Published
February 26, 2018

Why climate adaptation makes good business sense

As Adaptation Scotland launches its new Climate Ready business guide, Dame Susan Rice discusses what climate adaptation is and why it makes good business sense to take it seriously today.

 

In business, we’re always looking back at our past performance, and then looking forward to future plans, usually with a bias towards optimism. ‘Now’ is almost never what we’d expected it to be, and tomorrow’s almost always going to be better. That Janus approach – backward and forward – can inform debate about climate change as well, meaning we very rarely focus on the present, nor what actions we need to take the secure our future.

The reality of that future – as well as the present – is that Scotland’s climate is changing; and to remain in business, we need to adapt.

The Intergovernmental Panel on Climate Change (IPCC) defines adaptation as “adjustments in natural or human systems in response to actual or expected climatic stimuli or their effects, which moderates harm or exploits beneficial opportunities”.

Adaptation Scotland builds on this by saying:

“when our climate changes we need to make adjustments. […] Adapting to climate change will be necessary regardless of how much we manage to cut our carbon emissions. This is because historic emissions have already changed our climate and will continue to do so in the decades to come.”

Climate adaptation is different from climate mitigation: mitigation is about reducing greenhouse gas emissions in the atmosphere in order to slow or stop global climate change, whereas adaptation is about adjusting to the impacts of climate change as they happen (and continue to happen at an increasing rate).

Over the last few decades the climate has warmed, sea levels have risen, rainfall patterns have changed and the country’s been subject to extreme weather events.

Scottish businesses have been effected by the changing climate in a myriad of ways, from flooded premises, to transport disruption, to changes in the lives of staff, customers and clients. On top of this, businesses have had to respond to ever-expanding regulatory, environmental, and consumer pressures.

As we decarbonise our economy at scale, businesses not only have the challenge to future-proof; we have an opportunity to take the lead in how this is done.

We know that climate change is a significant challenge that needs to be built in to business plans today. We also know that many of the businesses already taking action are in fact reaping benefits including cost-savings, enhanced reputation and increased investor confidence – see these case studies for the proof. New business opportunities are also emerging for climate-related products and services within domestic and international markets.

As businesses really start to consider climate impacts – the threats and opportunities – they need to adapt, and to embed adaptation in a host of ways across the business. Some of this will be straightforward and practical – how will extreme weather affect your business continuity, your premises and your staff?  It will also impact longer-term planning around investment and exposure to risk, which will likely be less straightforward.

Regardless, understanding how your business will be affected by weather and climate change impacts is a crucial first step.

A good place to start is with the new Climate Ready business guide from Adaptation Scotland that I recently had the pleasure of being involved in launching at the Edinburgh Centre for Carbon Innovation in February. The guide includes practical examples of steps that businesses can take to increase resilience and adapt to the impacts of climate change, and includes case studies from a range of businesses of all sizes and across different sectors are responding to climate risks and identifying opportunities.

This year, for the first time, the VIBES Awards will have a sponsored award category focused on climate adaptation. This signifies a growing awareness of the importance of adaptation (not just mitigation) for Scottish business. It’s also an opportunity for businesses that are making strides in this area to be recognised as the forerunners that they are and share their best practice.

This focus is timely as the Government and leading agencies increasingly push business both to respond to risk and take advantage of what climate change may bring. One example comes from Scottish Enterprise who encourage businesses to see adaptation as an opportunity for growth, not just as a risk to be responded to and reported on. Key to this is businesses learning to collaborate with one another in a more meaningful way.

Over the last eight years, Scotland’s 2020 Climate Group has encouraged businesses to collaborate, to put a lens on the opportunities of climate change as well as the challenges. We’ve advocated that by facing the changes already with us, and preparing for the changes ahead, businesses are not only effectively addressing risk, but – crucially –  building in competitive advantage.

The 2020 Group are hardly alone on this: both globally and locally, business decisions and businesses themselves are increasingly being shaped by climate considerations, including iconic industries and products such as whisky, fishing and of course oil and gas. New business models and investment strategies are emerging; how they respond and, critically, how they adapt will be key to their future success and the drive for a modern, low carbon economy for Scotland.

How our bigger businesses adapt will necessarily affect our smaller ones. SMEs – which make up a large proportion of our existing economy – are deeply implicated in the wider supply chain.

We also see a dramatic shift in the thinking and behaviour of investors. Late last year, BlackRock , the world’s largest asset manager, told companies that now is the time to start reporting clear information on climate risk their businesses face. Blackrock sent letters to about 120 companies urging them to report climate dangers in line with the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures. The letters were sent globally to BlackRock holdings with “material climate risk inherent in their business operations”. Key energy, transportation and industrial sectors were the focus (and what business is not implicated or affected by at least one of these!).

While the world of Blackrock and asset management may seem far removed from many of Scottish businesses’ day-to-day operations, we all know that risk, insurance and pension provision are part and parcel of even a small business’ planning. Decisions regarding how to insure, to borrow and to invest will be affected by requirements to consider climate change impacts.

By understanding what climate change may bring, Scottish businesses can begin to adapt successfully and, with a fair wind, gain a competitive edge. And as societies and governments face into the challenges of climate change, there’ll be opportunities for businesses to create or adapt products and services to meet new needs and new markets.

Scotland’s 2020 Climate Group collaborated with Adaptation Scotland recently to run an event for businesses to find out more about adaptation.  Some points of key advice for business that were discussed were:

  • Understand how the climate will change, and then figure out what this will mean for your business. Look for the key point of failure – the thing that could happen that puts your business most at risk.
  • Make a business case for adaptation that focuses on long term benefit, economic opportunity and resilience, not one that just focuses on risks. If climate adaptation is not in your organisation’s vocabulary, find other language to explain it that’s relevant to core business.
  • See this process as an opportunity to involve your staff – behaviour change and intrapreneurship are key.
  • Find out about the tools and organisations which can help, and that can be tailored to suit your needs.
  • Share and collaborate with others in your sector to build a stronger economy.

Above all, see this process as one to start today; tomorrow may be too late.

For more information on climate adaptation, visit the Adaptation Scotland website at www.adaptationscotland.org.uk.