As the effects of climate change worsen, corporate efforts to reduce emissions must be paralleled with actions to strengthen climate resilience. Here, I have laid out four areas of action where companies can better protect themselves and others while seizing the opportunity to bring resilience-enhancing products to market.
Many companies are tackling climate change, setting net-zero targets or science-based targets to reduce their own emissions and those emitted by their suppliers and consumers. But reducing emissions alone is no longer enough to address increasingly extreme weather events and the creeping effects of climate change. Businesses must also work to build resilience to climate change.
Some companies are positive that they are already working on climate resilience because it is necessary and it brings multiple benefits. 30% of companies are aware of the impact of climate-related disasters on their operations, employees, and profitability. We also saw an increase in the cost of capital in response to climate risk.
As the impacts of climate change become more severe and the conservation investment movement takes hold, what will it take for companies to become leaders in climate resilience?
Four Scopes of Resilience to Climate Change
Companies working to reduce emissions are familiar with Scope 1, 2, and 3. This is the globally accepted standard for reporting on greenhouse gases (voluntary Scope 4 counts the emissions that companies help avoid). Based on this model, he proposes four “scopes” of climate resilience that can protect business interests while benefiting people and places vulnerable to climate change.
Scope 1. Protect your operations, facilities, and employees
Companies can continue to operate in the face of climate-related impacts, whether they are extreme events that cause sudden disruptions like hurricanes, or more insidious and persistent damage like heat stress or high salinity. Continuity must be maintained. To do so, companies must understand the scale and scope of current and future potential impacts and take appropriate actions to limit those impacts (e.g., using climate models and other reliable science (e.g., using technical tools to assess future risks and having backup options in place just in case). (Help your employees be better prepared if critical systems or locations are disrupted.)
Scope 2: Protect your supply chain, suppliers and customers
Many companies rely on suppliers and customers located in a variety of locations, often around the world. The coronavirus disease (COVID-19) has highlighted the lingering challenges of supply chain disruptions. We have seen that local challenges, such as the disruption at Shanghai Port, can have ramifications around the world. However, supply chains and production capacities in many sectors are showing signs of increasing stress caused by climate impacts. Recent floods in Thailand disrupted the auto and computer industries, a heat wave in India caused high disease rates and reduced factory productivity, and a drought in Europe cut energy and mining supplies.
Businesses must take steps to protect their supply lines and the people within them. Existing mechanisms to address climate risks include: Providing advisory services on climate resilience. Grants and loans for resilience activities. Use local suppliers. Certification or standard scheme. And smart contracts. In addition to this, the private sector must work with governments to ensure that business-critical infrastructure is climate-resilient. This can include ports, roads and railways, with initiatives like the Disaster Resilient Infrastructure Coalition bringing governments and businesses together at a national level.
Scope 3: Invest in and deliver products and services that promote resilience to climate change
Given that climate-resilient economies are rapidly growing, it makes sense to develop products and services that strengthen climate resilience. A new vertical category of business-driven climate resilience solutions is emerging. At the very least, products and services should not weaken our defenses against climate change.
Efforts to strengthen climate resilience are also an opportunity for innovation, with the number of dedicated startup accelerators, climate resilience venture funds, and investment opportunities increasing rapidly. Luxury fashion brand Chanel recently committed his US$25 million to the Climate Resilience Investment Fund. A private equity fund sponsored by the Wrightsmith Group has completed its first raise of US$186 million from insurance companies, banks and venture capitalists to improve agricultural yields vulnerable to climate change. Invested in companies implementing water harvesting technology and digital solutions.
Companies of all sizes can take advantage of these opportunities to support the emergence of early-stage resilient companies and resilient innovation clusters. In fact, millions of small and medium-sized entrepreneurs around the world are already delivering localized, low-cost resilience solutions.
Scope 4: Taking climate justice responsibilities seriously
Climate change is very unjust. Communities that have contributed the least to creating this crisis will suffer the most. Most large corporations are contributing to climate change and cannot reverse it. But businesses now have an opportunity to recognize that legacy and act to help people and places vulnerable to climate change become resilient and even thrive.
There is precedent. Salesforce has donated $100 million over 10 years to organizations directly working on climate justice and nature restoration. Patagonia is transferring all profits to nonprofits fighting climate change and the Ben & Jerry's Campaign for Climate Justice. A number of guides and business platforms have emerged to explore how the private sector can contribute to climate justice. Although many companies have launched philanthropic initiatives to pursue social and environmental objectives, and some have already focused on climate action, total spending on resilience remains largely unrecorded. and even fewer reach low-income communities struggling with climate impacts. This has to change.
Davos 2023 heard calls for more efforts to bring business, philanthropy and government together to support climate justice. Campaigns such as Race to Resilience and US PREPARE are rallying companies to increase their contribution to society in the fight against climate change. To avoid the proliferation of uncoordinated efforts, the private sector has established a group of Business Champions for Resilience (reflecting governments and multilateral institutions) to build on existing efforts to support the interests of climate-vulnerable populations. By contributing to the mechanism, we will be able to jointly build solidarity with people who are vulnerable to climate change. LDC Initiative and V20 Loss and Damage Funding Scheme for Effective Adaptation.
Improving competitiveness by combating climate change
The latest IPCC report calls for large-scale, simultaneous action on climate resilience and climate-induced loss and damage. For business, this means acting across the four climate resilience spectrums simultaneously. IIED helps companies strengthen their strategic approach to resilience. If you would like to discuss expert support or connect with other companies in a similar way, please contact us.
Dr. Tom Mitchell is Executive Director of the International Institute for Development and Environment (IIED). He has led global assessments of the actions needed to reduce climate risks and worked with businesses to foster innovative action on climate resilience.
