Climate Change Adaptation: Building the Business Case

1. University of Oregon Sustainability Leadership Taught by Ann Radil on June 24, 2013 Climate Change Adaptation: Building the Business Case

2. Who are you? What are you hoping to gain by taking this course? Introductions

3. Course Overview • Module 1: Introduction and Background • Module 2: Why Climate Change is Important to Business • Module 3: Building Support for Adaptation and Developing the Business Case • Module 4: Getting Involved

4. Module 1: Introduction and Background

5. Introduction • There’s a need for a new awareness when it comes to assessing and planning for the changing climate. • This class provides a context and presents recommendations for building the business case for climate change adaptation.

6. Key Principles in Building Your Business Case • In many cases, the Business Case for climate change is not straightforward and can be challenging, esp. in determining longer-term impacts and considering uncertainties. • However, progress has been achieved and common considerations or learning points have been identified.

7. Guidance (1 of 2) • Understand your business • Engage wisely across your business: build awareness, seek interest and share the challenge. • Don’t reinvent the wheel: leverage existing guidance and use existing decision making opportunities. • “Piggy back” on other projects and developments.

8. Guidance (2 of 2) • Use recent and future weather impacts as an early opportunity for business response. • Consider opportunities and dependencies, including competitive advantage from increased resilience to extreme weather and climate and decreased dependencies on increasingly scarce resources. • Look for ‘early mover’ opportunities; don’t underestimate the importance of making a start.

9. Terms and Language (1 of 3) • Global warming refers to the recent and ongoing rise in global average temperature near Earth's surface. It is caused mostly by increasing concentrations of GHGs in the atmosphere. Global warming is causing climate patterns to change. However, global warming itself represents only one aspect of climate change. • Climate change refers to any significant change in the measures of climate lasting for an extended period of time. In other words, climate change includes major changes in temperature, precipitation, or wind patterns, among other effects, that occur over several decades or longer.

10. Terms and Language (2 of 3) • Adaptation: Adjustments in natural or human systems (including businesses) in response to actual or expected climatic stimuli or their effects, which moderates harm or exploits beneficial opportunitie (IEMA). • Resilience: Ability of a system and its component part to anticipate, absorb, accommodate or recover from the effects of a hazardous event in a timely and efficient manner, including through ensuring the preservation, restoration or improvement of its essential basic structures and functions (IEMA).

11. Terms and Language (3 of 3) • Dependency: Environmental Dependency is a term that can be applied to a company's operation and activities (direct or indirect) which are significantly dependent upon the state of the environment and the services it is providing (including weather and systems; IEMA). • Mitigation: Anthropogenic interventions that can either reduce the sources of GHG emissions (abatement) or enhance their sinks (sequestration; UNFCC).

12. Source: IPCC Climate Change 2007 Synthesis Report

13. Corporate Dependency on Environment and Climate • Corporate approaches to environment are changing with increased understanding of business critical dependencies. • The business imperative to reduce environmental impact is accompanied by an appreciation of the direct economic value of the natural environment and our need for resilience to the changing climate.

14. Old Business Paradigm Source: Institute for Sustainable Infrastructure

15. Alternative Business Paradigm Source: Institute for Sustainable Infrastructure

16. New Business Paradigm Source: Institute for Sustainable Infrastructure

17. Working Towards the Five Capitals Model • Business concerns arise over supplies of economically critical resources such as water, energy and other raw materials. • While formerly seen from a cost perspective, perhaps considering social impacts, today awareness of vulnerabilities to climate and extreme weather overlay these concerns.

18. Knowledge and Skill Framework • There’s a critically important climate change adaptation role for environment and sustainability professionals in helping businesses understand the impacts and develop strategic responses. • We’ll now review the IEMA Skills Map, which provides a framework for knowledge and skills needed to deliver progress on climate change adaptation.

19. Critical Competencies (1 of 2) • Environmental and sustainability principles - understand environmental processes and limits an their impacts on the sustainability of organizations. • Managing business resilience – identify strategic opportunities and risks to improve business reliance. • Sustainable practice – understand how to make the business case for sustainable projects and lead initiatives that improve the triple bottom line.

