Why businesses must future-proof against climate change

South African businesses are sitting on a ticking time bomb. As extreme weather events intensify and climate-related costs increase, companies that fail to future-proof their operations face an existential threat to their survival.

The economic and operational risks of climate change have become defining challenges for businesses worldwide. Increasingly severe weather events, heatwaves, floods, and droughts caused global economic losses of $310 billion in 2024.

African countries are bleeding 2–5% of their GDP annually to climate disasters, while many governments divert up to 9% of their budgets just to respond to these emergencies.

Sashen Singh, Senior Manager for Sustainability at Nedbank Business and Commercial Banking, warns that businesses can no longer treat climate resilience as an optional extra.

“Climate impacts are coming at a high cost to business continuity, and the cost of ignorance is too high to go out of business compared to protecting your operations for the future,” Singh says.

"Businesses should therefore continue to prioritise setting targets for their products and services around their greenhouse gas emissions, air pollution emissions, water usage, waste practices, energy usage, and the product life cycle."

The threat extends beyond immediate operational disruptions. Companies face rising insurance premiums, potential exclusion from global supply chains, and new regulatory hurdles like the EU’s Carbon Border Adjustment Mechanism (CBAM), which targets carbon-intensive exports.

In South Africa, where coal accounted for 74.31% of the country's electricity generation in January 2025, and less than 9% of water resources remain unallocated, businesses face mounting pressure to respond decisively to climate challenges. Resilience is no longer a choice but a prerequisite for survival and competitiveness.

The stakes for South Africa and the world are significant. Without decisive action, industries such as mining, manufacturing, and agriculture risk losing global competitiveness, with consequences beyond immediate profit margins. Conversely, those who adapt stand to gain, strengthening their financial position and contributing to sustainable development.

Where to start

Businesses need to start by conducting a risk assessment to identify gaps in their climate readiness. This reveals vulnerabilities to extreme weather events like floods or droughts, and for agricultural businesses, critical water security risks.

Risk assessments help tailor mitigation strategies for long-term sustainability. This planning must extend to asset management, investments, and supply chain resilience, Singh encourages.

"You might have a department that's very paper-based, but if they move their processes to digital platforms, they could reduce their carbon footprint and carbon emissions for the company and their clients."

South Africa must prioritise water security, renewable energy, and responsible production. Nedbank Commercial Banking provides sustainable funding solutions and advisory services to help clients future-proof their businesses while contributing positively to society.

Embedding climate resilience into business strategy

South Africa's energy crisis demonstrates the devastating cost of climate inaction.

"Record load shedding in 2023 cost the economy R1.2 trillion – a stark reminder that renewable energy transitions offer more than stability, they reduce long-term costs," Singh explains. Water management is equally critical for the agriculture and manufacturing sectors.

Balancing immediate operational demands with long-term sustainability requires bold leadership and strategic integration across supply chains, operations, and governance.

With global climate losses projected to reach trillions by mid-century, South African businesses must diversify supply chains, digitalise processes, and embed sustainable practices that create efficiencies while mitigating escalating climate risks.

Profit opportunity

Sustainability presents major opportunities alongside challenges. PwC's 2024 research shows 80% of consumers pay a 9.7% premium for sustainable goods, making sustainability a growth driver rather than just compliance.

“Industries such as wine and fruit exports, collectively generating billions for South Africa’s economy, must adapt or risk losing relevance in sustainability-driven markets. Businesses that lead with responsible practices in emissions reduction, waste management, and resource optimisation will emerge as industry leaders,” Singh says.

Financing is critical for climate resilience. Despite South Africa's R1.5 trillion energy transition funding gap, green bonds offer solutions, with global issuance reaching a record $600 billion in 2024.

The opportunities presented by resilience extend beyond mitigation and risk management.

“Businesses that integrate sustainability into their core operations can innovate, capture new markets, and envision a sustainable future.”

The real question for businesses is not if they can act, but if they are prepared to lead.