How can you use climate change risk management to stand out?

I believe people are not really understanding that their own individual actions can impact the general climate change. They are expecting also that government or private companies do the job for them. We all as individuals must care for the environment and we must do our contribution. Little pieces get to big things. The impacts of climate change on different sectors of society are interrelated. Drought can harm food production and human health. Flooding can lead to disease spread and damages to ecosystems and infrastructure. Human health issues can increase mortality, impact food availability, and limit worker productivity. The tourism industry will face severe impact in the coming years as well for the same reasons. We must act now!

I recommend organizations adopt climate risk analysis tools, particularly for assessing physical climate risks. These tools are backed by climate scientists who analyze historical data and projections. Accurate risk identification is essential for effective risk mitigation and the pursuit of opportunities.

Climate change risks can be classified into physical, transition and systemic risks. 1) Physical risks include gradual and acute physical risk. The former include rising temperatures that affect labour and agriculture productivity over time. The latter include extreme weather events that directly damage your assets, disrupt your business operations and supply chains. 2) Transition risks are developments in climate policy (e.g. carbon taxes, ICE vehicle phaseouts etc.) and technology (e.g. renewables, EVs, batteries etc) that alter the way we produce and consume goods and services. 3) Systemic risks are cascading economy or society-wide impacts from climate-induced social conflicts, human migration, and financial instability.

Climate change risks refer to the potential negative consequences resulting from the varying patterns of weather associated with changes in the Earth's climate. These risks encompass a wide range of impacts that can affect ecosystems, human health, economic sectors, and social structures. They stem from increased temperatures, sea level rise, and more frequent and intense weather events such as storms, floods, droughts, and heatwaves. The severity of these risks depends on the rate of climate change, the vulnerability of different populations, and the capacity of societies to adapt to new climatic conditions.

Climate risks can be translated into a financial stability risk, including financial market losses (losses in capital, stocks, bonds, etc.), credit market losses (inability to take loans), operational losses (consumer/sales losses, business disruption, etc.), or even financial losses associated with litigations. This urge companies to embrace climate risks management and sustainable business models. However, keep in mind that climate change does not create only risks for companies, but opportunities as well.

Managing climate risks is essential for long-term sustainability. Environmental and social impact, economic consequences, health and well-being will evolve with climate change. We are increasingly moving towards urbanization for better living. It is irrefutable that urbanization is beneficial for us in many ways, but unplanned urbanization can be detrimental in the long run. We therefore need to take a long-term approach to climate change risk assessment that can drive innovation and create new economic opportunities through sustainable initiatives.

Remember there are no jobs, no customers nor profit on a dying planet. With Climate Change risk comes a new level of complexity: the compounding effects of ecosystemic extreme weather events. Which means even if it may cost more to change the hard stuff today (eg checking the design of your product, ditching your latest diesel powered generator for new biomass-based one) - it will cost you less in the long run than the cost of mitigating climate events impact on your operation. Once you have made this principle a clear part of your strategy, build a compelling narrative to sell this to your shareholders. They need to adopt a long term view if they want the companies they’ve invested in are still in business by the end of the decade

Climate change has drastically changed the definition of business risk. Traditional categories such as legal, market, and security threats must now be expanded to include the impact of climate instability and social erosion. Even earlier disaster risks must now account for increased severity and frequency. These shifts in climate are already affecting businesses. One report from the Federal Reserve Bank of San Francisco found that 37% of surveyed businesses said that climate change has affected their revenue and investments. Businesses need to consider climate a significant risk to every aspect of their business.

For effective mitigation and adaption policies is essential to manage the climate risks. From identification to strategy to prompt action, managing climate change risks is key to ensure business continuity, global decarbonisation and ecological balance.

As climate risk is the first truly overarching systemic risk that the companies and markets are facing, it is important to understand its dynamics, and map out impacts through the business value chain. Based on the assessed impacts, the companies have to redefine their risk management framework to include identified climate risks with sufficient materiality.

