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Summary Report: Business Adaptation to Climate Change

When uncertainty exists, the tendency is to do nothing. Avoid the paralysis of inaction that will leave your firm unprepared for extreme climate events.

Corporate practices, government policies, and academic research are focused largely on mitigation, and not adaptation. The NBS Knowledge Forum on Business Adaptation to Climate Change, which took place in November 2009, convened fifty managers, academics and policy-makers to address business adaptation to climate change.

Participants discussed how firms should encourage managers to conduct vulnerability risk assessments across their supply chain to evaluate potential impacts. It is equally important for firms to select a climate change adaptation strategy, focussing either on innovation or compensation.

Yet, more data is required to help managers make more informed business decision. This is necessary as a base for business and policy decision-making. To this end NBS commissioned David Nitkin, president of EthicScan, to conduct a systematic review of literature on business adaptation to climate change.

Dialogue Summaries

Worst Practices in Business

When uncertainty exists, the tendency is to do nothing. Business may operate in fear of making the wrong decision. Yet, this inaction may be creating the inertia that could lead organizations to be unprepared for a future changed by extreme climate events.

Challenges and Opportunities for Companies

  • Arguably the biggest challenge facing decision-makers is the uncertainty surrounding climate change. This uncertainty is driven in part by a lack of understanding around how organizations and governments will be impacted by climate change. Companies look to governments for direction on how to act and what future regulations will look like and express frustration when there is a lack of direction.

  • Many businesses grapple with measuring carbon emissions. It is expensive and time consuming. It is also unclear whether firms will receive carbon credits in the future. Adaptation to climate change requires “gambling on the future” and letting go of the need for hard numbers and working with reasonable assumptions. However, without hard and accurate numbers, climate change simply does not enter into the decision-making equations for some organizations.

  • Many companies are acting, but it is mostly shorter term risk management rather than thinking long-term and considering adaptation strategies. These firms often respond to climate change by setting up sustainability departments, but it is unclear whether or not they inform strategy.

  • The lack of agreement regarding climate change remains a challenge. Some senior executives are unconvinced that climate change is anthropogenic, while others may believe it is but do not know how to take action.

  • Vague definitions of sustainability may lead to disagreement about what actions to take, or whether climate change actions should take priority over more commonly practiced activities like health and safety.

Challenges and Opportunities for Government

  • Governments can create more regulatory certainty and provide incentives for early action on the part of firms. They can also assist in technology research and invest in green industries.

  • There is a need for governments to work together to address concerns about jurisdictional differences in regulations. They need to take long-term action and create awareness.

  • Governments are putting some resources towards climate change, but are often uncertain in where to invest tax-payers’ dollars. For example, some believe that carbon capture and storage may be part of the solution to climate change, but it remains unproven and government is wary to invest, putting initiatives on hold.

  • Governments need to develop a greater understanding of the constraints faced by companies. For example, imposing a five-year plan for a new technology may not be realistic.

The Bigger Challenges

With increases in the number of catastrophes, people, organizations and governments must change their behaviours in order to adapt. Drawing on multiple stakeholders to generate more realistic solutions may provide the best hope for the future.

Despite many obstacles, solutions exist if leaders are willing to take bold steps and if people, organizations and governments have the will. Leaders can think about the future in spite of short-term pressures. Scenarios can help with long-term planning and get people to think about the bigger picture.

Forum Highlights

Overview of the Business Adaptation to Climate Change Project

David Nitkin, President of EthicScan Canada Ltd.

  • Nitkin’s project will determine what we know, what we think we know and what we do not know about business adaptation to climate change.

  • Read the Systematic Review

  • Read page six of the full report

Climate Adaptation and Business Risks Context, Challenges and Potential Solutions

Dr. Robert Page, Chair, National Roundtable on the Environment and the Economy (NRTEE)

  • Mitigation addresses the causes of climate change and adaptation addresses its consequences.

  • Climate change is introducing new types of uncertainty into organizations, which some businesses address through Enterprise Risk Management (ERM) systems.

  • Until more robust climate change data are available, businesses must continue incorporating additional, rough risk factors into technical designs and financial models.

  • Read page eight of the full report

Organizational Resilience to the Physical Impacts of Climate Change

Dr. Monika Winn, Professor, University of Victoria

  • Extreme weather events will severely challenge business as usual and may threaten firm survival.

  • The development of an inventory of vulnerabilities across the organization and its supply chain appears to be a key success factor to enhance the firm’s adaptation and resilience.

  • To adapt to climate change, better climate change data are required to understand the nature, type, severity and probability of direct climate

  • Read page 12 of the full report

An Overview of Business Responses to Climate Change

Dr. Jonatan M. Pinkse, Amsterdam Business School

  • Organizations are pursuing mitigation and not adaptation strategies.

  • Across almost all sectors, firms have created carbon inventories, but relatively few have developed emissions targets and fewer yet treat their inventories as a material financial risk.

  • To adapt to climate change, firms can undertake innovation strategies focusing on process improvements, new product or market development, or compensation strategies focusing on emissions reductions and trading.

  • Read page 10 of the full report

Policy, Technology and Economics of Adaptation

Allan Amey, Senior Fellow, ICF Consulting Canada

  • Interest and attention to adaptation is an emerging trend.

  • Adaptation should begin with an assessment of the risks posed by climate change across the entire value chain, which frameworks can facilitate.

  • Understanding and analyzing climate risk may also reveal new business opportunities.

  • Read page 14 of the full report

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