Transcript Champions of Business Sustainability

Business Adaptation
to Climate Change
A systematic
review of the body
of research
Prepared by:
David Nitkin
Ryan Foster
Jacqueline Medalye
Table of Contents
Section
Pages
Study background
3-8
State and shape of the literature
9-17
Key findings
18-23
Risks, opportunities, and barriers
24-34
Leaders and laggards
35-38
What you can do
39-48
Future work
49-53
Sector strategies
54-80
STUDY BACKGROUND
Study Background: Guiding questions
• Are businesses incorporating climate change into their
business models and strategies? If so, how? And are do
differences exist across business units, in terms of risks,
opportunities, processes, and outcomes?
• Are certain sectors ahead of others? If yes, what drivers
account for these differences, and what lessons can
leading industries offer the laggards?
• What tools and processes do businesses use to evaluate
the opportunities to be gained from adapting to climate
change? Are there any examples of businesses creating a
competitive advantage by building adaptive capacity?
Study Background: Methods
• Systematic review (i.e., comprehensive, transparent
search) of academic, practical, and teaching related sites
(e.g. ABI Inform, Google, ECCH case studies)
• The universe of 2,455 eligible studies were culled to 201,
based on relevance and uniqueness
• The 201 studies were rated and categorized by 2 PhD
students
• Questions
–
–
–
–
What do we know?
What don’t we know?
What are the stakes?
How to be a leader?
Study Background: Definition of Adaptation
“Adjustments in natural or human systems in response to
actual or expected climate stimuli
and their effects or impacts
which moderates harm or exploits opportunities”
-IPCC Third Assessment Report
Study Background: Adaptation vs. Mitigation
MITIGATION
• Cut GHG emissions
• Long term
• Global
• Causes focus
• Regulation
• Compliance themes
• Public good
ADAPTATION
• Change practices
• Short term
• Regional/ local
• Consequences focus
• Voluntary
• Leadership language
• Business, individual
Study Background: Adaptation vs. Mitigation
MITIGATION
• Indirect benefits to actor
• All systems
• Benefits not seen for
decades
• Effectiveness more
certain
• Sometimes ancillary
benefits
• Monitoring relatively
easy
ADAPTATION
• Direct benefits to actor
• Selected systems
• Benefits seen more
immediately
• Effectiveness less
certain
• Mostly ancillary benefits
• Monitoring more difficult
STATE AND SHAPE
OF LITERATURE
Literature: Status
• Search key words 2,400 candidates
• Sensitivity, vulnerability, resilience, adaptative
capacity, risk, opportunity
• Identified and reviewed 201 studies
• New language (climate proofing, climate resiliency,
processes of co-adaptation)
Literature: Types
• Academic
– Journal articles
• Government, International Organizations
– Educational organizations
– Climate change leadership councils (Pew, Tyndall)
• Practitioner Literature
– Insurance, reinsurance, finance company reports
– Carbon Disclosure Project; Industry Referrals
Literature: Number of studies by source type
Journal, Peer Review
66
Consortium/ NGO/ Think Tank
28
Journal, Secondary
23
Newspaper, Magazine
25
Industry Report
7
Referred Study
17
Government report
7
Web-Site
10
Internal organization
5
Other
13
Literature: Findings by Sector (sectors with more
than 5 studies)
Insurance
35
Finance
7
Agriculture
23
Mining
5
Tourism & Recreation
20
Forestry
4
Energy
13
Oil & Gas
4
Water
12
Infrastructure
3
Construction
10
Transport
3
Literature: Findings by Sector (sectors with
fewer than 5 studies)
Food & beverage
3
Chemicals
1
Electricity
2
Manufacturing
1
Airlines
2
Fishing
0
Information technology
2
Retail
0
Automotive
2
Real estate
0
Coal
1
Media
0
Literature: Content Analysis
Topic
# studies
Case studies, lessons learned
32
Tools for business
18
Risk frameworks screening
9
Scenarios
5
Decision Trees
2
Literature: Focus on Academic Literature
•
•
•
•
Sector level
Approach adaptative cognition and action
Closely linked to IPCC assessments
Avoid definitions in abstract in favour of
operationalizing the concept through
– Theoretical construct
– Empirical studies
Literature: Limitations of the Literature
• English language only (there are other language
sources, notably German)
• Available on web
• Reports, case studies and articles that are web
