Getting ahead of the climate change curve

Regardless of your view of climate change, it’s likely already affecting your business. As a leader responsible to investors, customers, employees and others, you can benefit from understanding how climate change could affect your business, and when.

Here are five things to help any leader start building climate resilience.

Think beyond the obvious

The list of climate change issues potentially affecting any business is diverse. Here are just a few issues currently affecting businesses. Ask yourself how similar issues might bring you opportunities or challenges:

  • Shareholder activism: In 2017, ExxonMobil investors made history with a 62% majority vote in favor of the company disclosing its climate risks. This kind of activism is moving beyond energy companies to other businesses.
  • Climate change social movements: Greta Thunberg’s Fridays for Future movement is affecting schools and departments of education, since students are striking on Fridays, but from a business point of view, these Gen Z students also constitute a market segment with specific preferences.
  • Employee activism: Climate change movements are spreading from the streets and into companies like Amazon, where thousands of employees recently urged the company to stop selling cloud services to the oil and gas industry.
  • Rising temperatures: Wine, coffee and beer producers are concerned about how temperature rise is affecting quality and quantity. Winemakers in warming regions are seeking cooler locations, brewers are concerned about the impact of temperature rise on barley crops, and coffee growers fear it is affecting their yield.
  • Monetary policy: Central banks from Europe to Australia are concerned about the economic impacts of climate change issues like drought and extreme weather. The implications for businesses could include climate-affected exchange rates and interest rates.
  • Sea-level rise: Since 1901, global mean sea levels have risen by about 20 centimeters, and recent research suggests that small businesses can face a 22.5% drop in revenue on days where tides flood surrounding areas affecting things like customer parking.
  • Exposed infrastructure: Cities the world over are considering what infrastructure updates are needed to become climate resilient. Even if businesses and residents are not directly affected by an issue, they may still be significantly affected by energy, transport, health, water and emergency infrastructure disruptions.

Go beyond a rolling 5-year strategic plan

Five-year strategic plans are important for informing decision-makers of what may emerge during their tenure. However, they focus only on known trends and competition. Most significant organizational investments, assets, opportunities and challenges will outlive it, including those relating to climate change. To build climate resilience, place the five-year plan within a longer horizon by taking longer-term planning approaches like scenario planning.

Start by examining your geographic exposure

Understanding your geographic exposure is important. Plot your locations, and the locations of key infrastructure and suppliers onto maps that project possible changes in temperature, precipitation, sea level rise and flooding, and extreme weather. Look for maps with your local government or in reports published by the Intergovernmental Panel on Climate Change.

Know your options

No single business can control climate change trends, but you do have options.

Where nature is involved, like temperature change or sea level rise, you have three options:

  • You can adapt and develop resilience by altering products, markets, operations, investments, supply chains, distribution channels, etc.
  • You can avoid an issue by divesting from certain investments, considering climate change when making location decisions, relocating, etc.
  • Or, you can do nothing, and respond on the fly if/when possible.

Where people are involved, like shareholders, policymakers, customers or suppliers, then communication and even collaboration are possible. Advocacy and lobbying are old strategies to ward off challenging developments, but communication shouldn’t end there. For instance, it is often a no regrets move to communicate with key suppliers or the local government to understand their exposure to a particular issue. You might even partner with suppliers or governments -- a big trend in climate change adaptation is the rise of public-private partnerships to develop climate resilient infrastructure.

Get help if needed

If thinking about climate change is new to your business, you may benefit from hiring someone to help translate the issues for your organization, include climate change in strategic planning, and develop your in-house climate capabilities.

 

Nardia Haigh has been working at the intersection of climate change and strategy for nearly 15 years. Her book, "Scenario Planning for Climate Change," is now available on Amazon. Haigh is a tenured associate professor at the University of Massachusetts Boston.

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