Business Primer – Chapter 3: A Business Case for Action

THE CLIMATE IS ALREADY CHANGING;
SOCIETY MUST ADAPT.

Due to past greenhouse gas emissions, some degree of climate change is now inevitable, even if drastic cuts in global emissions occurred today. GHG emissions mitigation will limit the speed and scale of future climate
change, but governments, communities, businesses, and households must plan to adapt to the impacts of more volatile weather and gradual changes in climate conditions that are already locked-in.²³ The NRT’s 2011 report Paying the Price: The Economic Impacts of Climate Change for Canada suggests climate change could cost Canada $5 billion per year by 2020.²⁴ This amount will rise in the years ahead. Governments, communities, businesses, and households alike are all exposed to the fallout of the cascade of effects that move through the natural and built environment to impact our economic circumstances.

BUSINESSES STAND
TO BE DIRECTLY AFFECTED.

STAKEHOLDERS
WILL EXPECT ACTION.

In the coming years, businesses will be driven to adapt by the changing perceptions and expectations of governments and communities, in addition to key capital market players like investors, lenders, shareholders, and insurers.²⁹ Assessing the potential impacts of a changing climate on a business includes taking into account the positions adopted by these stakeholder groups — a strategy to get out in front of reputational, regulatory, and financial risk.

As insurers adjust their price structures, businesses will need to adjust their behaviour in response. For example, owners of offshore platforms and associated infrastructure in the Gulf of Mexico have faced increasingly expensive insurance coverage from asset damage caused by windstorms and hurricanes, which were due, in part, to 2008 losses from hurricanes Ike and Gustav. Insurers re-evaluate their pricing structures after every windstorm season, basing prices for the following year on the damages accumulated in the past season. In 2009, many businesses chose to self-insure against the risk of hurricanes.³⁰

EARLY ACTION
CAN BRING TANGIBLE BENEFITS.

Businesses can save money by moving quickly to assess and manage the risks and opportunities of changing weather and climate. Upgrading infrastructure or incorporating climate change into capital investments now is often less expensive than doing a retrofit later.³¹ Early adaptation builds skills and technical capacity and positions businesses to better manage future adaptation. The NRT report Paying the Price concludes that small investments in adaptive measures can offset the high costs that unabated climate change can impose on Canada.³²

Investments in managing current business risks from weather, water, and environmental shifts are even more justified in a changing climate. For instance, Suncor Energy’s continued efforts to reduce water withdrawals from the Athabasca River for production³³ not only reduce input costs now also but shelter the business from reduced water availability that could be caused by climate change in the future. Johnson & Johnson’s business continuity plans consider weather risks for all its major global operations. As a result of updating business continuity plans and risk assessments, and implementing adaptive measures, over five years the firm avoided $2.4 billion in expected losses from hurricane damage at its Puerto Rico facilities.³⁴

ADAPTATION DOESN’T NEED
TO BE COMPLEX OR COSTLY.

By integrating climate change alongside other business risks, firms can use existing management systems and procedures like enterprise risk management, business continuity planning, quality assurance, and environmental management systems to efficiently build on their expertise in these areas. In addition, several low-cost and no-cost measures can save businesses money and improve the performance of infrastructure and assets. To deal with rising flood risks, for example, businesses can relocate critical equipment and other property of high financial value to upper floors or higher elevation. Water-efficiency measures are a low-cost response to seasonal water stress. Natural ventilation and shading offer cheap solutions for businesses in cities exposed to extreme heat, with the added benefit of conserving energy.

For Whistler Blackcomb, a ski resort in British Columbia, adapting to climate change is both an environmenal and business necessity. The resort concentrates on inexpensive strategies such as diversifying guest experiences for the off-peak months of May through November by offering nature walks, hiking trails, mountain biking routes. It wants to avoid over-adapting, given that other climate change risk management measures, such as buying and operating snow-making machines, are costly.

IF YOU DON’T ACT,
OTHERS WILL.

A changing climate presents commercial opportunities for businesses,³⁵ such as opportunities to access new markets, develop new technologies and products, and stay ahead of regulation. In a survey of global businesses, 86 per cent described responding to climate change risks or investing in adaptation as a business opportunity.³⁶ Such activities can be a source of competitive advantage — or disadvantage, if a competitor gets there first.

Munich Re, in response to the growing demand for risktransfer solutions to climate change challenges, now offers insurance coverage to solar electric producers. The insurance covers loss of revenue in the event of unusually low sunlight conditions.

The following three sections of this report set out a process to advance adaptation within the business, starting with awareness raising, then assessing and managing risks and opportunities, and ending with building climate resilience across the enterprise.