Last reviewed 20 October 2016
Laura King investigates why incorporating the risks of climate change into your organisation’s planning makes good business sense and what actionable steps can be taken.
Business success is often determined by financial measures such as costs, sales and profit margins. A move to a more sustainable agenda provides another measure of success that is not just about doing the “right thing” but is also about fully understanding the cost and impact of the environment on your organisation.
Climate change is one area of the environment that has environmental, political, social and economic repercussions. A survey of 750 experts conducted by the World Economic Forum, identified climate change as the biggest potential threat to the global economy in 2016. Furthermore, the study showed that climate change is exacerbating more risks than ever before, such as water crises, economic growth and workforce instability.
The risks posed by climate change will be different for each organisation and will depend on the sector and its specific requirements, but in general, the following risks are likely to be commonplace across all areas:
impact of extreme weather on physical assets or resources (including people)
increased volatility in resource prices
changes to regulation and legislation.
These risks are widely known, and although there are some companies and organisations taking a very prominent role in reducing risk against climate change, many struggle to translate awareness and long-term data into short-term local risks and impacts. As a result, it is very difficult to know what tangible steps can be taken to mitigate against the effects of climate change, or where investment can, or should, be made.
This is especially the case for small to medium-sized organisations where the big policy drivers might not seem especially relevant. However, volatility in energy prices or the need to comply with additional legislation will have an impact on your organisation and potentially your ability to survive into the future. So what practical and actionable steps can be taken to improve resilience?
A good place to start is to look at core operations of the organisation and assess the impacts of climate change on these areas — essentially carry out a vulnerability risk assessment in the form of a business continuity plan. In each area, consider whether or not there is the ability to cope with:
extreme weather events — either at home or abroad
volatile prices for energy or other resources.
The areas to look at include:
markets and customers.
For each area, identify the risks and opportunities and then outline how you might adapt to, or mitigate against, that risk. Many considerations might already be part of your business continuity plan, so that would be a useful document to cross-reference with.
For example, some questions asked around your operations or services might be:
What threats are there to accessing vital data or servers?
If staff cannot get to work, can we continue to deliver our service?
Can we deliver services even with weather-related disruptions?
How might volatility in the prices of resources impact on profits/costs of delivering services?
Build a holistic business case
Once you know where the risks lie, the next step is to work out why mitigating against climate change makes good strategic business sense for your organisation.
Any organisation will have a number of drivers, including:
legal and regulatory requirements
improving resource efficiency.
Prioritising the drivers that are pinch-points and identifying those that can deliver sound financial benefits and savings will go a long way to convincing decision-makers that this is an important area to consider.
Collect and measure
All benefits and savings that can be made should be collected and measured, including measures for any mitigating actions put in place. Putting in place targets can provide a broader assessment of performance which in itself can be useful for organisations that want to demonstrate that not everything is about money, and not everything that is valuable can be valued.
Although climate change will impact organisations to varying degrees, there are some very clear actions that are likely to feature prominently in any vulnerability assessment regardless of the organisation; these are covered below.
Reduce demand and switch to renewable energy
Climate change has a direct link to resource and energy use. The energy sector is a massive user of fossil fuels if energy is not sourced from renewables, and these will be increasingly subject to volatile pricing and regulation. Reducing energy is therefore a very obvious way to reduce the impact of climate change on your organisation — not only will it save money it also reduces your exposure to hikes in energy prices.
Switching to renewable energy can also be a good business decision. It can help manage fluctuating energy costs, provides energy security, improves reputation and can deliver on carbon emission reduction goals.
Improve resource efficiency
Making sure that all resources are managed efficiently is an easy way to save money, reduces exposure to resource availability and price rises, and can also provide new business opportunities.
Resource efficiency can be achieved through methods such as lean production in manufacturing or by realising the efficiencies of the circular economy. Some examples of pilot businesses in the circular economy include business models based on leasing equipment rather than owning it and collaborative consumption that matches spare capacity or unwanted items with people who need that item.
Build resilience into your supply chain
A large part of your ability to provide services may rest with your supply chain or those that provide services for you. It is important to prioritise any critical or vulnerable areas within your supply chain and identify if there are any areas that could be improved. Ask suppliers whether or not their business contingency plans deal with climate-related disruption and consider whether it is important enough to build this into the contractual relationship. If their services are crucial, it may be necessary to pick suppliers that are more likely to be reliable in the event of climate-related disruption.
Build resilience into your workforce
Take a strategic look at how your workforce operate to make sure that productive hours are not potentially lost. It might be important to consider the impact of climate change in any upgrade of office equipment to ensure that it can be used remotely, or in any revamp of employment policies for local services to ensure that employees can get to work in the event of severe weather closing essential transport routes.
Good training for staff in systems and what their roles, responsibilities and obligations are towards environmental management will also help reduce risk and improve resource efficiency.
Futureproof your market
Finally, it is important to remember that climate change can provide opportunities too. Looking at the impact of climate change might identify potential strategic opportunities for new markets or services for your organisation. Adapting your own way of working before you are forced to, can help futureproof your organisation potentially allowing you to continue when your competitors cannot.