Climate change removes the option of business as usual, and presents the challenge of change to all types of organizations. Action on climate change, resulting from international agreements, is creating not only the necessity of change but also dramatic opportunities.
The implications of the Paris Climate Agreement on the way we do business are profound, daunting and exciting. Once implementation of the Paris Agreement sets in, it will bring deep changes to the framework within which businesses operate, and the choices open to both companies and their customers.
In a recent publication on climate change and poverty, the World Bank states: "The goal of maintaining climate change below a 2°C increase in global temperature above preindustrial levels—the very goal the international community has committed to—will require deep structural changes in the world economy" *
Debate within the finance and insurance sectors is now focusing on the issue of proper assessment of carbon-intensive assets and the risks of climate change. Leaders are asking how investment managers and insurers can demonstrate due diligence over predicted impact of climate change on operations, the cost of adapting to the new conditions and new laws, and what liabilities arise from losses incurred by others as a result of a business failure to respond to the known facts about climate change.
Governor of the Bank of England Mark Carney, in his role as Chair of the Financial Stability Board, has set up a Task Force on Climate-Related Financial Disclosures, which is chaired by Michael Bloomberg and will submit findings by the end of 2016.
It is in the interest of all business to face this emerging challenge head on. Risk management and fiscal responsibility justify climate smart strategies alone. To these can be added the change management benefits presented by early adaptation, green business opportunities, and unpredictable brand threats and social license challenges. This includes the avoidance of expensive last-minute catch up as low-carbon legislation tightens up.
Insightful business leaders have an essential role in helping governments navigate the challenges ahead in a way that achieves real results and which enables business to apply their skills and resources to meet the challenges.
Working for a zero-carbon future is the only serious survival strategy for the business sector in the face of all the evidence. Laggard companies will grudgingly adapt at great, sometimes fatal, cost.
In short, company boards and management has to become climate-competent, and time is running out.
* World Bank Group (2016) : Shock Waves: Managing the impacts of climate change on poverty. International Bank for Reconstruction and Development / World Bank. Washington 2016