Building companies for climate resilience one brick at a time
Building companies for climate resilience one brick at a time
What if someone told you that they could forecast specific regions of the world likely to encounter significant business losses linked to climate volatility?
The financial stakes of such corporate stranded assets, or business investments that become untenable due to reliance on an obsolete or underperforming variable, can be explained in the context of climate change as an "inevitable surprise" dynamic where companies have failed to respond to already-evident ecological risks.
Now consider a scenario where these financial threats could be averted, or at least muted, with relatively small-scale investments — but funds weren’t forthcoming simply due to a blind spot in current business decision-makers’ analytical frames. A few simple examples provide concrete frameworks.
Let’s start with Haiti. Denuded, muddy slopes bear witness to Haitian peoples’ struggles. With removal of forests (in many cases for wood to cook food), erosion has intensified. Trees, soils, hills and water tables have shifted. Saltwater intrudes (PDF) into formerly freshwater coastal aquifers. Thus hills become even harder to restore with replanted forests that could provide shade, fuel wood, productive soils and many other benefits key to rebuilding communities and economies.
Now consider Sao Paulo, with its own decimated forests further afield. The city faces a terrible water crisis born from multiple other crises, one of which is rooted in deforestation of the Amazon. Fundamentally altering the interlinked tree-water-soil-animal-people set of regional relations is in turn shifting water availability. It is now affecting human well-being and economic opportunity. With deforestation, there is a literal undercutting of regional well-being.
Finally, think about California, where there are towns in which residential pipes and plumbing are dry. In the eighth-largest economy in the world (ranked as if it were its own country), families live without basic plumbed sanitation. The severe drought and current governor-declared state of emergency has developed as a result of complex drivers related to rainfall patterns that scientists assert are related to climate change. Shifting weather patterns are exacerbated by water use and over-allocation, as well as forest dynamics that have further undercut watershed health.
In all three contexts, there is an interplay of climate, ecological, hydrological, community, economic and business "disturbances" that either already have manifested or fall into the inevitable surprise variety. All have linkages to changing natural systems, particularly forests.
Despite piles of studies about the swirl of issues, the refrain of business analysts is: “We don’t know where the risk lays.” Yet, the geography of risk is knowable. The problem is simply that this research is seldom issued in ways that are accessible for business decision-makers — a problem that is eminently solvable.
In the face of climate change, water scarcity, flooding and many other issues, companies could join together and invest in business-friendly, IT-enabled websites that "stack" scientifically-based, up-to-date maps to show where forests, flood plains and watersheds need to be restored in order to increase resilience through green infrastructure.
Accessing these maps of ecological and hydrological threat, as well as relevant opportunities, is important because a business asset won’t be around for long if its natural context is being undermined.
Component parts already exist in the form of WRI’s Aqueduct, Global Forest Watch, Stanford University’s InVEST, Oxford University’s Local Ecological Footprinting Tool (LEFT), the Microsoft Research Global Ecosystem Model and Mandingley Model and other similar tools.
Of course, perceiving the problem is only one issue. Another challenge is that even when risk is acknowledged, the question is who pays for solutions. In this case, the bill would be for restoring and maintaining natural systems to prevent ecosystem malfunction.
Often it is argued that a business case cannot be made for individual companies to invest in green infrastructure and ecological restoration. But the “I-can’t-make-the-ROI-work” logic is actually a mislabeling of the problem.
The issue is really one of mitigating risk and driving innovation for success — a task that, like many general business cases, requires a mix of “pictures, words, and numbers”, according to Edward Leamer of UCLA’s Anderson Business School.
The pictures that can help make a business case for ecological (and specifically, forest) restoration and conservation may be drawn from the local landscapes in which corporate operations are threatened by ecosystem malfunction (think Haiti, Sao Paulo and California, among numerous other illustrative examples.)
The verbal segment of the business case should include concepts such as “license to operate” and “operational risk mitigation,” as well as “long-term success."
The numbers supporting the business case include costs of investments, plus mitigation costs such as trucking in water, paying more for electricity and battling with stakeholders to retain license to operate in a water-scarce environment.
Ultimately, addressing corporate risk associated with stranded assets in an era of climate change and water scarcity will happen through both mitigation and adaptation. That includes small scale, tree-by-tree and watershed-by-watershed approaches.
Perhaps the simplest way to explain what needs to happen to avert business risk in a climate-constrained world is to envision a path toward resiliency built brick by brick over time. The question for companies becomes, "Where is your brick?" — or in this case, your seedling planted to help counteract inreasingly dire ecological threats.
Once business leaders see the geography of risk associated with potential stranded assets in the face of climate change, water scarcity and deforestation, more pointed questions arise: On what day will you leave your corporate fence-lines to invest in the well-being of the landscapes in which you work? On what day will your company perceive the risk, the opportunity and the business case for investing in the broader systems upon which your company relies upon to operate and succeed? When will restoration become a clear part of the business plan for ensuring long-term success?
The maintenance of well-functioning watersheds is essential to business success. When will you join in?