Wildfires, droughts, floods, crop failure, famine, mass migration and the destruction of ecosystems, communities and wildlife – these are just some of the predicted outcomes should the world reach a tipping point where we cannot reverse unmitigated global warming.

According to a draft report from the Intergovernmental Panel on Climate Change (IPCC) leaked to Agence France-Presse: “Life on earth can recover from a drastic climate shift by evolving into new species and creating new ecosystems … humans cannot.”

The IPCC is planning to publish its landmark report in the summer, but not in time for this year’s UN Climate Change Conference, also known as COP26, in November. The warning is a stark reminder of the need for urgent action to combat climate change.

So it was, for a short time, heartening to hear that the UK government is set to legislate on “the world’s most ambitious climate change target” this summer. The aim is to reduce emissions by 78% by 2035, compared with 1990 levels.

Ministers said that the government’s sixth Carbon Budget would take the UK more than three-quarters of the way to reaching “net zero by 2050” – the world’s latest mantra.

The past year has, quite rightly, seen an acceleration in the number of organisations around the globe publicly outlining their plans to reduce their greenhouse gas emissions. COVID-19 has underlined the disastrous economic and social effects that global risks, such as pandemics and climate change, can have on the world, people and places.

But what if we fail to meet our net-zero goals? Despite the UK government’s lofty promises, evidence of the possibility of failure, in stark relief, came in June. A report by the UK’s independent Climate Change Committee (CCC) found that Britain was even more badly prepared than five years ago, when the CCC published its last report on climate change risks.

“Alarmingly, this new evidence shows that the gap between the level of risk we face and the level of adaptation under way has widened. Adaptation action has failed to keep pace with the worsening reality of climate risk,” the report said.

Launching the announcement, Petteri Taalas, the World Meteorological Organization Secretary-General, said: “Increasing temperatures mean more melting ice, higher sea levels, more heatwaves and other extreme weather, and greater impacts on food security, health, the environment and sustainable development … It underlines the need for climate adaptation.”

The contrast between the CCC’s findings and those of the government’s sixth Carbon Budget is troubling. It suggests that the possibility of failing to reach net zero is a very real one. Further evidence of a lack of concrete action can also be seen in the shortage of skills needed for the green economy.

Helen Booth, Director of the HomeServe Foundation, which promotes apprenticeships, says: “So far, we’re a long way short of where we need to be, because the policies and grants launched in recent years haven’t driven effective change on a large enough scale.

“Despite the government’s bold and visionary net-zero goals, we currently don’t have the trades businesses, which are mostly small trades, SMEs of nine or fewer employees, or enough people with the skills to deliver them.”

Over the past decade, the UK and the rest of the world have increasingly seen the devastating effects of a warming planet. Analysis by Imperial College London’s Grantham Institute shows that in 2013-14, the UK winter floods alone cost the economy £450m in insured losses.

Without adapting behaviours, lifestyles and, more importantly, key infrastructure to limit climate change, its effects will disrupt the natural, economic and social systems that we depend on. This disruption will have an impact on global food security, damage infrastructure and jobs, and harm human health. All countries, communities and companies will feel the impact of climate change, according to the Institute.

The predicted costs are eye-watering. The World Bank estimates that natural disasters cost about $18bn a year in low- and middle-income countries, through damage to power generation and transport infrastructure alone. They also trigger wider disruptions for households and businesses, costing at least $390bn a year.

Many large companies have pledged to reach net-zero goals by 2030, but what of SMEs that make up 99% of all businesses in the UK but have fewer resources available? Will they face sanctions? That is unclear as yet because the government still hasn’t clarified its own policies and actions.

Anj Chadha, Chief Executive at consultancy TT Impact Strategies, says: “Sanctions on business that could be explored include a cap on the amount of CO2 a business can emit, with a very high tax on carbon (more than £100 per tonne of CO2, for example); carbon tax on imported goods with over a certain level of embodied carbon; sanctions on high-emitting buildings with increasingly high cost of retrofits; and bans on petrol and diesel vehicles.”

The UK government has already announced a ban on sales of new petrol and diesel cars by 2030, but the existing petrol and diesel fleets will also come under scrutiny as companies are pushed harder to set short-term targets for their net-zero plans, which would include decarbonising their existing fleets.

Chris Bowden, Managing Director of Squeaky, an energy supply platform that enables corporates and public sector organisations to buy clean electricity directly from generators and the wholesale market, says: “We’re already seeing the devastating effects of climate change. However, what many business leaders often fail to consider is the existential risk to their business if we don’t take action on climate change now. In short, there is a risk that their company simply won’t survive.”

If we don’t meet net-zero goals and temperatures rise by more than 2°C, the costs of climate change will accelerate. A 2015 study published in Nature by two professors from the University of California, Berkeley, suggested unmitigated global warming could reduce average global incomes by roughly 23% by 2100 and also make 77% of countries poorer per capita than they would be without climate change.

“The 2019 Climate Disclosure Project report by a UK environmental non-profit charity showed that the world’s largest 500 companies could potentially face $1trn worth of financial risks due to climate change, such as higher operating costs, asset write-offs and falls in demand,” says Bowden. “It is also very likely that many companies will simply become uninsurable, too.”

Perhaps even more worryingly though, in its report – the third independent assessment of the UK’s climate risks under the Climate Change Act – the CCC says: “Net zero alone is not enough. Reducing climate impacts requires both emissions reduction and adaptation.”

So, even though net zero is a critical goal and failure to reach it would result in catastrophic results for businesses, the environment and people, much more needs to be done, and quickly. “Adaptation is under-resourced, underfunded and often ignored,” the CCC report says.

Bowden says: “Climate change is quite frankly the biggest existential risk we all face in business. Companies need to act now.”

Climate risks are already affecting the supplies, the infrastructure and the routes by which goods are transported. According to the Climate Change Committee report, businesses say that heavy rainfall, surface-water flooding and high temperatures dominate the current weather-related risks in their supply chains, but coastal and river flooding and water scarcity will become more significant drivers in the future.

Adaptation, the report says, is urgently required with regard to the provision of better information, diversification of supply-chain risks and building better capacity to manage, share and transfer the risk. New technology and infrastructure have an important role to play in this evolution.

Although the government can ensure that “information and advice is available, especially for smaller businesses” and implement “stronger reporting requirements for businesses and infrastructure providers, such as ports and airports”, it is up to business to act on the changes needed.

The ICAEW Library & Information Service provides access to leading business, finance and management journals, as well as eBooks.

Further reading on the implications of climate change on businesses is available through the resources below.