In the last couple of years, the public and governments have understood and accepted the importance of addressing climate change adaptation. If potential climate change impacts on your company – both physical and business – are not addressed, it can be an existential issue. If key facilities lose power, suffer damage to key processes, cause database information to be lost, and impact your supply chain and markets, it can affect your company forever. While climate change adaptation is not guaranteed to avoid all disasters, a viable program to lessen impacts and allow you to bounce back to normal quicker can be implemented. Another problem is how to get internal support for a program that has no immediate financial payback, but is of great value (risk reduction).
Getting Decision Makers and Managers To Take Climate Change Risk Seriously
Climate change risk cannot be assessed and incorporated into corporate decision making until it is taken seriously as the critical business parameter it is, as a discipline and with benefits. Remember, those in the C-Suite are probably older and likely did not learn about climate change in B School; uncharted territory. Managers, who take their cues from the C-Suite, may also resist, thinking of this as just another responsibility to add on to their others, and a doomsday scenario, too, with little financial reward at the end. Here are tips to engender internal support for addressing climate change risk.
• Document losses that have already happened related to climate change. Has your company suffered losses that may be related to severe storms? Perhaps from Hurricane Sandy or a prolonged drought? While it has not yet been established that these events were “caused” by climate change, most of the scientific community believes that climate change did exacerbate and worsen such severe events. Quantify the financial losses from the event(s), and determine what future losses may be if these were to repeat.
• What critical facility or corporate operations may be impacted by climate change in the future? Examine your operation and supply chains for critical elements that may be impacted by severe storms, water shortages, temperature rise, etc. One former client assessed that the agricultural product it needs as a raw material for their main product may not be able to be produced by its currently-contracted farmers 10-20 years in the future, and therefore contingencies should start to be planned before it may be too late or too expensive to change suppliers.
• Quantify and personalize risks of climate change hazards. Once key operations or facilities are identified, determine potential impacts on your company’s viability and profits if long-term damage due to a storm or extreme heat or other effect occurs and the operation becomes non-functional for a significant amount of time. How much money might the company lose short- and long-term? May market share be lost permanently? Present the risk of such an event happening, particularly if it has changed from, say, a once in a lifetime, to a once per decade.
• Determine preliminary risk-averse strategies and rough costs for the most vulnerable elements. For a couple of vulnerable processes or assets, determine preliminary strategies, such as installing flood control measures, moving key equipment up from low lying floors, etc. What are the preliminary upfront and maintenance costs? How do these stack up to the potential short- and long-term costs and losses should the assets not be protected?
Ultimately, most C-Suite executives are swayed by numbers and the fear of substantial, existential risk. Presenting preliminary risk and cost estimates should convince them of the importance of tackling climate change risk now. This is likely an iterative process, so updating existing and showing new examples will help convince more executives and managers the business sense of a professional program to identify and address climate change risk. It is an argument that will likely take some time to win.
Approaches to Begin a Corporate Climate Change Risk Program
• If your company has multiple facilities, it is important to have corporate-wide climate change adaptation policies with specific goals covering all assets. However, it is also important to recognize that one strategy does not fit all facilities, given specific local issues each faces (i.e., operations conducted, local climate). Thus, a balance of consistency, yet addressing local needs is critical.
• “Do the science.” Amazingly, in established areas, such as the Northeast, there is a wealth of accurate information about flood zones and risk – many originating over a century ago. They have stood the test of time – until now. Climate change-caused rises in both the height of water bodies and moisture content of the atmosphere (confirmed by measurement) now raises the frequency of destructive storms damaging buildings and processes. Revisit those calculations and plan and modify to minimize adverse impacts from the more frequent storms.
• Make sure that your climate change risk program does not only focus on the physical effects of severe storms. The program should also look at business-related changes, such as shifting markets and availability of resources. If you produce a product dependent on a raw material from a supplier, may climate change effects eventually risk the scarcity or price stability of the raw material? Any raw material from farming may be vulnerable if your supplier cannot produce it anymore (or at a lower yield). Perhaps long-term rising temperatures will reduce demand for your main products; perhaps it will enhance demand. This is critical for corporate managers to understand and keep track of.
CCES has the technical experts to help you develop a climate change adaptation program, assessing and addressing risk for your maximum financial benefit. Contact us today at 914-584-6720 or at karell@CCESworld.com.