Acknowledge the importance of risk management. Engage external consultants to help you with risk assessment, climate risk scoring and implementation plan. Choose your service provider wisely. Identifying, quantifying, and managing climate risk requires a combination of technology and human expert knowledge. Choose a consultant that has both: 1) robust climate modelling solution, including AI, to process vast amounts of data and produce highly granular risk scores across a wide range of climate-related perils, and to calculate climate cost, and 2) sustainability expert that will create a climate risk implementation plan for your company and help you to properly address the risks identified.

Using climate change risk management as a way to stand out can benefit your organization in several ways. Here are some strategies to achieve this- -Integration into Business Strategy -Transparency and Reporting -Proactive Adaptation Strategies -Innovation and Technology -Supply Chain Resilience -Carbon Neutrality and Emission Reduction -Stakeholder Engagement -Training and Awareness -Responsible Marketing and Branding -Collaboration and Partnerships -Regulatory Compliance -Responsible Investment By modifying your business strategy and operations, you contribute to a more sustainable future & position your organization as a forward-thinking and responsible entity in the eyes of stakeholders, and also win the brand loyalty of customers.

Conducting a climate risk assessment is pivotal as the initial stride in crafting a climate change risk management strategy for your business. It entails systematically analyzing climate change impacts across your entire value chain and considering diverse time horizons. This comprehensive evaluation aids in pinpointing vulnerabilities and opportunities for mitigation and adaptation. Utilizing tools and frameworks, such as scenario analysis and vulnerability assessments, facilitates a structured approach to grasping climate risks. Integrating assessment outcomes into existing risk management processes ensures holistic risk consideration.

Let's make it simple: especially for SMEs, the first step is to acknowledge the matter at leadership level and task a person or a committee to make a first A4 report.

When undertaking such an assessment, do not shy away from thinking of cascading effects. This is when an event not only directly impacts a specific system, but can also (in)directly impact tangential/related systems that were not on anyone's radar. This is not unlike the widely shared butterfly effect. These cascading effects will be more and more tangible in their impact while at the same time becoming increasingly unpredictable, especially as one approaches tipping points.

Apart from managing the risk per say, - A more crucial aspect is to asses what opportunities for new services and products have risen. This way, you can move in a direction that reduces risk AND adds to your revenue, by better meeting changing consumer expectations. - At the execution level, do a bottom-up assessment of what might come in the way of implementing your plan. Employee awareness, fading willingness over time, focussing back only on profits and share-holders; all these have to factored in while draing out an implementation plan

All these tech and approaches are of course important, but from my own experience, I can say that it is also important to conduct a powerful communication and educational campaign among employees and explain the meaning and benefits (both economic and environmental) of what you are planning and where the money goes, i.e. when you are in high office, you may miss how your plans clash with the reality of indifference or lack of involvement on the ground.I met division directors who agreed at the board meeting that this was important and later said “Oh well, all investment funds already abandoning this green agenda” or did not allocate funding for new projects. Keep in mind that every business is unique that's why analyze and adopt plans.

The implementation process of any management plan should follow our risk-map identification stage. How are going to execute our actions so they have the desired impact? I could not agree more with the above mentioned "classical categories", however, when it comes to climate risks, I would like to refer to externalities. How your business deal and internalise the positive and negative externalities is a great focus point for a good implementation climate plan.

Implementing a climate change risk management plan involves assessing potential risks, prioritizing based on likelihood and impact, and crafting strategies for resilience. Integration into business processes ensures effective execution, while stakeholder engagement fosters transparency and support. Continuous monitoring and review refine the plan, with capacity building ensuring organizational readiness. Collaboration with partners enhances knowledge sharing and collective resilience. This iterative process fortifies the organization against climate impacts and contributes to broader sustainability efforts.

In going through the process of identifying a vendor to provide support on identifying, assessing, and managing these risks for the past ~12 months there are a number of things I've learned. Firstly, the space has exploded, so don't rush in selecting a platform. Spend time understanding your entity's needs the start with those most pressing. When you do engage with vendors, engage with many, while they may appear to be offering similar solutions, by exploring many you'll quickly find who knows their stuff Vs who's trying to cash in. Finally, one thing to consider is how customized you'd like a platform. They range from 'off-the-shelf' through to fully customised & various incarnations in between, and be weary of black box solutions also.

