Adaptation Measures of Energy and Utility Companies to Cope with Water Scarcity Induced by Climate Change

Abstract

Resource-intensive business plays a fundamental role in causing climate change through the emission of large amounts of GHGs (greenhouse gases), and, in turn, climate-induced physical changes affect companies. The IPCC (Intergovernmental Panel on Climate Change) reports an increase in the frequency and severity of extreme weather and climate events. Droughts represent a major challenge for energy and water businesses, in terms of both exacerbation of dry climates and increase in the number of territories that experience water shortage. On the basis of an analysis of the energy and utility companies operating in different continents, the objective of this empirical research is twofold: on the one hand, it examines how these companies perceive the changes in water availability induced by climate change (as well as the potential impacts on business); on the other hand, it analyses the corresponding measures that these companies adopt to cope with changes in hydrology and water resources driven by climate change. Data from the Carbon Disclosure Project (CDP) provide valuable information about business climate-related responses of several of the world's largest firms. Our results show that, in the energy and water sectors, some adaptive measures are starting to be implemented to deal not only with the risks but also with the opportunities related to climate-induced physical changes, thus leading to interesting innovation. The paper concludes that anticipated positive effects could drive energy and utility companies towards a proactive stance to achieve a competitive advantage and trigger innovative trajectories.