Climate change is a challenge organizations and entire societies must address quickly and decisively. Thus far the adaptation process to this new kind of reality has not been flawless, both at the national and organizational level. Disagreements on international accords, greenwashing, and reluctance to switch to sustainable practices for fear of hitting the bottom line have often gotten in the way.
In light of this, About Resilience has decided to dedicate a specific research stream to climate risk, which will include webinars, articles, and in-depth research reports. In this article we present an overview of the latest contents on the matter, to better understand how professionals can ensure resilience through sustainable practices.
The climate emergency has gotten worse with the Covid-19 pandemic, which has stalled discussions on the international stage. At the moment there is still a lack of clarity on how to protect the most vulnerable countries, how to create budget for the climate emergency and what measures to implement. This is particularly urgent for developing countries, who seem to be the ones to suffer already from the impacts of a changing climate. Incidentally, these are also less equipped to deal with the effects of a severe weather event, whose spill over effects have consequences on human health, social and financial dynamics.
Basic human needs could become increasingly hard to satisfy, while those living in the most-affected areas would have to adjust to harsher weather conditions, such as extreme heat. The extremization of atmospheric events would take a tool on critical infrastructure too, which will have to be maintained under tougher conditions with scarcer resources. This transition will likely also play a role in shaping markets. A report from McKinsey highlights through a series of case studies how, for instance, the housing market could take a hit in coastal areas like Florida.
First of all, it is worth stating that climate change and the set of practices required to adjust to it affect different aspects of an organization. For instance, the level and truthfulness of commitment towards sustainability will likely have an impact on reputation. The general public always welcomes a move towards green practices, but this should be a true effort and not a toothless marketing exercise, which could easily backfire. Differently, a sound business continuity management (BCM) or enterprise risk management (ERM) programme would work towards another type of goal, such as protecting assets from the impacts of climate change, whether it is people, financial capital or physical premises.
On the other hand, as with any type of change, those who will adjust better to the transition towards a low-emission reality will gain a competitive advantage, as they will be more comfortable with a different market. This includes less pollution in the production process on the supply side but also an accurate look at how the demand might change, following new environmentally friendly consumer trends.
According to the Task Force for Climate Related Financial Disclosures (TCFD) the transition to a low-carbon economy will require about $1 trillion and therefore investors should pay attention to it. The TCFD is an international working group of experts from the financial sector whose goal is to produce information for responsible investments and disclosures in relation to climate change. The group states that the impacts of climate change will likely be far-reaching, affecting different industries across several geographical areas.
This means that it is going to be hard to just pull out from certain high-risk investments and simply move the capital elsewhere. Rather, investors should look at the types of arrangements that organizations have and try to understand which are those with the most sustainable and resilience management structure. The TCFD is actively trying to encourage companies from G20 countries to provide information about their efforts on climate issues in their annual disclosures, with the purpose to spread virtuous practices. They suggest that disclosures include information that goes from high level directions to implementation practices; these are governance, strategy, risk management arrangements, and metrics and targets.
To provide a better sense of the urgency of the climate emergency, the European Union ran a pilot study to investigate the extent of climate exposure for European banks. Overall, 29 banks agreed to disclose their portfolio and have researchers map them. Only large enterprises were considered for this specific initial study. The results revealed that more than half of the participants invested in sectors that are exposed to climate risk and also that there is very little consistency in the approaches across the financial sector. Obviously, this is only a first step towards a more robust investigation, but it already offers interesting insights on why we should not wait too long to act.
The climate challenge is approaching quickly, and it is imperative that the resilience community contribute to the transition towards a greener, cleaner, and safer future. As always, it is very important to reach out across different disciplines. These include but are not limited to BCM, risk management, sustainability, health and safety, human resources and logistics. However, most of all we must start to seriously acknowledge how much of a priority climate change is, even though our perception might be that it is a relatively distant issue. If the last 18 months have taught us something is that we must keep an eye on how the business landscape changes, to avoid being caught by surprise once again.