Climate shocks threaten the huge global sports economy

A report showed that extreme weather conditions threaten annual revenue growth in the $2.3 trillion sports economy, as expansion depends mainly on tourism linked to resource-draining global events, such as the recently concluded Milan-Cortina Winter Olympics.

The growth of this sector should be leveraged to maximize social benefits such as reducing public health care spending and promoting gender equality.

This requires dealing with the threat the sector faces from climate change and nature loss – which may be exacerbated by its environmental footprint, said Tony Simpson, partner and global sports sector leader at consultancy Oliver Wyman, which prepared the report.

“Sports has more power than any other sector to motivate behavior because it sees itself as an asset to society. If you are an asset to society, you have to act like it,” he told Reuters.

The report prepared for the World Economic Forum showed that sports tourism, which is worth $672 billion, and the sporting goods sector, which has an annual sales volume of $612 billion, exceed the share of elite sports, which amounts to $140 billion.

Sports tourism, the fastest growing sector in the tourism industry as a whole, is expected to account for 60 percent of the total revenue increase in the sports economy until 2030.

Amateur sports and sports-driven revenues in sectors such as broadcasting, nutrition and wearable technologies complete the picture of an economy that the report said is set to grow to $3.7 trillion by 2030 and $8.8 trillion by 2050.

Oliver Wyman analysts collected and reviewed data from organizations including major leagues, investors, sponsors and the World Sporting Goods Industry Association, Simpson said, adding that the project required more than 5,000 hours of work.

He added, “By showing the scale of the sports economy – and doing so through a rigorous process… – this report highlights what is at stake if we do not apply the right behaviours.”

Heat waves and floods
Increasing youth inactivity and extreme weather events disrupting competitions, landscapes and supply chains could cost the sports industry more than $500 billion in lost revenue by 2030, the study found.

“There are fewer young people aged 15 to 25 playing football at weekends than ever before,” Simpson said, highlighting a trend that is undermining the future fan base.

“While increased participation by women and more children joining organized activities is pushing up the overall numbers, the core segment – young men who play sports – has shrunk,” he added.

At the same time, weather events such as extreme heat, flooding, lack of snowfall and pollution can cause competitions to be cancelled, hurting media coverage and advertising opportunities.

Last year, France witnessed severe heat waves before the start of the Tour de France, forcing competitors to find ways to adapt to the high temperatures.

“Broadcasters are increasingly including clauses in contracts that stipulate that events may not take place due to severe weather, meaning lower advertising revenues,” Simpson said.

External activities represent more than 90 percent of broadcast rights revenues in sports, and 76 percent of sponsorship revenues – the two main sources of revenue in this sector.

As for community sports, in the United Kingdom alone, adverse weather conditions cause a loss of around £320 million ($433 million) in income and maintenance costs annually.

Simpson pointed out that increasing awareness among sponsors and investors as the sport develops can help channel its positive impacts through “impact investing.”

“Sponsors increasingly want their money to lead to tangible results, not just put a logo on a T-shirt,” he said, referring to Standard Chartered’s sponsorship of Liverpool FC, a competitor in the English Premier League, which prompted the club to create community programs for women and girls or support recycling initiatives.

He continued, “These are financial incentives that drive social results, and major brands are now seeking to achieve exactly that.”