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Published 29 April 2013 12:37, Updated 30 April 2013 09:26
Winter might be coming, but higher-than-normal temperatures mean retailers could be stuck holding winter stock.
Retailers and consumer brands lack understanding of how climate change will affect their industry and need to factor greater weather volatility into their business planning, according to a stock analyst.
Regnan Governance Research & Engagement managing director Amanda Wilson, who specialises in advising institutional investors on long-term risk, says climate change affects all industries including retail but this is not well understood.
“Do I think it’s well understood? Certainly not well enough at all. We want companies to be proactive and sectors to be proactive especially about sector-wide risks and I think there is a dawning realisation that ... just about every sector will be impacted to some degree.
“I remember years ago a retailer told us that they won’t be affected by climate change because they sold both summer and winter clothes.”
The problem is the retailer assumed that weather would remain predictable. If a store knows in advance that the winter will be warmer than the previous one, they can simply order different stock. (Though this would have a bearing on suppliers of raw materials, such as wool manufacturers).
In fact, scientists say that climate change is not simply about uniformly warmer temperatures but also about weather unpredictability as shifting climatic patterns throw seasons out of kilter.
The Australian Financial Review reported on Monday that clothing retailers are struggling to shift autumn and winter apparel after above-average temperatures in Sydney, Melbourne, Brisbane and Perth.
Wilson says there are some things that companies can plan for - such as an increase in extreme weather events, rising sea levels and increases in rainfall in some parts of Australia and drought in others. She adds that actuaries specialise in unpredictability so companies can make robust plans to cover a wide variety of circumstances, though she says she “doesn’t expect them to be infallible”.
Some businesses are already taking steps to mitigate their exposure to the weather in any single country, particularly retailers and consumer goods manufacturers that rely on the hot Australian summer.
Gelato franchise chain Gelatissimo is opening stores in Asia and the Middle East to spread its risk beyond the Australian market, after a dip in profits thanks to a series of wet summers. The weather was also a big factor in the decision to take the Cancer Council sunscreen brand global.