2045, with companies likely underestimating the financial impact of these risks, according to the WEF analysis.

WEF climate risk framework

In order to help businesses confront these risks, the WEF has developed a framework for telecommunications executives to assess and manage climate risks. This includes conducting climate risk assessments, which measure potential impacts on network infrastructure and operations and implementing adaptation strategies.

The framework emphasises the integration of climate considerations into routine business operations, including network planning, infrastructure deployment and maintenance schedules.

The guidebook is broken up into the following steps and enablers:

• Step 1: Conduct a comprehensive climate risk assessment
• Step 2: Manage risks in the current business portfolio
• Step 3: Pivot your business to unlock opportunities
• Step 4: Monitor risks and report on progress
• Enabler 1: Upgrade climate risk governance
• Enabler 2: Integrate climate risk into business-as-usual
• Enabler 3: Develop effective climate risk systems

WEF also finds that companies investing in adaptation and resilience measures are seeing up to US$19 in avoided losses for every dollar spent, highlighting the financial case for preventative action.

Sony Group Corporation is one such telecommunications company that is implementing supply chain reforms to address these risks. 

"To achieve our net zero target by 2040, it is essential to reduce suppliers' emissions," explains Shiro Kambe, Senior Executive Vice President and Corporate Executive Officer at Sony Group Corporation.

"We are starting to ask major suppliers to aim for net zero Scope 2 emissions by 2030 and plan to support their capacity building."

IKEA: Setting an example within the industry

More broadly, WEF suggests that companies that fail to decarbonise are facing mounting transition risks, with up to 50% of profits at risk by 2030 in heavy-emitting sectors. This includes telecommunications providers with significant data centre operations.

Ingka Group, which operates IKEA retail operations globally, reports measurable progress in addressing climate risks while maintaining growth. 

"Since 2016 we have managed to reduce our climate footprint with 24.3% across Scope 1, 2 and 3, while growing our businesses by 30.9%," says Jesper Brodin, CEO of Ingka Group and Co-Chair of the Alliance of CEO Climate Leaders.

The company's approach includes investment in renewable energy for powering telecommunications infrastructure and data centres. This strategy has resulted in reduced operational costs alongside emissions reductions.

Looking ahead: The market grows, despite climate challenges

The report ultimately identifies market opportunities in climate adaptation technologies, with green markets projected to expand from US$5tn to US$14tn by 2030. This includes telecommunications infrastructure designed to withstand extreme weather conditions and energy-efficient network equipment.

The role of the telecommunications sector in particular is crucial when it comes to enabling remote work and digital services positions. With its physical risks to climate change considered, it therefore stands to hugely benefit from the transition to low-carbon operations.

Karen Pflug, Chief Sustainability Officer at Ingka Group, says: "Climate change is now an increasingly visible reality impacting all of us each year, and these new reports reinforce that embedding climate risks and opportunities into a business' decision-making process is not only the right thing to do but a necessity for a thriving business."

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