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Climate change – Another reason to expect higher prices in 2023

By Lee Cleveland - February 8, 2023

Per a recent PWC study, thousands of CEOs are worried about escalating prices, as they believe that 2023 is going to be an even more expensive year thanks to the ever-growing effects of climate change. 

The report included responses from more than 4,400 CEOs worldwide and a high majority of them anticipate a “moderate” to “very large” increase in their costs as companies prepare for the worst.

So, how can climate change impact the cost of consumer goods?

Answer: Climate disasters have become increasingly common in the last few months and the effects are far-reaching and alarming. Moreover, environmental degradation due to climate change has killed crops, damaged buildings and interrupted energy sources, while record-breaking temperatures have hindered workers’ productivity.

But, hasn’t inflation driven up prices enough?

Environmental experts and economists have already started establishing a link between climate change and inflation. And while climate change isn’t considered a primary driver of today’s inflation, economists insist the connection will grow stronger as the earth continues to warm.

“If we ignore it and don’t do anything about climate change, it will become a staggering cost,” Suzi Kerr, chief economist at the nonprofit Environmental Defense Fund, told The Hill last year. “And it will have a huge impact not only on grocery bills but many other aspects of our ordinary lives.”

So, what’s being done to address the issue?

Answer: According to PwC’s report, only CEOs who feel an immediate, clear and present danger are likely to take steps to address it.

That “creates risks of its own,” the report’s authors wrote, adding that climate change “won’t be solved if the only companies working on it are those that face immediate financial impact.”

Unfortunately, the world has adopted that attitude for too long as everyone seems to focus on today with little regard for the long term.

It’s no surprise that despite all the popular decarbonization efforts, like moving toward zero-emissions electricity, it’s becoming clear that they won’t be enough to make a real difference. In fact, a 2022 United Nations Report found that due to the levels of carbon already in the air, a rise in temperatures is inevitable regardless of our best efforts.

Simply put: We’ve been reactive but not proactive, and we’ll be paying for it.

Companies must find ways to be environmentally conscious without sacrificing revenue.

For example, Nike has spent the last 10 years using a form of fabric weaving that uses less material and labor time, according to a 2019 Los Angeles Times. As a result, they’ve saved money on materials and transportation — and, per the aforementioned Times report, millions of pounds of potential waste have been kept out of landfills.

And Nestle’s thin-water-bottle concept serves as yet another example of how companies can save money by being eco-friendly.

“We’ve moved past this concept that business versus the environment is a tradeoff,” Environmental Defense Fund executive vice president Tom Murray told the Times. “The business benefits were always there, but more and more companies are going after them.”

Even if inflation goes away, don’t expect a considerable drop in prices thanks to climate change. Companies that have already made eco-savvy adjustments will likely be able to minimize any impending price hikes for their goods and services.

Image: Fire Drill Fridays action on climate crisis in Washington D.C. (Ted Eytan | CC BY-SA 2.0)