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‘Guacapocolypse?’ Chipotle and how climate change might affect consumers

March 6, 2014
Personal Finance
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Holy guacamole! The Internet was abuzz Wednesday over a report that the popular Mexican restaurant chain Chipotle included a risk factor in its annual report that climate change could hit its menus—specifically, the ability to offer guacamole.

“Increasing weather volatility or other long-term changes in global weather patterns, including any changes associated with global climate change, could have a significant impact on the price or availability of some of our ingredients,” the company said in its annual report released last month. “In the event of cost increases with respect to one or more of our raw ingredients we may choose to temporarily suspend serving menu items, such as guacamole or one or more of our salsas, rather than paying the increased cost for the ingredients.”

The item, picked up late Tuesday by the liberal website Think Progress, quickly went viral—and Chipotle was equally quick to try to allay concerns.

“This is nothing more than routine risk factor disclosure. The sky is not falling,” Chipotle spokesman Chris Arnold told CNNMoney. “I wouldn’t read too much into this.”

Companies regularly forecast extreme risks in their corporate filings, notes Ben Popken of Today Money. “For instance, Microsoft lists ‘component shortages’ and McDonald’s cites ‘terrorist attacks’ as risk factors. But there are no stories being written about how Microsoft might run out of Xboxes, or how terrorists could drive up the costs of a Big Mac.”

True that. But it’s also true that companies have been planning for climate change risks for a while, which suggests that while the climate change deniers continue to fight in the culture wars, the boardrooms of many global companies are taking the threat seriously. NerdWallet took a look at the ways experts say consumers may be impacted in the future by climate change.

Shortages of raw materials. A 2006 study by the Lawrence Livermore National Laboratory projected that a rise in temperatures could reduce California’s production of almonds, walnuts, oranges, grapes and—crucial for guacamole—avocados by some 40%. Top raw materials that are vulnerable to weather changes include leather, paper products, fossil fuels, natural fats and oils, cotton and other agriculturally dependent products.

Change in seasonal clothing buys. Winter collection, meet spring apparel. Erratic weather patterns could blow away traditional fashion seasons. According to company reports surveyed in 2011 by the group Business for Social Responsibility, apparel companies such as the Limited, Billabong and H&M have included in their corporate disclosures the risk that traditional fashion cycles erode, bringing “less distinct changes between seasons and warmer temperatures.”

Can’t get there from here. According to BSR, filings from companies such as Target, Office Depot and Wal-Mart note that extreme weather events and rising sea levels could hit coastal areas, damaging stores and possibly impacting the ability of consumers to get to shops.

Supply chain breakdown. In a global economy, extreme weather events in one corner of the world has a knock-on affect of price and availability of products down the line. When record floods hit the Queensland area of Australia in 2011, price of steel production jumped worldwide because the country produces about two-thirds of the world’s coking coal, an essential element of steel production.

“Grandpa, what’s snow skiing?” Winter sports hit. Hard to imagine given the cold winter across much of the country, but the Northern Hemisphere has much less snow than 50 years ago—a loss of a million square miles of spring snow cover, according to the New York Times. That could hit a huge global event: the Winter Olympics. A recent study led by climatologist Daniel Scott, a professor of global change and tourism at the University of Waterloo in Ontario, found that given current rates of warming temperatures in 19 cities that have hosted past Winter Games, only 10 will be cold enough to host games by 2050.

Insurance premiums rise with temperatures. A report last year from insurance giant AIG notes that in 2011 insurers responded to 99 weather-related-disaster declarations in the U.S., exceeding the previous record of 81, set the year before. “Equally troubling is the fact that in addition to hurricane Sandy, 2012 saw 34,000 local record high temperatures set in the U.S., as well as large-scale heat waves and widespread drought through the lower 48 states,” said the report, entitled “Climate Change: A Call for Weatherproofing the Insurance Industry.” As the number of extreme weather incidents increases, it’s a good bet the costs to insurers will be passed down to consumers.

Illustration by Brian Yee