Learning to live with climate change
The increase in extreme weather indicates that climate change is already here, yet so far there has been little discussion of how it will affect business. The Climate Resilient Organization, a new book by Dr Martina Linnenluecke and Professor Andrew Griffiths of UQ Business School, considers what actions companies can take. In this interview, Dr Linnenluecke explains why they need to adapt and build their resilience.
Unless we make attempts to mitigate climate change, the situation is likely to become so severe that we would be unable to adapt at all
PUBLIC OPINION REMAINS DIVIDED OVER CLIMATE CHANGE, AND GOVERNMENTS HAVE BEEN SLOW TO TAKE ACTION. SO WHY SHOULD BUSINESSES BE CONCERNED?
There is now a large and growing body of scientific evidence that climate change is occurring – and posing very real and tangible threats to businesses and society as a whole. Scientific data gathered by the Intergovernmental Panel on Climate Change (IPCC) shows that rising temperatures, changes in sea levels and melting glaciers are already happening.
Meanwhile insurance statistics have demonstrated a greater magnitude and diversity of damages from weather extremes over the past decade. Climate change is already upon us and its impact is likely to increase in the future, particularly for companies in vulnerable sectors and locations.
WHAT IS THE LIKELY IMPACT OF CLIMATE CHANGE? AND HOW WILL IT AFFECT BUSINESSES?
Temperatures are gradually rising, but what is even more concerning is the extreme weather conditions that climate change will bring. Storms, floods and other climate events are likely to be more damaging than rising temperatures alone.
Even where businesses sustain no direct damage, they are likely to be indirectly affected by power cuts or damage to infrastructure. With companies increasingly reliant on tightly coupled infrastructure, such as financial systems, communications, energy and transportation, any outages can result in large-scale disruption.
In the world as a whole, population growth is pushing more people to live in higher risk areas such as coastal zones and cities, and greater industrialisation of these areas means they are more susceptible to weather extremes.
While we cannot be sure about the exact impact, what is certain is that there are few areas and economies that will not be affected by large-scale changes, such as rising sea levels and coastal flooding and disruptions to agriculture.
BUT WHAT CAN WE DO ABOUT CLIMATE CHANGE? IS IT TOO LATE TO TRY TO STOP IT?
There are two courses of action open to business, and society as a whole. We can reduce greenhouse gas (GHG) emissions to try to prevent further climate change, or we can learn to adapt and find ways to survive and thrive in a climate-changed world.
On the face of it, these concepts look like they are at opposite ends of the spectrum, however in reality we need to do both.
Unless we make attempts to mitigate climate change, the situation is likely to become so severe that we would be unable to adapt at all – or we would pay an extremely high price. Historical studies such as those outlined by Jared Diamond in his book, Collapse, highlight the fragility of social systems, and how rapidly they can break down under sustained environmental pressures.
However the IPCC recently concluded that even with the most stringent efforts to reduce GHG emissions, we cannot fully avoid the impact of climate change over the next few decades. Therefore we will also need to adapt, and reduce our exposure and vulnerability.
Adaptation is a process of adjustments to extend our coping range – the amount of change that we can tolerate without adverse effects. Organisations will also need to build resilience to deal with disruptions that go beyond these boundaries.
In other words, they will not only have to learn how to adapt to the gradual rise in temperatures, but also to recover quickly from extreme weather incidents.
For instance, an electricity utility company may need to upgrade its infrastructure to deal with warmer temperatures, but will also be exposed to prolonged heat waves and excessive energy demand.
WHY SHOULD THE PRIVATE SECTOR HAVE TO TAKE THE INITIATIVE – SURELY GOVERNMENTS OUGHT TO BE LEADING THE WAY?
The public sector, especially local governments, will certainly have a major role to play as issues such as land use planning or disaster management are under their control. However governments are often slow to agree on changes.
The private sector, on the other hand, can react much more quickly and efficiently. Companies tend to respond to market signals of their own accord and those in exposed sectors such as tourism or agriculture are likely to develop their own response to climate change.
However in this situation, relying on individual businesses to take the initiative is not ideal as they tend to pursue their own particular goals and their efforts will lack co-ordination. As yet there are very few government incentives in place to encourage firms to take an integrated approach. Private companies may also be hamstrung by cost, uncertainty or an emphasis on short-goals.
Overall, the private sector has not yet systematically considered the implications of climate change and extreme weather. While some companies, such as Munich Re and Swiss Re in the reinsurance industry, have begun to research the risks, most current debates focus on reducing GHG emissions, mainly in response to changes in policy and legislation. The question of how organisations can cope with the physical impact of climate change has hardly been discussed.
SO HOW SHOULD COMPANIES GO ABOUT PLANNING THEIR RESPONSE?
UQ Business School has been working with companies since 2005 to develop strategies on climate change and management. Since then over 650 corporate leaders have completed courses and workshops and over 400 postgraduate students have elected a Masters subject. We are also supporting four PhD projects in the areas of climate change and environmental finance.
Our experience shows that the key difficulty for executives lies not in accepting the reality of climate change, but in determining the likely effects on their business and what actions they can take. They need to consider the impact of climate change and also of related policies such as carbon trading.
The challenge is not only to determine their organisation’s carbon intensity and transition to low-carbon business models, but also to consider how to adapt and become more resilient.
Determining strategic approaches is a complex task, especially in the construction, energy and infrastructure sectors, however it one that businesses urgently need to address.
WHAT CAN BE DONE TO HELP BUSINESSES AND MAKE RESPONSES TO CLIMATE CHANGE MORE EFFECTIVE?
There are still plenty of gaps in our knowledge and issues that need resolving – for example, how do we measure progress in building resilience and what do we use as a baseline? What should our priorities be in trying to avoid adverse impacts? And who is supposed to pay for it all?
We see two key areas for action. Firstly, we need policy initiatives to encourage businesses to respond in a coordinated manner, and integrate their responses with long-term planning frameworks and large-scale infrastructure developments. Only by the public and private sector working in partnership can the best possible outcomes be achieved.
Secondly, we need to translate scientific research into corporate planning – for example, to help us reduce GHG emissions, we need to develop better climate models and projections, and to learn more about how best to audit emissions and implement abatement measures. Company targets for reducing emissions also need to be clearly linked to global emission targets.
To help companies adapt, ideally we need to know more about the effects of climate on organisations in different geographical locations and sectors.
The key challenge for policy and corporate decision-makers will be to recognise the significant challenges but also opportunities associated with future climate change. Our book provides managers, academics and practitioners with important ideas that will help business prepare for the future.