Recent years have seen a step-change in how business understands climate change; more than just an environmental concern, climate change has now become an existential threat.
“The focus on environmental risks like those featured in the King reports many years ago, has evolved to include environmental, social and governance (ESG) issues and climate change,” said Philippa Burmeister, principal environmental scientist at SRK Consulting. “While policy and regulation have tended to drive progress in this field, climate change is now increasingly recognised as a strategic risk to business survival.”
Many businesses are therefore moving proactively to find solutions to climate change impacts, well ahead of regulators’ efforts to guide and enforce action. Burmeister argued that a constructive approach needs to prioritise business resilience to climate-related trends and risks.
“Climate change has become a significant risk that must be managed,” she said. “The sustainability of businesses is becoming increasingly reliant on how well they succeed in doing this.”
One of the challenges is that business is still discovering the sheer breadth of these impacts, and in what ways they affect operations, according to Ashleigh Maritz, principal environmental scientist at SRK Consulting. The process of identifying risks is still developing – whether these relate to the business itself or its upstream and downstream stakeholders.
“A climate change impact assessment (CCIA) is therefore quite different from a traditional environmental and social impact assessment (ESIA),” said Maritz. “An ESIA considers mainly the effect of a project on its immediate and broader environment; conversely, a CCIA is more about understanding the environment’s current and forecasted effects on the business and its stakeholders and formulating practical responses that will build resilience to risks identified.”
She highlighted that response strategies need to include the early stages of becoming resilient, the maintenance of that resilience in the medium term, and then sustaining that resilience through building a future proof approach – where a much-changed world awaits.
Building business resilience rests strongly on adaptive management, which emphasises ongoing and in-depth monitoring of factors that have potential to destabilise operations. According to Lisl Pullinger, principal ESG consultant at SRK Consulting, heightened uncertainty makes such monitoring vital.
“In the past, we could rely on historical rainfall records to provide predictions for the scaling of infrastructure, for instance,” said Pullinger. “Now we must model future scenarios in real time, based on how conditions are changing.”
She noted that it is not enough just to collect data; it must also be regularly analysed and interpreted to inform decision-making and decisive action at a strategic level.
“To sustain resilience into the future, business needs to move beyond silo-thinking – to ensure that company functions do not operate as stand-alone pillars,” she said. “Rather, climate change impacts will extend across traditional disciplines and departments, from community dynamics and employee wellness to optimising water and energy resources.”
Effective resilience to climate change will mean integrating companies’ responses to the various impacts. The pinch is already being felt as businesses seek finance for their projects, as financiers have been among the first to recognise how climate change puts their investments at risk.
“Many of these key stakeholders now ask clients to respond to climate change risks in their project planning and execution,” she said. “Finance therefore now comes with strings attached – which demand that borrowers essentially build their climate change resilience into project scoping and design.”