The Sustainable MBA

IBM, AECOM show why resilience is a winning business strategy

Dale Sands, vice chair of the United Nations’ Private Sector Advisory Group for the International Strategy for Disaster Risk Reduction.

This Q&A is an edited excerpt from a Nov. 8 Sustainable Business Fridays conversation held by the Bard MBA in Sustainability program, based in New York City. This twice-monthly dial-in conversation features sustainability leaders from across the globe. The last interview was with Libby Bernick at Trucost.

“It’s hard to be sustainable if you are not resilient. These two aspects are very interrelated,” said Dale Sands.

As vice chair of the United Nations’ Private Sector Advisory Group for the International Strategy for Disaster Risk Reduction, Sands has spearheaded private sector engagement to improve disaster resilience. As part of this overall initiative, he led AECOM’s collaboration with PSAG member IBM to develop a Disaster Resilience Scorecard for Cities to evaluate degrees of preparedness for natural disasters, in connection with the U.N.’s Ten Essentials for Resilience. From applying the Disaster Resilience Scorecard, cities may develop a multi-year plan to improve resilience.

Bard MBA: Why is climate adaptation and natural disaster resilience important?

Dale Sands: The World Economic Forum noted in their ninth edition report (PDF) that extreme weather events are the second highest of five ranked global risks in terms of likelihood of occurrence, while climate change is the second highest of ranked global risks based on potential impact. While there’s a certain amount of adaptive capacity that we have in our infrastructure to adjust to natural disasters, since 1980 overall financial losses have increased to over $200 billion a year. With 75 percent of these losses uninsured, liabilities fall to the individual or governments to address, so climate adaptation is not really an option, but a requirement that we must consider looking forward.

Bard MBA: Could you discuss what disaster reduction initiatives the U.N. has and how you’re involved?

Sands: The U.N. has launched several initiatives beginning with the establishment of the Hyogo Framework in 2005, for which 168 member states were signatories. The Hyogo Framework was established in response to the December 2004 Indian Ocean tsunami that took the lives of over 250,000 souls. This disaster pointed to the need for effective warning systems, emergency response and recovery actions. The U.N. also launched the Making My City Resilient Campaign in 2010, and today over 2,000 cities around the world have signed a declaration that they will adhere to the 10 Essentials for resiliency. Ironically, and somewhat embarrassingly, only four cities in the U.S. are signed.

Secretary-General Ban Ki-Moon made the statement that “economic losses from disasters are out of control and can only be reduced with collaboration from the private sector.” With that in view, the Private Sector Advisory Group was formed in 2011 to bring the Private Sector into the discussion with the Public Sector to address disaster risk reduction.

I’ve been working with the United Nations ISDR team for over three years using AECOM’s strong architectural engineering know-how. The PSAG is a group of 70 companies that are committed to disaster resilience. It was through this cooperation that AECOM and IBM collaborated to develop the disaster resilient scorecard on a pro bono basis. The U.N., with AECOM and IBM support, released the scorecard to the public domain in February. Another important initiative launched by the U.N. ISDR this past year is the Disaster Risk-sensitive Investment Program called “Project R!SE.” Project R!SE is earmarked to raise funding for climate resilient activities.

Bard MBA: Could you describe the resiliency scorecard and how cities may use this to prepare for disasters?

Sands: The Disaster Resilience Scorecard is a quantitative tool based upon the U.N. ISDR’s 10 Essentials. The Scorecard is translated into an 81-character algorithm that may be used to evaluate a city and county’s degree of preparedness in response to natural disasters. Since its deployment, we continue to refine the Scorecard. It’s turning out to be a very useful tool, not to compare one city to another but rather to establish a benchmark of where that city is and what actions they need to take.

About 80 percent of the investment in a city typically comes from the private sector, so the private sector does have a stake in making cities more resilient. We spend a great deal of effort to respond to natural disasters, but we have not done very well as a society to plan response actions to mitigate the impacts of natural disasters. The California Emergency Management Agency found that $1 invested in planning can save $4 to $7 in disaster response cost. It is important to note that not all actions require capital investment to improve resiliency, such as the City and County of San Francisco holding earthquake drills to raise awareness and disaster preparedness.

However, by creating financial incentives for retrofitting buildings, important actions will be taken to further reduce disaster impacts. AECOM has developed an index for what kinds of building materials should be used in contrast to the types of natural disaster threats that the local community may experience, such as high levels of rainfall leading to floods or drought conditions leading to bushfires.

Bard MBA: What are the major obstacles to build resilience and where are the greatest needs?

Sands: One of the biggest barriers today is funding. Fortunately, the Rockefeller Foundation has set aside $100 million in funding for cities to use to create a resiliency program. Receivers of this funding establish a resiliency coordinator, an essential first step because a city is a system of systems and a complex structure that needs a coordinator. This is an excellent example of what a single foundation has done. Through the U.N. ISDR and the PSAG we are approaching foundations to understand how we may create a channel of funding from a variety of sources for resiliency improvement.

There is also a need for building awareness. The U.N. published a Local Government Self-Assessment Tool to bring a focus to this area. Perhaps there are highly exposed areas in our cities where residential housing and business operation should not be permitted, and instead they should become dedicated park space. There is an adage that "a fool learns from his own mistakes, but the wise person learns from the mistakes of others," so there have been a lot of good lessons learned that have come from natural disasters, such as Hurricane Katrina and Hurricane Sandy most recently.

Bard MBA: How are businesses responding to these disasters and what is their role in resiliency?

Sands: Most companies have Business Continuity Plans in place, but are now taking notice of the increased disaster intensity. In some cases, shareholder groups are demanding updated or more robust business continuity plans. There is a general rise of awareness among leading companies that are taking a very proactive approach to become a part of the community in resilient activity and build a stronger supply chain.

An important element in natural disasters is not only the planning and the response, but how fast communities can recover. Let me take you back to The Great East Japan Earthquake where the Toyota supply chain was interrupted. It created a loss in revenue of over $1 billion, and in the U.S. alone 150,000 Toyotas were not produced because of the interruption. Even though there have been continuity plans developed, those plans sometimes are not perhaps robust or comprehensive, or they haven’t considered the supply chain enough to consider the interdependencies.

One of the things I’ve done is facilitate working groups between the public and the private sector in various cities to share their business continuity plans, so that they can be more aligned and respond together rather than individually. There is a very important role in the private sector to become more engaged in the community with climate adaptation.

The full recording of this conversation is available.

The Bard MBA's Sustainable Business Fridays conversation will resume next with Joel Salatin of Polyface Farms, who will discuss sustainable farming and the food system.