Engage external consultants and providers while maintaining independence. Clarify your objectives and essential metrics before delegating tasks to external partners. Now there are many people who want to make money on this topic, so your internal expertise and incoming filter control are important so as not to overpay in vain and not to attract the wrong expert. Stay updated as the market evolves, explore relevant digital solutions, and assess your requirements through analizing and testing. In communication/reports create feedback mechanism, prioritize transparency, accountability and avoid complex reports; consider creating simplified versions to reach a broader audience.

Measure, measure and continue measuring. Make sure that your set KPIs are SMART and can be measured, also, that they are are science-based, so they can be translated into the existing management frameworks, such as the GHG protocol, etc.

Managing climate risks isn't just about fulfilling obligations or avoiding negative outcomes; it's also an enormous opportunity to innovation and positive impact. An agreed transparent framework for tracking and reporting progress is essential, but it's equally important to foster a culture of open communication (the real commitment to improvement is more important than eg. the software solution to "officially" track it!) Employees at all levels should feel safe to speak up if they see something off-track, but also to share creative solutions for sustainable solutions. By adopting a transparent approach, you're not just ticking boxes; you're building a resilient, innovative, and future-ready organization.

Monitoring and reviewing performance in climate change risk management necessitates setting clear metrics and key performance indicators for tracking progress and identifying improvement areas. Regular data analysis provides insights into emerging risks, while benchmarking against industry standards and peer organizations allows for comparative evaluation and innovation opportunities. Periodic reviews and stakeholder engagement ensure alignment with expectations and gather valuable feedback for refinement. Scenario planning and stress testing help assess vulnerabilities and inform strategy adjustments, facilitating continuous improvement.

1. Set ambitious emission reduction goals. 2. Transition to renewable energy. 3. Ensure supply chain resilience. 4. Publish transparent sustainability reports. 5. Invest in green innovation. 6. Embrace circular economy principles. 7. Offer eco-friendly products. 8. Implement internal carbon pricing. 9. Foster partnerships and collaboration. 10. Engage employees in sustainability. 11. Explore green financing options. 12. Adapt to climate impacts. 13. Educate customers on sustainability. 14. Stay compliant with climate regulations. 15. Develop climate resilience plans. 16. Join climate initiatives. 17. Cultivate a sustainable culture. 18. Conduct climate scenario analysis.

First and foremost, we need to embrace climate risk and truly seek minimization for long-term sustainability. Climate risk reduction initiatives must be implemented in real terms and not limited to attractive cover-page sustainability reports. We all together need to work for sustainable maintenance of this world, which will foster a serene environment for our subsequent generations.

Leverage climate risk management for business distinction. Climate change threatens both the environment and corporate operations, demanding proactive and holistic risk management. It's vital to understand climate change risks, which encompass potential adverse impacts on your business, from extreme weather events to policy changes. Effective climate risk management can reduce costs, boost resilience, and align with global goals, satisfying legal, ethical, and social expectations. In summary, use climate change risk management to distinguish your business. By understanding, addressing, and monitoring climate risks, you can bolster resilience, enhance credibility, and excel in an evolving business landscape.

The evolution of climate risks, mainly the physical risks, is an ongoing issue that will have tremendous consequences in the global markets. While we cannot predict 100% how these risks will manifest, we are aware that they will surely occur. The real economy must be prepared to cope and respond to these risks, and there is no better way to do it that with a proper climate risk management plan.

Stand out? Is contributing to a habitable biosphere something that we should stand out for? Or does this have to become part of our everyday patterning? Clearly it's the latter. Given this, I'd suggest that 'standing out' is the wrong teleology (purpose, goal etc.). Instead, figure out how you can meaningfully contribute. Demonstrate how others can join you. Make that shared process slightly easier each and every day until it becomes a core part of who you are. Once we no longer stand out for doing this we might well be making progress.