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Transcript of Business Adaptation to Climate Change A systematic review of the body of research Prepared by: David...
Business Adaptation to Climate Change
A systematic review of the
body of research
Prepared by: David NitkinRyan Foster
Jacqueline Medalye
Table of Contents
Section Pages
Study background 3-8
State and shape of the literature 9-17
Key findings 18-23
Risks, opportunities, and barriers 24-34
Leaders and laggards 35-38
What you can do 39-48
Future work 49-53
Sector strategies 54-80
STUDY BACKGROUND
Study Background: Guiding questions
• Are businesses incorporating climate change into their business models and strategies? If so, how? And are do differences exist across business units, in terms of risks, opportunities, processes, and outcomes?
• Are certain sectors ahead of others? If yes, what drivers account for these differences, and what lessons can leading industries offer the laggards?
• What tools and processes do businesses use to evaluate the opportunities to be gained from adapting to climate change? Are there any examples of businesses creating a competitive advantage by building adaptive capacity?
Study Background: Methods
• Systematic review (i.e., comprehensive, transparent search) of academic, practical, and teaching related sites (e.g. ABI Inform, Google, ECCH case studies)
• The universe of 2,455 eligible studies were culled to 201, based on relevance and uniqueness
• The 201 studies were rated and categorized by 2 PhD students
• Questions– What do we know?– What don’t we know?– What are the stakes?– How to be a leader?
Study Background: Definition of Adaptation
“Adjustments in natural or human systems in response to actual or expected climate stimuli
and their effects or impacts
which moderates harm or exploits opportunities”
-IPCC Third Assessment Report
MITIGATION• Cut GHG emissions• Long term• Global • Causes focus• Regulation• Compliance themes• Public good
ADAPTATION• Change practices• Short term• Regional/ local• Consequences focus• Voluntary• Leadership language • Business, individual
Study Background: Adaptation vs. Mitigation
MITIGATION• Indirect benefits to
actor• All systems• Benefits not seen for
decades• Effectiveness more
certain• Sometimes ancillary
benefits• Monitoring relatively
easy
ADAPTATION• Direct benefits to actor• Selected systems• Benefits seen more
immediately• Effectiveness less
certain• Mostly ancillary
benefits
• Monitoring more difficult
Study Background: Adaptation vs. Mitigation
STATE AND SHAPE OF LITERATURE
Literature: Status
• Search key words 2,400 candidates• Sensitivity, vulnerability, resilience, adaptative
capacity, risk, opportunity• Identified and reviewed 201 studies• New language (climate proofing, climate
resiliency, processes of co-adaptation)
Literature: Types
• Academic– Journal articles
• Government, International Organizations– Educational organizations– Climate change leadership councils (Pew,
Tyndall)• Practitioner Literature
– Insurance, reinsurance, finance company reports
– Carbon Disclosure Project; Industry Referrals
Literature: Number of studies by source type
Journal, Peer Review 66 Consortium/ NGO/ Think Tank 28
Journal, Secondary 23 Newspaper, Magazine 25
Industry Report 7 Referred Study 17
Government report 7 Web-Site 10
Internal organization 5 Other 13
Literature: Findings by Sector (sectors with more than 5 studies)
Insurance 35 Finance 7
Agriculture 23 Mining 5
Tourism & Recreation 20 Forestry 4
Energy 13 Oil & Gas 4
Water 12 Infrastructure 3
Construction 10 Transport 3
Literature: Findings by Sector (sectors with fewer than 5 studies)
Food & beverage 3 Chemicals 1
Electricity 2 Manufacturing 1
Airlines 2 Fishing 0
Information technology 2 Retail 0
Automotive 2 Real estate 0
Coal 1 Media 0
Literature: Content Analysis
Topic # studies
Case studies, lessons learned 32
Tools for business 18
Risk frameworks screening 9
Scenarios 5
Decision Trees 2
Literature: Focus on Academic Literature
• Sector level• Approach adaptative cognition and action• Closely linked to IPCC assessments• Avoid definitions in abstract in favour of
operationalizing the concept through– Theoretical construct– Empirical studies
Literature: Limitations of the Literature
• English language only (there are other language sources, notably German)
• Available on web• Reports, case studies and articles that are web
accessible• Articles or web sites, not books or book
chapters
KEY FINDINGS
Findings: Literature
• We are in early stage of “early adapter” literature: citations in last ten years
• Not many sectors have heavy coverage (more than 10 case studies) in literature
• Not many companies have a well told story in literature on adaptation
• Some adaptation literature is really adaptation to mitigation challenges
Findings: Management
• Important to add climate change risk and vulnerability analysis to decision-making
• Place to start is to define risk because climate change has many indirect
• Rationale based on traditional economics: save money, reduce risk, increase energy efficiency, minimize waste
Findings: Action
• One size or answer doesn’t fit all• What’s right for one company may not readily
“work” for another (management, geography, business strategy)