accessible
• Articles or web sites, not books or book chapters
KEY FINDINGS
Findings: Literature
• We are in early stage of “early adapter” literature:
citations in last ten years
• Not many sectors have heavy coverage (more than
10 case studies) in literature
• Not many companies have a well told story in
literature on adaptation
• Some adaptation literature is really adaptation to
mitigation challenges
Findings: Management
• Important to add climate change risk and vulnerability
analysis to decision-making
• Place to start is to define risk because climate
change has many indirect
• Rationale based on traditional economics: save
money, reduce risk, increase energy efficiency,
minimize waste
Findings: Action
• One size or answer doesn’t fit all
• What’s right for one company may not readily “work”
for another (management, geography, business
strategy)
• Not all businesses need to take action now, but most
need to ensure decision-making includes a good
vulnerability analysis (property damage, business
disruption)
Findings: Value of Literature
• Possibilities of collaboration
• Organizational adaptation is individual and direct
response
• Mitigation not enough: curb GHGs too late to prevent
significant warming
• Some businesses, managers confuse weather (daily)
and climate (long term)
Findings: Climate Change
• Requires diligence in looking not only at extreme
events (flooding, hurricanes, drought) but also at
– greater intensity of extremism
– Significant uncertainties
• May lead to technical change for some sectors and
not others
• When it does, it can either enhance or badly hurt
(destroy) a company
RISKS, OPPORTUNITIES
& BARRIERS
Risks & Opportunities: Landscape
• Risks are tangible and real
– Canada highest country risk
– Africa highest vulnerability
– Mitigation may not be enough
• Opportunities are dramatic
– Prosper not just survive
– Positive cost-benefits
Risks & Opportunities: Types of Climate Change
Risk
Market
Changing consumer behaviour
Operations
Increasing operational, infrastructure costs
Reputation
Being perceived as a laggard
Counterparty
Bankrupted suppliers
Political/Legal
New regulations, lawsuits
Business/
Competitive
Uncertain costs, deferred decisions
Risks & Opportunities: Scientific Status
Climate Change
• Scientific community has accepted that (a) climate
change is happening; (b) that it is largely man-made;
and (c) it will have significant effects (IPCC 2007,
Stern 2006, Source 178)
• Increase risk drought, desertification, melting ice,
flooding, intense hurricane activity
Risks & Opportunities: Opportunities
• The business sourced literature puts an especial
emphasis on business opportunities
• Mitigation and adaptation are co-dependent but
different contexts of climate change
• Actions involve shorter term adaptation (decreasing
unavoidable damages) together with longer term
mitigation can reduce risk
Risks & Opportunities: Forms of Adaptation
•
•
•
•
Bearing the cost
Preventing losses
Sharing or spreading losses through insurance
Changing the activity (for example, making ski resorts
four season facilities)
• Changing the location of activities
• Enhancing the adaptive capacity of ecosystems to be
more resilient.
Source: Natural Resources Canada
Risks & Opportunities: Types of Adaptation
• Intent: timing relative to climate change (proactive,
reactive)
• Temporal (short-term, long-term)
• Spatial (local, regional)
Risks & Opportunities: Barriers to Adaptation
•
•
•
•
•
Lack vision
Lack regulation
Lack leadership
Lack long term sector specific climate change data
Poor pricing certain resources (water)
Risks & Opportunities: Findings on
Vulnerability (1)
• Degree to which system is susceptible to and unable
to cope with adverse effects of climate change
• Three factors affect vulnerability:
– Nature of climate change to which exposed
– Climate sensitivity of system
– Capacity of system to adapt (IPPCC, p 21)
Risks & Opportunities: Findings on
Vulnerability (2)
• Businesses likely affected by
– Climate change itself
– Exposures: regulatory, physical, competitive and
reputational
• While climate change may well be a slow-moving
force, relative to terrorism or hurricane, asset prices
will on occasion move sharply when
– new evidence reaches the market
– policies are changed.
