Gerard Gallagher, head of business risk services at Ernst & Young, said that "The carbon agenda is starting to cut across all sectors and affect consumer demand. These sectors could therefore be exposed if they view this as an operational risk rather than a strategic risk. For pharmaceutical companies, climate change affects disease and how disease is spread. This could have significant impact on pharmaceutical product distribution and future product development."
The industries in which "greening" is expected to have limited or no effect include the pharmaceutical, biotechnology, banking, telecom, and media and entertainment industries. The inclusion of biotechnology comes as something of a surprise since a number of established biotech giants (e.g., DuPont) have been named by environmental watchdog groups as among the worst carbon offenders on record.
Other factors expected to register a lower impact on businesses include inflation, consumer demand, energy shocks, and industry consolidation and transition. The increase in globalization for domestic businesses has driven up the number of regulations and protective standards enforced by compliance officials.
Fiona Sheridan, head of Ernst & Young's risk advisory services, observed that "Globalization continues to cause a major compliance headache for many organizations, which are frequently being forced to manage diverse regulations as they expand into new markets. The response from business to these challenges has largely been either to back away from opportunities because of regulatory restrictions or to build up a 'layer cake' of internal risk activities that barely touch each other."
The report also highlights the influence of the credit crisis on the business sector, demonstrating how a big problem in a limited market can have widespread effects. The credit crisis could very possibly extend beyond the financial industry and affect oil and gas prices and even utilities and biotechnology. Its damaging effects on the housing market and real estate have already started to register, with home sales falling to historic lows.
The report also cites a respondent who asserts that "A crisis in structured finance markets could lead to potential systematic problems. Sustainability of financial sector growth is more fragile than markets realize. There is the potential for dramatic fallout from excessive leverage."
The conclusions were drawn from experts and analysts from a wide array of industries, including law, finance, science, business strategy, geopolitics, regulation, medicine, economics, and demographics.
