• Tue. Apr 23rd, 2024

How climate adaptation can both protect and grow your business

Three actions that can make your company more climate-resilient

As we’ve seen, piggybacking on established capabilities will move your organization ahead in its climate adaptation journey. Putting in place measures to manage climate risk is just the starting point. Companies can also seek opportunities to create value, though they will also want to take care not to inadvertently cause problems. Here are three moves to consider as you work on climate adaptation.

1. Align adaptation and decarbonization for co-benefits

Integrating your company’s climate adaptation efforts with your net-zero program can yield significant advantages. An example is the practice of agroforestry, which coffee companies like Nespresso and Starbucks have embraced. This is an affordable land management system of planting trees on the same land as crops and livestock pastureland, resulting in significant ecological and economic advantages. In simple terms, agroforestry reduces or removes GHGs through increased carbon storage, mitigating climate change. But it has adaptive benefits too, like improving water retention and enhancing soil diversity and land use efficiency.

Similarly, co-benefits can be realized by improving the energy efficiency of buildings, whose operations account for up to 60% of urban emissions. Not only does energy-saving retrofitting support decarbonization and lower running costs, but it also increases resilience in the event of extreme heat (because of better insulation) and droughts (because of water efficiency).

As you set out to build an adaptation strategy, start by taking stock of your climate-related vulnerabilities—including infrastructure, operations, and supply chain exposure—and associated risks. Then, as you’re coming up with plans to protect assets and processes, you can look for solutions that help reduce emissions as well.

2. Recognize trade-offs and unintended consequences

“Mainstreaming” adaptation into business decision-making is key. This practice does involve grappling with complex trade-offs, considering the significant future costs that a company may incur by not factoring climate risk into its current thinking.

An agricultural business, for example, might have to make a choice between putting in place climate-resilient processes (like adaptive farming practices) and acquiring more climate- resilient assets (such as farmland in a location that is less exposed to climate risk). Arriving at the right answer may involve calculating extended financial costs and benefits, such as avoided losses and damage, while making a decision regarding the returns on an investment.

Companies will also want to watch out for short-term solutions that come with unintended consequences for the organization and its stakeholders.

Consider a food, agriculture, and forest products business that has seen its crop yield reduced by frequent climate shocks in a certain location. To that company, it may seem sensible in the short term to pull out of that area and go elsewhere. But such a move could trigger additional costs and disruptions for the business and its workforce while weakening the local economy. By addressing the issue instead with the use of more resilient crops, weather data systems, and new seed varieties, the company might find it can continue creating value in the same community and strengthen the natural ecosystem that the company depends on.

3. Use tech to zero in on both climate risks and opportunities

Certain technologies may be particularly well suited to supporting adaptation strategy. Early warning systems, mentioned earlier, are one example. At COP27 in 2022, the United Nations’ “Early Warnings for All” initiative unveiled a plan to use EWS to help protect every person on the planet against extreme weather events within five years. Various companies, including technology firms, are collaborating with the World Meteorological Organization on this initiative.

Weather and climate prediction startups are, in fact, already scaling up innovative weather prediction platforms. By applying artificial intelligence (AI) and machine learning (ML) to satellite and radar data, they can support organizations in better preparing for extreme weather events, and in growing their businesses.

One weather prediction tool, from climate analytics startup Terrafuse AI, uses AI and ML to forecast the probability of wildfires for any given location; historical fire data, real-time satellite observations, and existing physical simulations inform this model. Insurance companies can use the tool to help base insurance prices on actual risk and to mitigate wildfire risks in their portfolios.

Another technological solution, digital twins, provides organizations with data-rich digital versions of real-world systems, territories, objects, or processes that give users insights into performance under different conditions and helps them simulate and plan for different situations. As part of a European Commission initiative, Destination Earth, a digital twin of the planet, is using data from real-time observations and simulations to determine the effects of climate change–related extreme weather events and inform adaptation and related strategies.

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