20. Critical Competencies (2 of 2) • Lead change – lead a process of change management overcoming barriers. • Influence behavior – educate, influence, persuade and challenge others to lead and promote sustainability. • Communication – measure and report key metrics, milestones and progress to respond to stakeholder needs.

21. Where does climate change intersect business? • Organizational management • Supply chains and procurement • Sales • Service delivery • Product design • Risk management • Business continuity • Health and safety • Human resources • Facilities and operations • Finance • Marketing

22. Questions?

23. Module 2: Why climate change adaptation is important to businesses

24. Introduction to Module 2 • Climate change is widely accepted as a scientific reality and increasingly as a material business consideration. • Scientific consensus and projections are overwhelming and a step change is needed to meet emission reduction targets (mitigation). • See “Climate Change Science” presentation on course website for additional information.

25. Business Context for Mitigation • The focus has moved to business realties such as: • Reducing energy costs • Complying with climate legislationImproving performance • Increasing business resilience • Building corporate reputation • Meeting contractual and stakeholder expectations

26. Don’t Recreate the Wheel • Significant work has been undertaken for categorizing and considering business relevant climate change risks and opportunities.

27. Background on Climate Change Risk and Opportunity (1 of 2) • UKCIP has identified six categories for the impacts of weather and climate on businesses: • Changing markets – impacts on demand for goods and services (can also be positive) • Business logistics – disruption to supply chains, utilities and transport • Business premises – impacts on buildings and sites

28. The conditions and constraints under which infrastructure must perform are increasingly challenging.

29. Source: Envsion, OSU: “An Analysis Framework for Policy-Drive Alternative Futures Analyses”

30. Background on Climate Change Risk and Opportunity (2 of 2) • People – impacts on employees and customers (heat, cold, extreme weather) • Industrial processes – especially if temperature and weather sensitive • Company finances – losses through disruption, insurance costs, etc. • Videos • http://www.youtube.com/watch?v=5vfCAt52NnU • http://www.juancole.com/2013/03/disrupts-industry-interview.html

31. Risk • Further approach uses the concept of direct and indirect risk. • First, what is risk? • Chinese symbol of risk is a combination of danger (crisis) and opportunity (downside and upside of risk) Source: Aswath Damodaran, Stern School of Business, NYU

32. Direct Risk • Direct risk impacts can be seen as: • Damage to physical assets • Disruption to business from extreme weather • Water scarcity as a direct resource • Unsafe weather conditions for staff working outdoors, etc.

33. Indirect Risk • Indirect risks include: • Disruptions of supply chains • Rising insurance costs, etc.

34. ‘Risk Disk’ Source: “Adapting to Climate Change: A Business Approach” - Pew Center on Global Climate Change

35. Risks Resulting from Climate Change Across Key Economic Sectors Source: “Adapting to Climate Change: A Business Approach” - Pew Center on Global Climate Change

36. Risks Resulting from Climate Change Across Key Economic Sectors

37. Climate Change Vulnerability Evaluation • Risk combined with actions taken (or not taken) to adapt yields a net vulnerability of the business to the physical effects of climate change Probability of exposure to physical effects of climate change Potential impacts on business arising from exposure Risk of adverse outcomes Manage Transfer Mitigate Avoid Accept RISK Source: “Adapting to Climate Change: A Business Approach” Pew Center on Global Climate Change Net vulnerability to climate change

38. Competitive/Comparative Advantage Source: “Sustainability-MTR Corporation Limited

41. Questions?

42. Module 3: building support for adaptation

43. Introduction • The purpose of Module 3 is to provide guidance on building support and making progress on decision making.

44. Understand Your Company • Have a clear understanding of your company’s approach to risk, decision making and the environment (as well as the overall approach to business, central values and core business). • You must be able to make the clear the business relevance to key decision makers. • Practitioners identify that knowledge of how your business functions, drivers, challenges, barriers is at least as important as knowledge on climate change projections.

45. Understand Change Management • Understanding the company’s approach to change is also important in planning any business case or new approach on adaptation.

46. Planning for Climate Change Adaptation • Practitioners who have advanced adaptation business cases are clear about the importance of initial planning. • Key approaches and learning points include: • Understand your company (culture and approach) • Understand (or define) you role and remit on climate change adaptation. • Identifying climate risks and opportunities for your business. • Mapping internal stakeholders and decision making.