As the impacts of climate change bite, business efforts to reduce emissions must now be matched by action to strengthen climate resilience. Here I set out four action areas where companies can better protect themselves and others, while seizing opportunities to market resilience-enhancing products.
Many businesses are acting on climate change: setting net-zero or science-based targets for cutting their emissions and those generated by suppliers and consumers. But to keep pace with increasingly extreme weather and creeping climate change impacts, reducing emissions is no longer enough: business must also commit to building climate resilience.
Positively, some companies are acting on climate resilience already, driven by necessity and because it brings multiple benefits. 30% of businesses have noticed the impacts of climate-related disasters on their operations, workforce and profitability; and we have also seen the cost of capital increase in line with climate risks.
With climate change impacts set to escalate in severity and as the nature-positive investment movement taking hold, what does it take for a business to be a climate resilience leader?
Four scopes for climate resilience
Businesses working to reduce emissions are familiar with Scope 1, 2 and 3: the globally accepted standard for reporting on greenhouse gases (a voluntary Scope 4 counts the emissions a business helps to avoid). Building on this model, we suggest four ‘scopes’ for climate resilience that can protect business interests while also benefiting climate-vulnerable people and places.
Scope 1. Protect your operations, facilities and people
Companies need to maintain operational continuity in the face of climate-related impacts, whether extreme events causing sudden disruption, like hurricanes, or more insidious and ongoing damage, like heat-stress or high salinity. To do this, businesses must understand the scale and scope of potential impacts, both present and future, and take appropriate action to limit their effects (for example, using climate models and other credible scientific tools to assess future risk; having reserve options if a key system or location is disrupted; supporting the workforce to be better prepared).
Scope 2: Protect your supply chains, suppliers and customers
Many businesses depend on suppliers and customers in diverse, often global, locations. COVID19 highlighted the protracted challenges of interrupted supply chains; we saw local challenges – like disruption to Shanghai port – can cascade worldwide. Yet supply chains and productive capacity in many sectors show signs of incremental stress caused by climate impacts. Recent floods in Thailand disrupted the automotive and computer industries, heatwaves in India caused high sickness rates and lower factory productivity, and drought in Europe curtailed energy and mining supplies.
Businesses must take measures to protect their supply lines and the people in their supply chains. Existing mechanisms to address climate risks include: offering climate resilience advisory services; grants or loans for resilience action; using local suppliers; certification or standards schemes; and smart contracting. Alongside this, the private sector should work with governments to ensure that business-critical infrastructure is climate resilient. This may include ports, road, or rail, where initiatives like the Coalition for Disaster Resilient Infrastructure are bringing government and business together at country level.
Scope 3: Invest in and deliver products and services that foster climate resilience
Given the fast-growing climate resilience economy, it makes sense to develop products and services that strengthen climate resilience; there are emerging sector-by-sector categories of business-led climate resilience solutions. At very least, products and services should not weaken climate defenses.
The struggle to strengthen climate resilience is also an innovation opportunity, inspiring a rapidly growing number of dedicated start-up accelerators, climate resilience venture funds and investment opportunities. Luxury fashion brand Chanel recently committed US$25m to a climate resilience investment fund. A private equity fund hosted by the Lightsmith Group closed its first raise with US$186m from insurers, banks and venture capitalists – it invested in companies deploying water harvesting technology and digital solutions to improve climate-vulnerable farm output.
Companies of all sizes can take seize these opportunities to support early-stage resilience enterprise or the emergence of resilience innovation clusters. Indeed, millions of small business entrepreneurs globally are already delivering locally-appropriate low-cost solutions for resilience.
Scope 4: Take climate justice responsibilities seriously
Climate change is deeply unjust: the communities who have done to least to cause this crisis suffer the most. Most big businesses have contributed to climate change, which cannot be undone. But companies now have an opportunity to recognise that legacy and act to help climate-vulnerable people and places achieve resilience, and even thrive.
There are precedents: Salesforce is giving away US$100m over 10 years to organisations working directly on climate justice and restoring nature. Patagonia is transferring all its profits to a non-profit fighting climate change, and Ben and Jerry’s campaigns for climate justice. A number of guides and business platforms have emerged to explore how the private sector can contribute to climate justice. Many companies set up philanthropies to pursue social and environmental aims – some already focus on climate action – but the total spend on resilience barely registers, and even less reaches the low-income communities contending with climate impacts. This must change.
Davos 2023 heard calls for more initiatives integrating business, philanthropy and governments to support climate justice; campaigns like Race to Resilience and US PREPARE are rallying business to better serve society on climate resilience. To avoid a proliferation of uncoordinated initiatives, the private sector could establish a ‘Business Champions for Resilience’ group (mirroring governments and multilateral bodies) and collectively build solidarity with climate-vulnerable people by contributing to existing mechanisms that support their interests, such as the LDC Initiative for Effective Adaptation and the V20 Loss and Damage Funding Facility.
Get the competitive edge on climate action
The latest IPCC report demands massive, simultaneous action on climate resilience and on climate-driven loss and damage. For business, this means acting across the four climate resilience scopes at once. IIED can help companies looking to strengthen their strategic approach to resilience. Please get in touch if you wish to discuss specialist support or connect with other businesses on a similar path.
Dr. Tom Mitchell is the Executive Director of the International Institute for Environment of Development (IIED). He has led global assessments of the action needed to reduce climate change risk and worked with businesses to promote innovative action on climate resilience.