C2ES published on September 22 the most recent installment of its series on business climate resilience: Weathering the Next Storm, a Closer Look at Business Resilience. The report builds on years of research and earlier reports to identify how Fortune 100 companies approach climate risk.
The C2ES team reviewed three main types of public disclosures from Fortune 100 companies: their annual financial filings (10-K), their corporate sustainability reports, and their reporting to CDP. C2ES also conducted in depth interviews and organized several workshops on business resilience over the past years.
1) Global corporations are aware of climate risk. Finding strategies to manage those risk are harder to find.
While 91% of respondents publicly acknowledging climate risks, this awareness often does not translate into concrete actions to identify and mitigate risk.
2) Tracking and assessment of risk are at highest levels ever.
The overall number of companies taking action to understand their risk is on the rise.
The C2ES report states, “Of the companies interviewed, 77 percent have conducted or are in the process of conducting a vulnerability assessment of some kind.” While the scope and depth of those assessments very greatly between sector and organizations, the assessments indicate that companies are establishing a baselines and recording data, creating the foundation needed to build business resilience strategies.
3) Water is the immediate stressor. Drought has been a wake-up call.
Many assessments are motivated by increased stress on water resources. The C2ES study states “drought can be an important stressor, as can other events or trends affecting water supply and demand, such as flooding, changing precipitation patterns, reduced snowpack, heat waves or salt water intrusions associated with sea level rise.”
We observed similar responses in the 2015 Corporate Adaptation Survey where water scarcity emerged as the climate hazard of greatest concern for corporations, with 16 percent of respondents citing it as a risk.
4) Climate impacts are both Macro and Micro in scale.
A challenge of building resilience lies in part in the fact that the impacts of climate change are widespread, but direct responses to risk must be local are local. The indirect activities outside corporations’ sphere of influence needed to build resilience are harder to identify, and even more challenging to implement without larger support. The C2ES report refers to these indirect activities as being outside a “”fence line” to critical supply chains and infrastructure, and can be effectively managed only in partnership with the public sector.”
The report establishes a need for the public and private sectors to leverage complementary strengths achieve climate resilience.
5) Current best practices are based off of history, not projection of future risk.
C2ES notes that many companies use historical events and data to project future risks – they are considering future changes in weather and climate, or using climate projections of how these and other risks would change over time.”
Using historic data risk assessment strategies is inherently reactive, rather than proactive. Corporations need to integrate climate projections to prepare for “the next storm,” but the report indicates that despite the rapid increase in data availability, finding suitable granular data that meets organizational analysis needs is still a challenge.
6) One size doesn’t fit all.
While there is a clear desire for guidance on how to overcome the barriers to resilience, the methods needed to overcome those barriers are different across organization. According to the report, “some companies start at different points and pursue risk management in a different order. For example, some companies are starting with a narrowly scoped vulnerability assessment that examines only one region or only one impact to raise internal awareness and assess the need for a broader vulnerability assessment.”
Addressing the challenges identified by the C2ES report and previously in our 2015 Corporate Adaptation Survey is a critical first step to supporting business resilience. Our team focuses on developing tools and strategies to overcome these challenges in practice.
By delivering customized climate risk assessments that speak to sector and company’s specific activities and locations, we empower operation managers to take concrete actions and mitigate risk. By simulating decision-making in a context of uncertainty, we encourage our clients to think creatively through scenarios and equip them to confront uncertainties and reach consensus. And by working hand-in-hand with corporations, local governments and business associations, we create a space for a fruitful dialogue over the proverbial “fence” and encourage cross-sector partnerships that support our collective resilience. We encourage you to reach out and learn about what climate change means for your organization.
By Sam Irvine