Source: Lehman Brothers
Risks & Opportunities: Time Scales and
Forecast
• Short: 3-12 months, typical biz, long range hurricane;
info on coming season, year
• Medium: 5-10 yrs, longest biz can consider
• Long: 10-100 yrs; pension fund, nuclear generation
or waste; limited climate data
Source: Med Office Consult
LEADERS AND LAGGARDS
Leaders and Laggards: High
Resources Dependence
High Level of
Coverage
Agriculture
Moderate Level of
Coverage
Fishing
Low Case Study
Coverage
Chemicals
Energy
Transport
Forestry
Industrial products
Electronics
Pharmaceuticals
Leaders and Laggards: Long Planning
Horizons
High Level of
Coverage
Moderate Level of
Coverage
Low Case Study
Coverage
Energy
Transport
Automotive
Health
Mining
Real estate
Waste-Nuclear
Leaders and Laggards: Already
Affected by Climate
High Level of
Coverage
Moderate Level of Low Case Study
Coverage
Coverage
Agriculture
Tourism &
Recreation
Insurance
Fishing
Forestry
Food and beverage
Pharmaceuticals
Health
Real estate
WHAT YOU CAN DO
What You Can Do: Strategies (1)
•
•
•
•
•
Rethink business strategy: look into pure adaptation
Prepare for the worst: contingency planning
Cut green exposure/taxes; really mitigation
Determine if there is any/no risk
Develop climate resilience strategy with codependent mitigation, adaptation actions
What you can do: Strategies (2)
Manage
Transfer
Avoid
Bear the cost
Share or spread losses through insurance
Prevent losses
Adjust
Adapt
Anticipate
Change nature activities, business
Enhance adaptive capacity
Invest in acquiring better info
What you can do: Adaptation Pyramid
Adapt
Risk + opportunity
= Adapt initiative
Building resilience
Decreasing vulnerability
What you can do: Lessons from Insurance
• Pricing and capital markets are deficient and lacking
• Extreme windstorm events will increase in particular
with major impact on businesses and insurers
• Climate change will have great impact on asset
values: more important to price risk accordingly
• Not addressing these issues will bring lawsuits from
shareholders, investors and clients
What You Can Do: Why Mitigation is Not
Enough
• UNEP: critical to adopt vigorous adaptation measures even as
we strive to cut emissions because even with aggressive
mitigation
– can’t avoid further warming
– benefits of mitigation not seen before 2040
– ocean’s at least 0.6 degrees warmer due to inertia, whatever
we do
• Key is to realize “triple dividend”
– Need integrate and/or synergize sustainable development,
risk management and adaptation.
– This will integrate adaptation policies with sustainable
development policies and disaster management.
What you can do: The wait-and-see option
• Wait See Approach Predominates
• North American Task Force FI, UNDP study of costs
of waiting by time periods
• Wait and see is folly as issue is inescapable carbon
footprint responsibilities: it’s the market curve, not the
regulatory curve; it’s a business imperative, not an
environmental one
What you can do: Proactive and Reactive Matrix
Lead
Wait for gov’t
regulations
Adapt
React
Act
Do risk analysis
Monitor
Follow
What you can do: Collaborations (1)
• Industry collaborations
– Insurance
• Academic/industry centres
– Pew Centre
– Tyndall Centre
– Intergovernmental Panel on Climate Change
What you can do: Collaborations (2)
• Institutional networks or shared action-study
mechanisms
–
–
–
–
–
Carbon Disclosure Project
Equator Principles
UNEP Financial Initiative
CERES
Investor Network on Climate Risk (INCR)
– Institutional Investors Group on Climate Change
FUTURE WORK
Gaps in Knowledge: Literature
•Lack of consensus surrounding meaning of business
adaptation
•“early” literature: Not often literature address risks,
opportunities and adaptation at firm level
•Rarely reveal insights not only of actions
•taken and why but also what action alternatives not taken,
or why
Gaps in Knowledge: Decision Making
• Uncertainty re: statistically significant
variations
– climate change risk by region
– Perceptions of climate change risk
• Actual risk exposure for each sector by
country
• Lack empirical data carbon emissions/risk
measure for each plant, office
• Lack transparency firm level opportunities
analysis
Gaps in Knowledge: Meteorology
• Near absence projections beyond 2012
• Weather and climate info needed across a range of
time scales
• Need know impacts climate change on water,
weather, food, health and ecosystems at temperature
increases 1 to 5 degrees
Gaps in Knowledge: Future Research Agenda
• Research collaboration
– Industry associations
