Climate change is often thought of as tomorrow’s problem. But according to the Intergovernmental Panel on Climate Change, growing concentrations of greenhouse-gas pollution has already affected socio-ecological systems around the world. Analysis conducted by Munich Re and captured in the Economist shows that since 1980, climate change has resulted in a significant rise in weather-related disasters, including more frequent and intense storms, floods, droughts, and extreme temperatures.
As the threat of climate change increases, so do the risks for business. These include disrupted supply chains, reduced availability of natural resources, damage to infrastructure and utilities, disrupted transport and logistics routes, heightened price and market volatility, and unpredictable impacts on the workforce and consumers. Some estimate that if we continue on our current path of GHG emissions, the effects of climate change will cost as much as US$4 trillion by 2030.
To survive and grow, business must invest in climate resilience—a topic we will explore in depth at the BSR Conference 2015. For business, the path to climate resilience consists of two important steps:
- Deepen understanding of climate vulnerability. Traditionally, business leaders have considered climate vulnerability through the lens of risk: physical risk to operations and facilities resulting from extreme weather events, risks to raw materials such as water and crops, and the financial risks associated with losses incurred from climate-related events.
In today’s era of fundamental change, business leaders need a three-dimensional understanding of vulnerability that accounts for the company’s sensitivity to climate risk. This recognizes that climate vulnerability is tied to other interconnected challenges, such as the financial, political, legal, cultural, and social landscapes that the business operates within. For instance, the vulnerability of supply chain workers is higher when they live in informal settlements, lack access to information and decision-makers, and are exposed to human rights abuses.
- Enhance adaptive capacity. Today, business leaders can draw from a broader menu of options to enhance their company’s adaptive capacity, or the firm’s ability to withstand and rebound rapidly from climate-related impacts. BSR has identified seven assets—physical, natural, governance, technological, knowledge, social, and financial—that business leaders can use to strengthen their companies’ resilience in the face of climate and to enhance the ability of communities to rebound and prosper in a climate-constrained world.
For instance, financial services companies can create new classes of products and support investments in physical and natural assets. ICT companies can create new technologies and deploy their analytical power to help manufacturers understand and address their exposure to extreme weather events. And multinational companies across all sectors can work through their supply chains to grow the adaptive capacity of their workers and vulnerable communities.
The innovative power of the private sector is critical for building a resilient business and a resilient world.