The world has made important strides to combat climate change — we’ve avoided the worst climate scenarios — but unfortunately the world is on track to exceed the 1.5°C target of the Paris Accords. This means the climate change impacts we are already experiencing are irreversible this century and they are likely to worsen — extreme weather (droughts, intense precipitation, storms, etc.), sea level rise, and biodiversity loss will be the norm.
As companies make commitments to curb their GHG emissions, they will also need to conduct climate adaptation planning. However, few companies have done any kind of planning, and only a few have performed climate risk assessments as a precursor to adaptation planning. To date, the focus has been on what local, state, and federal governments should be doing to adapt and become more resilient. In the US, the White House has mandated climate planning for all federal agencies, and the US Department of Defense has conducted extensive adaptation planning for years. Meanwhile, the UN has been sounding the alarm about the lack of focus on and investment in adaptation.
Both governments and businesses need to conduct climate adaptation planning. It’s heartening that some government agencies will be resilient, but governments won’t rescue businesses from supply chain disruptions or the loss of key resources necessary for their products. The challenge with climate adaptation for businesses is that it requires:
- New skills at the intersection of business continuity, climate science, data analysis, and strategic planning. You need individuals who have experience identifying, mitigating, and planning responses to systemic risk. You also need individuals who know how to work with complex data models — the kind that you need for predictive modeling. There is a multitude of variables that go into understanding how climate change will unfold and impact our environment, and this analysis needs to be localized and married with context about the business itself. Finally, you need skills in strategic planning because it’s not just about preparing for extreme weather — businesses may have to make tough decisions about what markets they compete in, relocating or retrofitting facilities, replacing hard-to-source ingredients in signature products, etc.
- New investment in skills and capabilities. The above skills will either have to be sourced externally (particularly climate experts) and/or you’ll need to invest in developing the skills of your existing business continuity, data, and business analysts. There are even certifications dedicated to climate adaptation planning. It will also require investment in capabilities and solutions for early warning systems, crisis and critical event management, and climate risk analytics and predictive modeling, to name a few.
- A commitment to planning over a long horizon. Climate change is already here but it’s going to continue to evolve over years and decades. Some of the adaptations require that firms make decisions and investments today that won’t benefit the organization for a long time. With average CEO tenure at five years, you’re asking execs to make decisions and secure financing for initiatives that may lessen short-term profits — currently a key marker of their success.
- Comfort with uncertainty. Firms struggle with risk management now. We can never predict risk with complete confidence — we have to make decisions based on likelihood and impact. AI will improve our predictive models, but there is a lot of uncertainty in climate change modeling, especially anything beyond the next 10 years, because the number of variables and complexity are significant. It’s also hard to predict whether green tech like carbon capture will succeed or how government efforts at curbing carbon emissions will play out. Cities with climate adaptation plans incorporate multiple emission scenarios and update their projections every few years. Faced with so much uncertainty, some executives might decide there’s too much uncertainty to do anything at all and punt challenges to the next executive when it’s already too late to take action.
- Close coordination with local efforts. If the cities and states in which you operate aren’t also creating their own adaptation plans, that’s problematic because maybe the city isn’t conducive to staying there a decade from now no matter what steps you take as a business. Or it could be the efforts they are planning will reconfigure parts of the city itself with new flood barriers and floodable parks and new building regulations affecting where and how you operate.
- Continuous adaptations. It’s not a one-time planning event. Not only do climate projections need to be updated every few years, adaptation requires layers of strategies to make employees, facilities, infrastructure, resources, and supply chains more resilient — strategies that the company must initiate at different times in response to the environmental impacts of that time period. This means climate adaptation has to become a permanent and integrated part of enterprise risk management and strategic planning.
While it’s daunting and there’s a lot of uncertainty, you have to get started. You’ll improve over time and, no matter what, your business will be better for it. You’ll be more resilient without a doubt. You’ll also be ready for new reporting requirements in the US and Europe, you won’t be caught off guard by the sudden loss of agriculture products or materials, loss of/dramatic increases in insurance, or new local regulations that change building requirements.
You may even find new market opportunities. If your operations are resilient you can use your position of strength to offer services to other businesses, and you may uncover entirely new markets to enter. But you won’t be able to realize these benefits unless you start planning now.