Article: Climate-proofing business: Strategies for success


Climate-proofing business: Strategies for success

Businesses need to recognise the urgent need to enhance their climate resilience in response to global climate challenges, emphasising proactive adaptation and harnessing the transformative power of standards in building resilient enterprises.
Climate-proofing business: Strategies for success

Within boardrooms and executive suites, a growing realisation is taking hold – the changing climate has become an undeniable factor shaping the corporate landscape. It’s estimated that $125 trillion of investment is needed by 2050 to meet net zero emissions. This recognition underscores the pressing need to elevate corporate climate resilience as a core business imperative. However, the outcomes of COP28, the latest international climate conference, reveal a concerning gap between global climate ambitions and immediate corporate actions. Only companies adept at identifying both physical and transitional climate risks, seamlessly incorporating them into their strategic and operational blueprints, will be capable of not only weathering the storms of change but also thriving in the new era of sustainability and resilience. 

The outcomes of COP28 further emphasise the urgency for corporations to reassess their climate risk management strategies. It’s estimated that 16.9% of global assets worth about US$24.2 billion are at risk due to climate change.   

 Amidst escalating climate challenges, organisations must assess climate risks on their financial health and disclose plans to address them. This article explores key strategies for bolstering business resilience, with a focus on climate change and sustainability.

In its core definition, resilience translates to “the ability of an entity to withstand and adapt to adverse conditions, absorb shocks and uncertainties, and ultimately emerge from adversity stronger and better equipped for the future.” Resilience is not a static state but a methodical process of identifying potential risks and opportunities, innovating, and evolving to flourish in a dynamic and unpredictable environment.

Five pillars of resilience:

The characteristics of a resilient business vary depending on the specific industry and market conditions. However, businesses that are most resilient to the impacts of climate change consider the five pillars of resilience:

  1. Strategic: It hinges on the ability to swiftly respond to shifts in the economic, social, regulatory, and political environment.
  2. Financial: The financial health of a business determines its ability to endure crises, adapt to new circumstances, innovate, and invest to seize opportunities that may arise.
  3. Operational: This pillar measures a company’s capacity to withstand disruptions and continue functioning even after experiencing shocks.
  4. Ecosystem: The success of a company is linked to the wellbeing of the communities and natural environment it operates within. This includes supply chains, customers, contractors, and clients.
  5. Culture and wellbeing: The effectiveness of a workforce and the overall culture and structure of the organisation play a pivotal role in dealing with disruptions and transformations.

Strategic blueprint to achieve climate resilience

Translating the pillars of resilience into objective and outcome-based models to ensure consistent readiness would ensure the organisation is always ready to proactively address long-term risks and safeguard the future vitality of the organisation. As a starting point, a strategic blueprint as follows can help prepare an action plan to be adopted to enhance climate resilience.

Comprehensive value-chain assessment: Understanding climate resilience demands a holistic approach. Organisations can begin by mapping themselves against the five key pillars of climate resilience. This method uncovers vulnerabilities and critical nodes, laying the foundation for a resilient framework.

 Embrace TCFD reporting: Task Force on Climate-Related Financial Disclosure (TCFD) reporting isn’t just a regulatory obligation—it’s a strategic asset. Organisations can dive into their unique climate risks and opportunities through a mature TCFD report. This initiative not only satisfies compliance but also builds stakeholder confidence in their climate resilience strategy. 90% of investors and other users incorporate climate-related financial disclosures in financial decision-making, 

 Anticipate future changes: Long-term growth requires constant adaptability. Conducting horizon scanning can decipher upcoming trends and environmental shifts. This proactive approach prepares businesses to seize opportunities and mitigate threats, ensuring their corporate strategy remains resilient in evolving environments.

Strategic climate evaluation: Once the organisation charts its roadmap, it is important to question whether it withstands external climate influences. Engaging in climate strategic evaluation workshops can prove beneficial. These sessions assess how climate factors might impact a company’s ability to achieve its goals, offering valuable insights into adaptation strategies. 

Digital risk analysis: 72% out of 8,000 suppliers surveyed said that climate change presents risks that could significantly impact their operations, revenue, or expenditure. Equipping businesses with enhanced scenario planning and real-time risk analysis capabilities provides organisations with an upper hand in building a climate-resilient environment. By doing so, organisations can align with the evolving landscape of climate resilience.

Standards-driven approach for sustainable transformation

Climate resilience extends beyond business. It encompasses the development of socio-ecological systems and organisations capable of weathering climate change’s challenges while promoting sustainable development. Standards play a pivotal role in guiding this complex endeavour:

Integrated approach: Embrace a fluid outlook, shifting from mere adaptation and mitigation to full transformation. This involves considering trade-offs like resource allocation, technology adoption, and co-benefits such as societal stability, worker health, and long-term cost savings.

Comprehensive risk assessment: Address both acute (e.g., extreme weather events) and chronic (e.g., rising temperatures and sea levels) climate risks. Transforming organizational strategy and business models is key to uncovering opportunities amidst these challenges.

Harnessing standards: Utilise powerful frameworks such as the Carbon Disclosure Project (CDP), Task Force on Climate-Related Financial Disclosure (TCFD), and Corporate Sustainability Reporting Directive (CSRD) to embed climate risks and opportunities into core business strategies, facilitating necessary transformations.

Driving change: Standards should not only influence company operations but also impact the broader environment, potentially shifting worldviews and paradigms. For example, promoting low-carbon production requires supportive policies, ingrained beliefs, and leaders who champion such initiatives.

Research alignment: Bridge the gap between climate science and business by engaging in solution-oriented research. Seek insights that can inform and shape strategic initiatives effectively.

To thrive in a changing climate, businesses must be proactive and adaptable. Integrating these principles strengthens their ability to overcome challenges and seize opportunities. This extends beyond individual businesses and underscores the transformative power of standards, which should drive a shift in mindset, not just compliance.

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Topics: Others, Business, #WorldEarthDay

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