– Multi-stakeholder networks
– Academic-practitioner collaborations
• Assess efficacy various decision-making models
• Climate change scenarios
– Disaggregate, sectoral
SECTOR STRATEGIES
Sector Strategies: Agriculture (1)
Challenge: drought in Africa
ADAPTATION
INITIATIVE
Drought and flood
resistant seeds
BUILD
RESILIENCE
New heat-tolerant
goats
DECREASE
VULNERABILITY
Irrigation, drip
systems
New heartier crop
strains
Exterminate cattle ticks
Cold tolerant plant
species
On-farm genetic
diversity banks
Water conservation
Invest in women as seed
keepers
Sector Strategies: Agriculture (2)
Challenge: increased incidence weather extremes
ADAPTATION
INITIATIVE
New irrigation
trading rights
BUILD
RESILIENCE
Biodiversity
conservation
Fertilize oceans with Revegetation for
iron (reduce CO2)
carbon
sequestration
Use biofuels
Improve rangeland
management
DECREASE
VULNERABILITY
Adopt plumbing fixtures
Grow more resilient
crops
Relocate activities
Sector Strategies: Automotive Sector
ADAPTATION
INITIATIVE
BUILD
RESILIENCE
DECREASE
VULNERABILITY
Set emission targets
Design, use more
carbon efficient raw
materials
Design lower emission
products
Build hybrids, more Measure carbon
fuel efficient vehicles footprint (total and
plant basis)
Assess which types
adaptation will increase
GHG
Sector Strategies: Building and Construction (1)
Challenge: high tides and storm surges
ADAPTATION
INITIATIVE
Redesign roofs and
windows
BUILD
RESILIENCE
New product,
materials, markets
DECREASE
VULNERABILITY
Modular systems
Invest in better
water treatment
Larger drain pipes
Watertight storage
Design for safer
living
Flood prevention
equipment
Measure carbon
footprint
Sector Strategies: Building and Construction (2)
Challenge: droughts, less water
ADAPTATION
INITIATIVE
Redesign roofs and
windows
BUILD
RESILIENCE
Increase use local
power supply
DECREASE
VULNERABILITY
Modular systems
Prefabrication
Move offices
Better emergency
planning
Better drainage
(material, sewers)
Improve insurance
coverage
Better water storage
Sector Strategies: Chemicals
ADAPTATION
INITIATIVE
BUILD
RESILIENCE
DECREASE
VULNERABILITY
New agricultural,
health products
“No till” farming
herbicides
Assess, invest in
biotechnology
Use less carbon
intensive fuels
Exit some businesses
based on carbon
emission grounds
Better insulation, energy
efficiency
Reuse heat from
manufacturing
Sector Strategies: Electric Utilities
ADAPTATION
INITIATIVE
BUILD
RESILIENCE
DECREASE
VULNERABILITY
Catastrophic event
bonds
Reduce water for
cooling
Reduce air travel
Zero air and water
emission plants
Reconfigure data
centre
Reduce carbon
emissions through
supply chain
Reuse heat to make
electricity
Sector Strategies: Energy (1)
Challenge: lower water levels, less water
ADAPTATION
INITIATIVE
BUILD
RESILIENCE
DECREASE
VULNERABILITY
Water acquisition
strategy
Contingency
planning
Cut carbon exposure
New exploration
fields, locations
Low impact vehicles Report carbon
emissions
Set CO2 output
targets
Drill ships
Deep injection water to
recover oil
Sector Strategies: Energy (2)
Challenge: extreme events, melting permafrost
ADAPTATION
INITIATIVE
BUILD
RESILIENCE
DECREASE
VULNERABILITY
Diversify location
critical functions
Pollution to reflect
sunlight
Run wires into stations
at roof level
Reflect sunlight back More generation
into space
from renewables
Recycle CO2 into fuel
(hydrogen)
Target outage
reduction timing
Relocate vulnerable
operations
Tougher anchor
platform specs
Sector Strategies: Finance
ADAPTATION
INITIATIVE
BUILD
RESILIENCE
DECREASE
VULNERABILITY
Facilitate emission
trading markets
Catastrophic events
bonds
Measure carbon
footprint
Invest in clean power, Weather derivatives Energy efficient lighting,
renewables
sensors
Climate change
investment fund
Conservation
throughout operation
Sector Strategies: Fisheries
Challenge: more severe floods, droughts, storms, spread of disease
ADAPTATION
INITIATIVE
BUILD
RESILIENCE
DECREASE
VULNERABILITY
Fish farming
Diversify into other
species
Build better climate
models
Conservation
Sector Strategies: Food and Tobacco
ADAPTATION
INITIATIVE
BUILD
RESILIENCE
Set water use
targets
Invest in
sustainable
agriculture
Seed research
DECREASE
VULNERABILITY
Abandon storage
facilities in hot climates
Investment in water Measure carbon
management
footprint
Use more resistant
seeds
Educate supply chain
Sector Strategies: Forestry
ADAPTATION
INITIATIVE
Plant climate
resistant species
New reforestation
partner strategies
Convert wood
damaged by pine
beetle to biofuel
BUILD
