Adaptation strategies: Invest in natural capital

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Wetlands are an important element for climate change adaptation.

Corporate leaders face many questions about how to succeed in the years ahead, but one is too often overlooked:  What can our company do today to succeed in a climate-constrained world?

Business already operates in a climate-constrained world. This reality is detailed in reports from the Intergovernmental Panel on Climate Change (IPCC). It is affirmed by a growing set of businesses and governments such as the U.S. Department of Defense, which now factors climate change into today’s plans. The future tense has become the present tense. And the time for action is clearly now, as laid out in the New Climate Economy report.

A detailed business-relevant report from BSR lays out the recommended pathway forward. Those recommendations include: translating climate risks into business-relevant language; building an “architecture of participation” for climate action and stabilizing the climate system through “resilience wedges” that combine ambitious greenhouse gas emissions reductions with enhanced adaptive capacity. The “We Mean Business Coalition” offers an “architecture of participation” for corporate engagement and action.

For companies, the first step is to set targets — in this case science-based emissions targets to be on the path to achieve zero emissions by 2050. Tools are available for such a process, including the Autodesk’s C-FACT tool (PDF).

Once targets are set, companies need to invest in aggressively decreasing greenhouse gas emissions. A growing body of reports provide guidelines on pathways forward for transport, agriculture and data centers. In addition, the WWF 3% Solution illustrates a business strategy to drive uptake of energy-efficiency measures and transitioning to low-carbon energy sources in a profitable manner.

Many companies stop at this point and call their work complete on corporate climate strategy. In so doing, they not only miss opportunties but also leave an enormous hole in becoming a climate-smart business.

Businesses not only need to decrease greenhouse gas emissions, but also craft and implement robust climate change adaptation strategies. The reason is simple: the climate will continue to change and companies need plans to manage through the ensuing disruptions.

It is at this adaptation stage that the road (currently) less travelled can be seen.

A key component of adapting to climate change is investing in natural capital — the structure and function of ecosystems and watersheds, or “green infrastructure” (think: forests; wetlands; and natural landscapes). Companies rely upon this green infrastructure just as they depend on “grey infrastructure” (think: roads; harbors; and other aspects of built environments).  

Ultimately, companies both affect and rely on “services” that flow from well-functioning ecosystems (PDF).

Wetlands can buffer flooding. Coastal mangroves can diminish the impact of storm surges. Forests sequester carbon and filter water, while also addressing soil loss and erosion. Many other ecological features provide important “services” to businesses and societies alike.

Given these many natural capital-based benefits that societies — and many businesses — rely upon, investments in restoration and maintenance of well-functioning ecosystems should be considered along with other investments to ensure the resilience of both natural and built infrastructure — particularly within a climate change context.

Yet, businesses often act as if green infrastructure will operate as “normal” even in the face of climate change and increased human pressure. This assumption is erroneous, and may prove fiscally irresponsible for companies operating in areas with little resilience given climate change impacts.

Climate smart companies will need to invest in business-relevant approaches to ecosystem based adaptation. This work will come in the form of partnering to conserve biodiversity and restore natural systems or ecosystems.

Corporate attention to this area of work and the important role of “green infrastructure” is slowly emerging.

Companies are investing in wetland restoration, reforestation and habitat restoration. Unilever, SwissRe and Royal Dutch Shell have documented case studies in a publication that make the case for investing in green infrastructure to improve both gray and green infrastructure and business resilience.

For unconvinced corporate decision-makers, the business relevance of work on ecosystem-based adaptation starkly emerges through two simple questions:

  • Do we know whether our corporate facilities and key supply chain partners face climate change related risks that could render them inoperable for a time?

The answers to these questions likely will lead to the need for communicating internally about climate change-related risks in business-effective ways, such as Kering’s approach to understanding impact across the business and highlighting where mitigation and action are needed through their Environmental Profit & Loss Account (EP&L).

Then, companies will need to explore crafting “climate-smart” strategies that factor in adaptation and investments in ecosystem structure and function. This work will draw upon analytical approaches for identifying areas in a watershed to invest in order to improve ecological function (such as, from the body of decision aids summarized in a recent report, including the Stanford University, TNC and the Natural Capital Project’s “Resource Investment Optimization System or RIOS).

For now, the pathway into climate change adaptation is perhaps best captured in a reformulation of John F. Kennedy Jr. famous words, which we recalibrate for a climate changing world:  Ask not what your company can do for climate, but what the climate can do to your company?

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