[Editor's note: This article was authored by BSR, a global business network and consultancy focused on sustainability.]
As climate change sets in, its impacts -- increasing severity of storms and weather disasters, receding snow and rivers, advancing deserts, and more frequent landslides and floods -- will test companies' ability to effectively deliver high-quality products and services.
In response, BSR is launching a series of briefs to illustrate how these changes will affect each industry and what current adaptation practices look like, beginning with an examination of the food, beverage, and agriculture sector (PDF).
Some effects of climate change will be familiar, such as crop failures and ensuing price shocks, but over the next several years, they will happen with more frequency and with even higher insurance costs. Beyond direct business impacts, companies will also need to understand how climate change will affect their most vulnerable stakeholders -- the poor, citizens of developing countries, and women -- who will face increasing risks due to drought, disease vectors, and the perils of migration.
The good news is that many resources on business adaptation to climate change are already available (see end of article). McKinsey & Company developed a cost curve for adaptation (PDF), for example, which highlights different adaptation options and shows that investment paybacks can be short. Also, companies do not need to choose between adapting to climate change and helping to mitigate it; the distinction between these two is rarely clear and we should do both together.
There are also tools that translate state-of-the-art climate monitoring, prediction, and imagery into practical information to help companies improve their relevant governance and decision-making processes. These tools include: the Climate Administration Knowledge Exchange (CAKE), Google Earth Engine, the International Research Institute for Climate and Society, the National Oceanic and Atmospheric Administration's Climate Prediction Center, and weADAPT. Companies can also take advantage of new market opportunities by providing solutions to enable effective adaptation.
There are several obstacles to climate adaptation, even for those most committed to proactive and responsible responses. First, the language of adaptation does not resonate well beyond specialists, so communicating on the topic is difficult. As Carmel McQuaid, Climate Change Manager at Marks & Spencer, recently told us, it's usually more effective to engage stakeholders by communicating on the topics that matter most to them. For example, retailers would be most concerned with their ability to continue to sell high-quality products, such as coffee. For companies that thrive on innovation, positioning adaptation as part of the portfolio of trends affecting the industry is usually more effective than treating it as a standalone topic.
Another obstacle is the complexity and uncertainty of the climate. This goes for today's weather, let alone the future of the climate more broadly, as evidenced by the fact that we are not well-equipped to handle disasters such as the recent floods in Pakistan and Australia. The fact is that we do not know how to properly prepare for disasters even when they are expected. This is partially due to the cognitive difficulty of coping with low-probability, high-impact consequences, and it is also a result of markets and organizations that don't encourage or reward proactive preparation.
Third, our first reactions may not serve us well. Companies are at risk of taking seemingly sensible actions that may lead to adverse effects elsewhere or on others. Such "maladaptation" (PDF) can take many forms, such as combating heat by turning up the air conditioning (which would produce more greenhouse gas emissions), using desalinization technologies that pollute marine environments, raising prices or otherwise excluding vulnerable customers that depend on insurance or other essential services, or giving customers more resources without the incentives to conserve.
This is partly a result of focusing on the specific, current problem at hand while not taking into account the broader repercussions. It is also a result of failing to identify where weather risk and other familiar issues have climate change dimensions.