Corporate Adaptation: The Blackbox of Economic Resilience
Climate change presents a multitude of new risks, challenges and opportunities for corporations and communities around the globe. Successfully preparing for and adapting to the climate impacts that are already set in motion – such as sea level rise, increases in extreme heat and more frequent and intense storms – will require strategic planning and action in the near term as well as ongoing monitoring and long term strategic development.
Yet as our understanding of global climate risks continues to grow, companies are struggling to measure, monitor and prepare for climate impacts that threaten global economic stability. The public sector has made great strides in developing conceptual frameworks, practical guidance and actionable tools to help practitioners. However, there is much less transparency regarding the current state of climate change risk management and adaptation planning in the private sector, which could discourage the development of best practices and stymie much needed collaboration between public and private stakeholders.
An Inaugural Survey on Corporate Adaptation
To help address this knowledge gap, Four Twenty Seven and the University of Notre Dame Global Adaptation Index (ND-GAIN), with support from BSR (Business for Social Responsibility), present the 2015 Corporate Adaptation Survey. The goals of this survey were:
- Further our collective understanding of the challenges corporations face when addressing climate change impacts
- Highlight gaps in private sector knowledge of, and capacity to address, these impacts
- Raise awareness about best practices and potential strategies that advance resilience building across sectors and communities
Key highlights from the survey include:
1. What Are the Climate Risk Drivers of Greatest Concern?
- Water scarcity and political instability driven by climate change are cited as the top two anticipated risks across sectors. Water scarcity emerged as the climate hazard of greatest concern for corporations, with 16 percent of respondents citing it as a risk, followed by social and political instability driven by climate change, at slightly above 14 percent.
2. How Will Climate Change Affect Businesses?
- Thirty percent of surveyed companies have faced or are experiencing impacts from climate change that negatively impact their bottom line.
- More than 70 percent of respondents say they are “somewhat concerned” that climate change will have a material impact on their value chain, in particular their supply chain, distribution and customers and markets. Nearly 20 percent say they are “very concerned” about the material impact on each of these major segments.
- Two-thirds of the respondents expressed concern over increased operational and capital costs and reported they had already experienced cost increases or considered them a likely outcome.
3. How Do Companies Assess Climate Risk?
- Thirty percent of respondents said they haven’t developed a plan to adapt their business to climate change impacts. The remaining were most likely to have monitored climate risk in some capacity as part of their enterprise risk management (43 percent) or by looking at a specific driver of concern (29 percent).
- Respondents rely on publicly available data, reports and websites to inform their climate adaptation work, as well as on industry associations and/or non-profit led initiatives.Internal sustainability teams were also cited as a key resource for climate change risk information.
4. Who Within an Organization Should Be in Charge of Climate Adaptation?
- Respondents were divided over who should be managing climate risk and adaptation planning: the sustainability team (28 percent), risk management team (26 percent) and operations team (24 percent) were all cited as possible choices.
- The sustainability team was seen as the most knowledgeable about climate change by far, while respondents were least confident in the level of understanding of climate change held by their investor relations team, their supply chain team, and their Board of Directors.
5. Have Companies Already Implemented Adaptation Measures?
- The most common adaptation measures already implemented are energy and water efficiency measures, closely followed by business continuity plan development and staff training on risk management.
- Retrofitting or relocation of company assets are actions that are under consideration but few respondents reported having already implemented retrofitting and no respondents reported relocation of assets as a current measure.
6. What Are the Main Barriers to Corporate Adaptation?
- The main barrier to action cited was the challenge of getting climate-related risks recognized as an immediate priority, followed by lack of leadership on climate change.
- While 30 percent of respondents reported that climate change has already had a material impact on their company, a third of respondents expected impacts in the 5-20 year timeframe only, and over 20 percent did not expect impacts for at least another 20 years. Very few respondents expected short-term material impacts from climate change (1-5 years).
7. What Are the Next Steps in Assessing Climate Risks?
- Respondents noted a wide range of planned next steps, though the most common was engaging with key industry groups to build consensus on sector-wide initiatives. The need for additional research and data was also frequently cited as a priority.
8. What Opportunities Might Climate Change Bring for Your Company?
- A quarter of respondents anticipated opportunities for both new product creation and efficiency improvements.
- Opportunities typically associated with sustainability programs, such as brand development and cost reduction, ranked far lower when considering opportunities associated with climate change.
Download the full survey: 2015 Corporate Adaptation Survey
Download the flyer with key insights: Corporate Adaptation Survey Flyer
About the Survey Sponsors
Four Twenty Seven (www.427mt.com) is an award-winning climate risk and adaptation consultancy dedicated to helping organizations understand and mitigate risks posed by climate change impacts. Its innovative tools and services blend economic modeling and climate science to deliver actionable intelligence and effective adaptation strategies. Four Twenty Seven’s supply chain application, developed in partnership with Climate Earth, is the first enterprise-quality application that enables large corporations to quickly map and quantify global supply chain risks due to climate change. It was awarded the 2014 Environmental Business Journal Award for Technology Merit in Climate Change Risk Management.
The Notre Dame Global Adaptation Index (www.nd-gain.org) is a practical solution to the world’s climate problem. It promotes adaptation by identifying the places most vulnerable to extreme weather and changing climate and identifying real-world solutions that can prevent these changes from becoming disasters. Its mission is to enhance the world’s understanding of the importance of adaptation and inform private and public investments in vulnerable communities. ND-GAIN is part of the Climate Change Adaptation Program of the University of Notre Dame’s Environmental Change Initiative (ND-ECI), a Strategic Research Initiative focused on “science serving society,” and draws resources from across the campus.
BSR (Business for Social Responsibility) www.bsr.org is a global nonprofit organization that works with its network of more than 250 member companies to build a just and sustainable world. From its offices in Asia, Europe, and North America, BSR develops sustainable business strategies and solutions through consulting, research, and cross-sector collaboration.