An Apple report on the business impact of climate change shows how extreme weather conditions could have benefits for the company as well as downsides.
The report was published by the Carbon Disclosure Project (CDP), a non-profit which aims to encourage companies to make the right choices about their environmental impact. Its reports collate company responses to questions about their policies, targets and performance – but the most interesting section is on the ‘risks and opportunities’ …
Apple details a number of risks to the business posed either by climate change itself, or by governmental responses to it. For example, the company outlined the way in which extreme weather could disrupt its supply chain and logistics.
Change in precipitation patterns, including more frequent extreme weather events, strain the infrastructure systems (e.g., power, water, transportation, and communication) supporting our supply chain and our operations, as well as the human resources needed to maintain normal operations at Company facilities. Effects from severe weather events could cause a temporary disruption in production or the availability of component parts or finished products, in the availability of a data center, or in the availability or productivity of our workforce. For example, Hurricane Harvey required the relocation of Apple employees whose homes were damaged. Though most of these effects will not, by themselves, affect the Company in an immediate or significant way, there are some exceptions. For example, Apple has sales channels that depend on certain facilities and services being operational (e.g., retail stores, the iTunes Store, and the App Store). Disruptions to these facilities and services due to changes in precipitation patterns or extreme weather events such as flooding, hurricanes, etc. could create immediate lost-revenue effects. While we consider this risk to be medium-term, we experienced disruptions from hurricanes that occurred in the United States in fiscal year 2017.
Apple assesses the risk as 50/50, and the likely financial impact at around $300M.
Other risks described in the report are increased energy costs (which Apple notes are in part mitigated by its own solar panels) and reputational risk if it fails to satisfy consumers that it is doing the right thing in regard to climate change.
But the company also notes potential upsides. For example, tighter regulation on energy usage could boost sales given that it works hard to make its products energy-efficient.
Jurisdictions seeking to address climate change may implement new or more stringent regulatory schemes aimed at reducing the energy consumed by electronic devices, and/or they may require energy use labeling to better inform consumer choices. Apple would be well positioned to benefit from such regulations, due to our ongoing focus on the energy efficiency of our products. For example, Apple’s entire product line exceeds ENERGY STAR standards for all products where ENERGY STAR standards exist (specifically, for Apple TV, Mac Pro, MacBook Air, MacBook Pro, MacBook, iPad, iMac and Mac Mini). Broader or more stringent standards would call upon a particular strength of Apple’s product design teams, enabling us to comply rapidly if changes were required, or to demonstrate best-in-class results. This may favor Apple in competitive procurements, or become more of a differentiator among consumers; both of these effects would increase demand for Apple’s products.
And as consumers become more conscious of climate change, they may increasingly favor companies like Apple that try to do the right thing – like powering all operations from renewable energy. Apple publishes an annual Environmental Responsibility Report, and VP Lisa Jackson last year won an award for greening Apple’s supply chain.
Apple says that consumer concerns about preparations for severe weather events could also make its products more appealing, citing functionality like the SOS feature.
As a recent example, Apple rolled out “SOS” feature for Apple Watch and iPhone, which enables users to automatically call emergency services when side buttons of the Apple Watch or iPhone are pressed—no matter where you are in the world.
Overall, Apple estimates that the total upsides of climate change could be worth as much as $920M.
CDP awarded Apple an A rating for its responses, the top rating achieved by only 2% of companies.