The climate action reporting requirements centred on climate risk disclosure, included in the federal Large Employer Emergency Financing Facility, may seem daunting. Climate change presents risks and opportunities, the likes of which most businesses have never experienced. However, the fundamentals of risk management still apply.
Climate risk should be treated similarly to other systemic and evolving business risks, through a dedicated climate risk management plan integrating existing risk plans, procedures, protocols, and tools. A transparent plan accounting for climate hazards, vulnerabilities, and risks, provides a foundation from which climate risks can be managed. As well as accounting for climate risks and opportunities not limited to their physical impacts. Such a plan also accounts for transitional risks and opportunities of decarbonization related to regulations, reporting, technology, markets, and reputation.
Climate risks can rarely be removed, so must be controlled through mitigation and retention measures. What is required to effectively integrate climate risk into existing business practices?
- Governance & Leadership. Developing governance structures which recognize that as much as grassroots and staff initiatives cannot be discounted, senior and executive leadership are imperative. The extent to which climate risk extends into all aspects of business requires a response that is linked and integrated.
- Targets and Goals. Clearly establishing a management framework that will foster the desired business outcomes through better climate risk management and opportunity maximization. Making sure instructive and insightful (leading and trailing) performance indicators are provided is important to evaluate targets and goals.
- Scenarios and Planning. Recognizing that the future is without precedent and characterized by radical uncertainty, developing sound evidence-based tools and techniques to adapt to and manage the uncertainty across a range of possible future climate scenarios.
- Response Planning. Developing appropriate and relevant responses to climate risks and opportunities that are based on scenario planning. Developing actions that are strongly linked to well-defined risk thresholds and levels of service, and are reflecting corporate sustainability priorities.
- Agility. Successfully responding to climate risk must be an inherently agile process. The rate of variation in climate change related risks and opportunities cannot be managed through static frameworks. Developing and implementing mechanisms to monitor, validate, and evaluate lessons quickly is key to determining subsequent actions that can minimize climate risk and maximize opportunity exploitation.
For more information or assistance, please contact us to speak to our advisors in sustainable management and climate science.