With boardroom discussions shifting from how the business is impacting the environment to how climate change is impacting the business, is your organisation ready to take on climate change?
Climate change presents complex and interconnected risks to a business and its ecosystem including suppliers, partners, employees and communities along the supply chains. With that in mind, it’s imperative for senior management to initiate a dialogue on climate change and an active approach to its risks and opportunities towards the business.
What does it mean to be climate resilient?
According to Marsh & McLennan, climate resilience refers to the capacity to adapt and success despite the impacts of climate change. It encompasses of addressing and managing risks, as well as capitalising on the strategic opportunities presented by the shift to a lower-carbon and resource-constrained economy.
Most firms are still in the 1st and 2nd generations where they’re more CSR-focused and would need to make the shift for a more strategic approach to be climate resilient.
Image Source: Marsh & McLennan
How can you identify climate-related risks?
One of the common pitfalls highlighted by sustainability consultant, Adrian Pang from Paia Consulting, is how companies invest less time in understanding emerging risks. He said: “Focus is often given to visible and known risks (e.g. credit- and market risks). Less time is invested in understanding what other emerging risks are out there.”
To gain forward-looking information on the financial impact of climate-related risks and opportunities, companies should conduct climate-related scenario analysis. Through a scenario analysis, companies get to explore the impacts of different climate futures and alternative views of future climate trajectories. For instance, they can be used to:
- Evaluate the potential resiliency of the strategic plans of a business to the range of different scenarios
- Identify possible responses to the business’s strategic and operational risks
- Support necessary disclosures responding to stakeholder demands
Expert Tips on How To Build Climate Resilience
Wondering where to get started? Here are some expert tips from sustainability consultants Paia Consulting to get you going:
- Assess your company’s own exposures to climate change, and introduce scenarios to stress tests its resiliency to natural events and/or changing business patterns (e.g. regulation, behaviour etc.)
- It is key for management to own the decision-making process in managing climate-related risks
- Management to be involved in how the climate-related risks are tracked by metrics, targets and integrated into the overall risk management
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