Pakistan ranks eighth in the Global Climate Risk Index 2021, making it one of the top three nations for air pollution levels globally. This vulnerability is exacerbated by factors such as El Niño, which disrupts agriculture and water resources, emphasizing the urgent need for comprehensive climate risk management.
The country is projected to face a food shortage of 70 million tonnes by 2025, with a 23 percent decrease in cotton productivity already witnessed due to flooding in 2022. These challenges are not distant threats but current realities, highlighting the critical importance of strategic climate risk management.
Moreover, the anticipated disappearance of 7,000 glaciers within the next 70 years poses a significant risk to water supplies, underscoring the immediate need for proactive climate risk management.
A recent ‘Climate Change Readiness’ study conducted by GIZ, a German development agency, and the Pakistan Business Council revealed that while awareness of climate risks is increasing among companies, many are still in the early stages of integrating these risks into their strategic and operational frameworks.
The study indicates a strategic gap between acknowledging climate risks and implementing robust management strategies to effectively mitigate and adapt to these risks. Specifically, 70 percent of companies exhibit fragmented internal processes that hinder effective climate risk management, highlighting the need for a more integrated approach.
With the updated International Financial Reporting Standard for Sustainability-related Disclosures (IFRS S2) mandating companies to report climate-related risks in their financial statements, Pakistani businesses have a significant opportunity to map both physical and transitional climate risks for their organization, enhancing their resilience and ability to manage risks effectively.
However, only 30 percent of companies have developed comprehensive strategies to manage these risks, leaving many struggling with partial or fragmented approaches that could jeopardize their long-term sustainability.
Furthermore, 36 percent of companies have identified low-quality agricultural output due to extreme weather as the top climate-related challenge affecting supply chains, emphasizing the intricate ways climate risks intertwine with operational and financial performance.
Amidst evolving international climate policies and market demands, Pakistani businesses must align with global green initiatives to remain competitive. This involves significant investment in sustainable technologies and processes essential for maintaining market access and capital inflow.
As global consumer preferences shift towards sustainability, Pakistani businesses can leverage this trend by developing products that align with new consumer standards, potentially opening up new domestic and international markets.
In conclusion, Pakistani businesses must conduct thorough risk assessments and integrate climate considerations into their business strategies to protect their financial health and ensure long-term resilience. With rising temperatures expected to increase the intensity and duration of climate-related events, proactive and strategic responses are imperative for navigating the challenges and opportunities presented by climate change.
