If only because of the inexorable evolution of regulations, companies are on the front line when it comes to the ecological transition.

In fact, they face a very high adaptation risk associated with the transition to a low-carbon economy. New taxes, investments to meet new regulations, technological investments... all these obligations, if not met, could lead to a drop in competitiveness.

In the much shorter term, companies will also have to take into account the physical risks associated with climate change. In concrete terms, the impact on a company may concern the most at-risk buildings (flooding, thermal discomfort in offices during heatwaves, structural weakening caused by droughts), electronic equipment subject to heat peaks, or the deterioration of stocks of perishable foodstuffs (particularly during transport). French insurers have identified such climate-related damage and, in a 2015 study, estimated that material damage caused by climate is set to increase by 90% between now and 2040 (compared with 25 years ago). A case in point is the Californian electricity supplier PG&E, which went bankrupt after being suspected of being behind the giant fires that ravaged California in 2019. These fires were said to have been started by PG&E's negligence (poor maintenance of its equipment), a cause independent of climate change. However, these fires have been encouraged and amplified by recurrent and accentuated dry spells over the past 15 years, linked to climate change.

Finally, the reputational risk associated with changing customer attitudes and habits should not be overlooked. Consumers and employees increasingly value the social and environmental commitment of the brands they consume or work for. A bad buzz leading to the devaluation of a product or brand on the market can happen very quickly. On the other hand, ecologically responsible suppliers are at an advantage when bidding for contracts from major groups with increasingly stringent CSR requirements. They attract and retain talent, and gain a significant financial edge.

Finally, there is the risk of liability, i.e. the possibility of being sued for inaction on climate issues. The proliferation of lawsuits is a recent illustration of this. The French government, which was taken to court by the Affaire du Siècle associations, has just been condemned for inaction in the face of climate change and found liable for ecological damage. Will companies be next on the list?

Moreover, the market is not mistaken: according to a McKinsey study, since 2014, investment in sustainable and environmentally responsible companies has increased by 68%. In 2019, it represented $30 billion (*Fiveways that ESG creates value, Nov. 2019).

Very small businesses play a key role in the French economy. They account for 10% of French GDP and 14% of the country's CO2 emissions. They employ over 50% of the population. Yet, according to the CESE, these are the companies that have the fewest resources at their disposal to anticipate climate change, whether in terms of information, financing, time or human resources.

Of these companies, 80% believe that climate change calls for an urgent response, but only 70% have heard of carbon accounting. Yet measuring emissions is the first step towards a low-carbon economy.

And the situation is urgent: according to Bpifrance, nearly a third of SME managers say they have already been affected by climatic and environmental events(Les dirigeants de PME-ETI face à l'urgence climatique, 2020).

What climate risks are you exposed to?

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