CDP, C40 report makes the business case for resilient cities

Two Steps Forward

CDP, C40 report makes the business case for resilient cities

Cities and companies are both focusing attention on identifying and increasing resilience against climate risks. But what risks have each sector identified, and over what time horizon? And what steps is each sector taking to address those risks?

These aren’t academic questions. If cities and the companies they host prioritize climate risks differently, or view them over wildly different time frames, they may be working at cross purposes. On the other hand, when cities and companies communicate and coordinate, they reduce the risks to both parties and increase resilience.

That’s a key conclusion from a report, released today (download), by CDP, C40 and AECOM. Titled “Protecting Our Capital,” it analyzes data from cities and companies to understand what impacts cities expect businesses could face from climate change and how greater climate resilience makes cities more attractive to business.

The report combed CDP’s extensive database of climate change activities in the 207 cities that disclosed their environmental data to CDP over the past year — nearly double the number from the previous year — and from more than 4,500 large, publicly traded companies “to understand how action by city governments creates a resilient place for business.”

Among the key findings:

  • Three-fourths (76 percent) of cities report that climate change could impact business across a range of sectors, from shipping and food production to tourism and service industries.
  • Three-fourths (75 percent) of the most severe physical risks from climate change that businesses disclose are also recognized by the relevant city — “a broad agreement between cities and business about what climate change risks the city could face.”

“What we’re seeing is that where there is increased communication and collaboration, it’s really the best possible environment for cities and businesses to work together to improve adaptation,” Larissa Bulla, Head of Cities at CDP, and one of the report’s principal authors, told me.

This has bottom-line impacts, says Bulla. “Cities are recognizing that where they have improved their resilience they are much more business friendly. So to enable them to have access and understanding of what risks their local businesses are facing is definitely a motivator for cities to take that into account.”

The report offers up examples of where climate risks can impact both companies and cities — disrupting ports in Hamburg, Germany, and Cleveland, USA; degrading local food industries in Bologna, Italy, and Campinas, Brazil; disrupting the workforce in Taipei and Rio de Janeiro.

One challenge is aligning the timescales in which both companies and cities view such risks. The report notes that each sector can view the same risks with far different time horizons. The timescales of risks reported by cities and companies were classified as either current, short-term (expected within the next 10 years) and medium- to long-term (expected to take effect after the next 10 years). “In only 26 percent of cases does the relevant city expect the risk to take effect within the same timeframe as the business,” the report found.

“A big issue in the complexities around climate change is understanding what the impacts will be over time, because it's a dynamic and variable issue,” explains Seth Schultz, Director of Research at C40 Cities Climate Leadership Group. “You also need to understand whether it's going to happen now or in 20 years, and whether the severity is going to increase. There are a lot of models and processes to identify that but there's not a lot of consistency yet.”

There are reasons for the disparity in how cities and companies view risks. In Paris, for example, the real estate investor Gecina conducted a risk assessment of its buildings in the city and identified that heat waves are increasing in frequency. As a result, the company conducted a detailed study to understand whether its air conditioning equipment has the capacity to deal with these increasing heat waves. Gecina reports that rising temperatures will not impact its business for another 10 years or more. The city of Paris, however, reports that the August 2003 heat wave caused over 1,000 deaths and that temperature increases and heat waves are a current risk. “Gecina assesses the climate risk in terms of when it will impact its tangible assets, whereas the city assesses the risk in terms of when it will impact its citizens,” concluded the report.

Ultimately, the authors noted, it isn’t critical that companies and cities agree on the timescales or severity of climate risks. “What is significant is that cities are identifying the same climate change risks that companies report as posing an extremely serious threat to their business. Analysis shows that cities recognize 75 percent of the extremely serious risks reported by companies.”

Bulla pointed out that 96 percent of the cases where a city has recognized the same risk as a business, it’s acting on that risk. “Disclosure isn’t just about kind of self-accountability. It’s also about proliferation of key information to all the stakeholders.”

The bottom line for all this is a new dimension to the relationship between cities and companies. Cities have long been responsible for creating and maintaining environments that are conducive to business prosperity. Climate change has added a new dimension to this responsibility, which, to be managed effectively, requires cooperation across the public and private sectors.

Says Schultz: “As cities are tackling the issue of creating a resilient environment for their citizens they are making a more resilient environment for companies. Cities that are at the forefront of doing that are going to be where cities are going to want to locate to protect their balance sheets and their assets.”