RESILIENCE
Process dead trees
Plant forests to
sequester CO2
Plant trees reduce
urban heat islands
DECREASE
VULNERABILITY
Community
reforestation
Increase urban (waste)
sources
Sector Strategies: Health
ADAPTATION
INITIATIVE
Invest in water
treatment and
storage
Better emergency
management
BUILD
RESILIENCE
Introduce climate
resilient seeds,
food varieties
Social protection
DECREASE
VULNERABILITY
Increase mangrove
swamps (hurricane
protection)
Disaster responses foe
epidemics
Pest management
Sector Strategies: Industrial Products
ADAPTATION
INITIATIVE
Rainforest skin:
analyze carbon
sequestration
Set carbon
footprint targets
BUILD
RESILIENCE
More sophisticated
thermostats
DECREASE
VULNERABILITY
Design products
made from carbonefficient materials
Reduce carbon
emissions through
supply chain
Design products
that consume less
energy
Telecom substitute for
travel
Sector Strategies: Insurance (1)
Challenge: increased incidence of catastrophic losses
ADAPTATION
INITIATIVE
BUILD
RESILIENCE
DECREASE
VULNERABILITY
Public-private
partnerships
Association
networking
Manage supply chain
expectations
Finance low carbon
technology
Weather derivatives
Innovative financing Invest in GHG credits
Client risk education Enhance design
standards
Sector Strategies: Insurance (2)
Challenge: increased natural catastrophe exposure
ADAPTATION
INITIATIVE
Reduce reliance on
historical losses info
DECREASE
VULNERABILITY
Corporate
responsibility
partnerships
BUILD
RESILIENCE
New insurance
products,
underwriting
procedures
Better predictive
models of climate
change
Catastrophic event
bonds
Customized
insurance policies
Protect high value
property in vulnerable
areas
Increase attention
water-related property
damage
Support carbon footprint
disclosure
Sector Strategies: Mining and Metals
Challenge: more extreme weather events
ADAPTATION
INITIATIVE
BUILD
RESILIENCE
DECREASE
VULNERABILITY
Sturdier buildings,
machinery
Close loop
Increase maintenance
operations systems of rail, roads
Emphasize recycled
sources for metals
Catastrophic
Water strategy
insurance coverage
Curtail building roads
Sector Strategies: Oil and Gas
Challenge: extreme weather events
ADAPTATION
INITIATIVE
BUILD
RESILIENCE
DECREASE
VULNERABILITY
Invest in offshore,
onshore wind
turbines
Invest in hydrogen
fuel cells
Multi-fuel (not just
gas) stations
Better climate change
data, scenarios
Shift to alternative
energy
Review drilling station
risks
Sector Strategies: Pharmaceuticals
ADAPTATION
INITIATIVE
BUILD
RESILIENCE
New tropical disease “No till” farming
products
herbicides
Low GHG emission
production
DECREASE
VULNERABILITY
Trap factory fugitive
emissions
Water recycling
Sector Strategies: Real Estate
ADAPTATION
INITIATIVE
BUILD
RESILIENCE
New forms of
Relocate new
catastrophic insurance investment in less
coverage
risky zones
Reposition asset
portfolio
DECREASE
VULNERABILITY
(No literature)
Sector Strategies: Retail
ADAPTATION
INITIATIVE
Reduce power
consumption
BUILD
RESILIENCE
Buy, use green/
renewable energy
DECREASE
VULNERABILITY
Location decision
models include
climate change
Measure, target
carbon footprint
Reduce emissions
throughout supply
chain
Purchase carbon
offsets
Combine heat, power
(use waste heat): on-site
energy production
Energy efficient lighting,
sensors
Buy local
Sector Strategies: Tourism & Recreation
ADAPTATION
INITIATIVE
BUILD
RESILIENCE
DECREASE
VULNERABILITY
Develop off-site
activities
Snow farming
and fencing
Ski slope design
Invest in more
indoor facilities
All year round
tourism
Invest in artificial
snow
Create artificial
beaches
Develop higher
terrains
Flexible ticket
pricing
Sector Strategies: Transport (1)
ADAPTATION
INITIATIVE
BUILD
RESILIENCE
DECREASE
VULNERABILITY
Year-round roads
Ice class vessels
Apply higher emission
standards
Scenarios re: marine, Climate research
land transport
systems
Strategic marine
Water treatment
services
Maintenance and
safety standards
Relocate railroads to
new growing areas
Sector Strategies: Transport (2)
Challenge: change in permafrost, sea and lake ice, and snow cover
ADAPTATION
INITIATIVE
NorthWest Passage
Eject CO2 from
atmosphere at poles
BUILD
RESILIENCE
Thermosyphons
DECREASE
VULNERABILITY
Improve insurance
coverage
Water tight storage Improve supply chain
management
Move offices
Sector Strategies: Water Utilities
ADAPTATION
INITIATIVE
Promote
conservation
BUILD
RESILIENCE
Catastrophic event
bonds
DECREASE
VULNERABILITY
Reduce water for
cooling
Better risk forecasts
data
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