How businesses can manage or adapt to climate uncertainty
How businesses can manage or adapt to climate uncertainty
This article originally appeared at BSR, where it is second in a series on a new initiative called "Business in a Climate-Constrained World."
In his piece describing BSR's new strategic initiative, "Business in a Climate-Constrained World," my colleague Edward Cameron rightly highlights the urgent need for all of us to address both sides of the global climate challenge:
1. "Avoiding the unmanageable" by taking bold action to reduce greenhouse gas emissions sufficiently to avoid planetary warming of more than 2 degrees Celsius.
2. "Managing the unavoidable" by improving the resilience of our operations, supply chains and communities in the face of climate-related changes that are already locked in based on the decisions we have made (or failed to make) thus far.
Business has a leadership role to play in each area by taking a bold and systemic approach in its capacity as an operator and value chain partner, as an investor and innovator, and as a leader and influencer. Although this sounds (and is) daunting, there are at least two pieces of good news. First, many investments and actions required actually will make business stronger and more profitable over time. Second, we are not starting from scratch. Many companies have been working for years to address their climate impacts and take advantage of opportunities. In his "Climate 2.0" article just last year, my colleague Ryan Schuchard described some then-emerging elements of corporate leadership on climate action.
So why are we launching a new initiative now, late in 2013? I go back to the two words I used earlier to describe the necessary approach for business: bold and systemic. We need to be designing and taking bold actions that are up to the scale and urgency of the challenge. Taken alone, even bold actions from business will not be enough to meet our objectives if they are not aimed at systemic solutions and undertaken in collaboration with other key actors in the system, including government, academia and civil society.
Based on a wide range of BSR experiences -- from working with individual companies on their operational and supply chain emissions to broad, cross-cutting initiatives such as the Future of Fuels and the Clean Cargo Working Group -- we have identified some of the main opportunities for action.
Avoiding the unmanageable: Prevention and mitigation
There are five main opportunities within this sphere:
1. Understand the total climate impact of your business -- along the entire value chain and/or lifecycle of your products. Sometimes a company's most material climate impacts are indirect or outside direct operational control.
2. Identify and capture opportunities for radical efficiency gains -- again along the entire value chain. Efficiency in energy, water and material use offers some of the most dramatic near-term wins with respect to business and climate performance, but this remains underexploited among most companies and industries.
3. Accelerate the adoption of low-carbon energy sources and technologies in facilities and transport across your entire value chain by partnering with peers, suppliers and other sectors to increase investment in critical R&D and the deployment of new technologies.
4. Harness design and innovation to reduce the lifecycle impacts of your products and services. In addition to providing climate benefits, this also will achieve better long-term security of supply, greater protection from energy and regulatory costs and a number of other business advantages over time.
5. Mobilize your business leaders to help advance public policies that will support the actions described above. The centrality of good public policy -- and the need for business leadership to help us get it -- has arisen in all of our work, from the need for intelligent carbon pricing and regulation to achieve our goals, to the importance of sound incentives to accelerate efficiency efforts in individual companies.
Managing the unavoidable: Adaptation
In many ways, this is the other side of the same coin, and here, too, there are a number of meaningful opportunities for business:
1. Similar to the starting point above, it's important to understand the total climate exposure and risk in your business, from the direct and operational to the furthest reaches of your supply chain and customer communities.
2. Map your material risks and opportunities by engaging internal and external stakeholders: Senior management can help determine which risks and opportunities are most material and most addressable, both now and in the likely future. This can start as an extension of existing strategic planning or enterprise risk-management exercises or, if that's not possible, this can be done as a "futures workshop" co-hosted by the sustainability team and strategic planning. Then, based on this map, you can engage critical external stakeholders to help you identify the investments, policies and partnerships you will need to improve the resilience of your operations, products, supply chain, and relevant communities. This can be a wide range of actors, from international development banks and the Red Cross, to local government and NGOs.
3. Provide leadership (and share costs and resources) through partnerships with peers as well as the public sector and civil society to take effective action in the areas where you have the most to contribute (and to lose) via improvements to shared infrastructure, local capacity building, and disaster preparedness and response.
A new approach at BSR
This is obviously an enormous amount of ground to cover -- in fact, too much for any one company or organization alone. In light of this, BSR will make three main changes that we hope will both simply and amplify the efforts of our member companies:
• Provide more specific industry guidance on climate priorities and approaches via the "wedges" research referenced in Edward Cameron's piece.
• Launch and expand our collaborative initiatives that will help our members work together and with partners in the public sector and civil society in areas ranging from energy and transportation to supply chain practices and public policy engagement.
• Integrate new tools and content into our core sustainability services for individual members, from strategy to stakeholder engagement and reporting.
Highway image by Iakov Kalinin via Shutterstock.