I sat down to write this editorial on the day the United States government released the 4th National Climate Assessment Report.
Designed to be an authoritative assessment of the science behind climate change, it concludes that we are living in the warmest period in the history of modern civilization; that human emissions of greenhouse gases are the dominant cause; and that the results include increases in the intensity and frequency of extreme weather events.
Having worked on climate change for more than 20 years, I have read more than my fair share of these reports. This particular one impacted me like no other because it was published hot on the heels of a spate of weather events that has brought climate change into the daily lives of Americans all across the country.
The 2017 Atlantic hurricane season is likely to be the costliest on record, with a preliminary total of over US$290 billion in damages for hurricanes Harvey and Irma alone. Harvey breaks the record for the greatest amount of rain recorded from a single tropical storm or hurricane in the continental United States. Hurricane Irma was the strongest recorded hurricane ever to form in the Atlantic Ocean. And late in the season, hurricane Ophelia made landfall in my home country of Ireland - becoming the easternmost major hurricane in the basin on record.
Exposed and vulnerable: we should all be responding to climate risk
For most of my career, I have worked with communities on the frontlines of climate risk, particularly small island developing states and least developed countries.
The poor and marginalized remain disproportionately impacted, hit first and hardest by a global challenge they played no part in creating. However, exposure to climate hazards and vulnerability to climate impacts are increasingly becoming shared experiences – as more of the world is confronted by extreme weather and environmental calamity.
Global businesses are also feeling the pressure and cannot afford complacency:
- Analysis conducted by the World Economic Forum identified climate change as the “highest impact risk to business” out of 29 risks that were reviewed.
- Mercer has calculated the cumulative global cost of climate change-related impacts between $2 trillion and $4 trillion by 2030.
- The National Climate Assessment concludes that climate-related extreme weather events have cost the US economy more than US$1 trillion in damages since 1980.
- Meanwhile a study in the journal Nature suggests costs to the market value of global financial assets could be as high as $24.2 trillion under worst case scenarios.
Climate risk is increasingly impacting individual companies - across finance, operations, human resources, compliance, marketing and strategy divisions.
Warren Buffet has built a fortune at the interface between risk and reward. One of his most famous quotes is that “risk comes from not knowing what you are doing.”
The evidence suggests the private sector doesn’t fully understand the complexity of the risks it faces and therefore does not know how to respond.
A recent review of corporate disclosure reports revealed that 72% of suppliers say that climate risks could significantly impact their business operations, revenue or expenditure - yet only half are currently managing this risk.
My own experience working with companies suggests this is because they understand climate risk as being exposure to a hazard such as an extreme weather event, but overlook the concept of vulnerability – the underlying weaknesses within their own operations, infrastructure, investments or supply chains that exacerbate risk.
For example, the ILO calculates that approximately 190 million women work in global supply chain-related jobs. In sectors such as consumer products and food, the proportion of women in the labor force can be as high as 70% in some countries.
And yet, most companies fail to understand that climate change disproportionately affects women because of social, political, economic and cultural norms. As a result, they fail to develop meaningful interventions to protect their women workers, maintain productivity and ensure business continuity.
The world needs to move from risk to resilience.
From climate risk to shared resilience
The Intergovernmental Panel on Climate Change defines resilience as “the ability of a system and its component parts to anticipate, absorb, accommodate or recover from the effects of a hazardous event in a timely and efficient manner - including through ensuring the preservation, restoration or improvement of its essential basic structures and functions.”
A resilient business should therefore be able to anticipate, absorb, accommodate and rapidly recover from climate events in its own operations and throughout its supply chain. This will help contribute to building resilient societies by moderating harm to socio-ecological systems and by enabling people to rebound quickly in the face of adversity.
How can a business transition from risk to resilience?
The journey begins with investments in six so-called “capital assets” - the human, financial, social, natural, physical and political capitals. These are considered the key building blocks of resilience.
A company might enhance human capital by investing in resilience-building skills and training for the workforce. A company could also strengthen adaptive capacity by enhancing social capital, establishing planning boards with worker participation, designed to evaluate risk and design strategies for resilience.
Companies wishing to build physical capital should ensure that their infrastructure is updated to account for changing exposure to physical hazards.
The private sector could also enable deeper investments across all capital assets by re-evaluating how it spends its own money through expenditures, procurement, the allocation of investment capital and the management of risk through insurance and other instruments.
Shared resilience begins at COP23
In an increasingly connected world, underlying weaknesses at one end of a global supply chain will have implications from the farm to the fork and from the factory to the showroom.
A business that builds infrastructure to defend its facilities but neglects the communities from which it draws its workers has a two-dimensional understanding of enterprise risk.
Similarly, a frontline community that ignores the private sector loses the opportunity to harness the transformative power of partnership in resilience.
We therefore need to create a vision of shared resilience at COP23.
This begins with individual companies promoting assessments of climate change risks inside individual companies and across complex supply chains.
The private sector should also facilitate the sharing of good practices, experiences and lessons learned; identify actions that could significantly enhance the implementation of adaptation actions; promote cooperative action on adaptation with a specific focus on vulnerable sectors and regions; and identify opportunities to strengthen policy enabling environments conducive to climate resilience.
The Development and Climate Days organized over the middle weekend at COP23 provide a prime opportunity to build a partnership for resilience. Sessions on supply chain risk and resilience, adaptation finance, and building a science-based approach to corporate resilience will provide a platform for collaboration between the private sector and other stakeholder groups.
Governments should also recognize the private sector’s adaptation efforts and identify ways to enhance the effectiveness of business leadership on climate resilience. This includes working with the private sector in designing national adaptation and resilience plans.
Today, climate risk is no longer something faced by small island nations, we all share it. It’s global - and given the interconnected nature of our earth systems and global supply chains, we are all impacted irrespective of where we are and the industries in which we operate.
It is time we move beyond risk to create the conditions for shared resilience.