• Not all businesses need to take action now, but most need to ensure decision-making includes a good vulnerability analysis (property damage, business disruption)
Findings: Value of Literature
• Possibilities of collaboration• Organizational adaptation is individual and
direct response• Mitigation not enough: curb GHGs too late to
prevent significant warming• Some businesses, managers confuse weather
(daily) and climate (long term)
Findings: Climate Change
• Requires diligence in looking not only at extreme events (flooding, hurricanes, drought) but also at – greater intensity of extremism– Significant uncertainties
• May lead to technical change for some sectors and not others
• When it does, it can either enhance or badly hurt (destroy) a company
RISKS, OPPORTUNITIES & BARRIERS
Risks & Opportunities: Landscape
• Risks are tangible and real– Canada highest country risk– Africa highest vulnerability– Mitigation may not be enough
• Opportunities are dramatic– Prosper not just survive– Positive cost-benefits
Risks & Opportunities: Types of Climate Change Risk
Market Changing consumer behaviour
Operations Increasing operational, infrastructure costs
Reputation Being perceived as a laggard
Counterparty Bankrupted suppliers
Political/Legal New regulations, lawsuits
Business/Competitive
Uncertain costs, deferred decisions
Risks & Opportunities: Scientific Status Climate Change
• Scientific community has accepted that (a) climate change is happening; (b) that it is largely man-made; and (c) it will have significant effects (IPCC 2007, Stern 2006, Source 178)
• Increase risk drought, desertification, melting ice, flooding, intense hurricane activity
Risks & Opportunities: Opportunities
• The business sourced literature puts an especial emphasis on business opportunities
• Mitigation and adaptation are co-dependent but different contexts of climate change
• Actions involve shorter term adaptation (decreasing unavoidable damages) together with longer term mitigation can reduce risk
Risks & Opportunities: Forms of Adaptation
• Bearing the cost• Preventing losses• Sharing or spreading losses through insurance• Changing the activity (for example, making ski
resorts four season facilities)• Changing the location of activities• Enhancing the adaptive capacity of
ecosystems to be more resilient.
Source: Natural Resources Canada
Risks & Opportunities: Types of Adaptation
• Intent: timing relative to climate change (proactive, reactive)
• Temporal (short-term, long-term)• Spatial (local, regional)
Risks & Opportunities: Barriers to Adaptation
• Lack vision• Lack regulation• Lack leadership• Lack long term sector specific climate change
data• Poor pricing certain resources (water)
Risks & Opportunities: Findings on Vulnerability (1)
• Degree to which system is susceptible to and unable to cope with adverse effects of climate change
• Three factors affect vulnerability: – Nature of climate change to which exposed– Climate sensitivity of system– Capacity of system to adapt (IPPCC, p 21)
Risks & Opportunities: Findings on Vulnerability (2)
• Businesses likely affected by– Climate change itself– Exposures: regulatory, physical, competitive and
reputational• While climate change may well be a slow-moving
force, relative to terrorism or hurricane, asset prices will on occasion move sharply when – new evidence reaches the market– policies are changed.
Source: Lehman Brothers
Risks & Opportunities: Time Scales and Forecast
• Short: 3-12 months, typical biz, long range hurricane; info on coming season, year
• Medium: 5-10 yrs, longest biz can consider• Long: 10-100 yrs; pension fund, nuclear
generation or waste; limited climate data
Source: Med Office Consult
LEADERS AND LAGGARDS
Leaders and Laggards: High Resources Dependence
High Level of Coverage
Moderate Level of Coverage
Low Case Study Coverage
Agriculture Fishing ChemicalsEnergy Forestry ElectronicsTransport Industrial products Pharmaceuticals
Leaders and Laggards: Long Planning Horizons
High Level of Coverage
Moderate Level of Coverage
Low Case Study Coverage
Energy Automotive Real estateTransport Health Waste-Nuclear
Mining
Leaders and Laggards: Already Affected by Climate
High Level of Coverage
Moderate Level of Coverage
Low Case Study Coverage
Agriculture Fishing Food and beverageTourism & Recreation
Forestry Pharmaceuticals
Insurance Health Real estate
WHAT YOU CAN DO
What You Can Do: Strategies (1)
• Rethink business strategy: look into pure adaptation
• Prepare for the worst: contingency planning• Cut green exposure/taxes; really mitigation• Determine if there is any/no risk• Develop climate resilience strategy with co-
dependent mitigation, adaptation actions
What you can do: Strategies (2)
Manage Bear the costTransfer Share or spread losses through insuranceAvoid Prevent lossesAdjust Change nature activities, businessAdapt Enhance adaptive capacityAnticipate Invest in acquiring better info
Risk + opportunity= Adapt initiative
What you can do: Adaptation Pyramid
What you can do: Lessons from Insurance
• Pricing and capital markets are deficient and lacking
• Extreme windstorm events will increase in particular with major impact on businesses and insurers
• Climate change will have great impact on asset values: more important to price risk accordingly
• Not addressing these issues will bring lawsuits from shareholders, investors and clients
• UNEP: critical to adopt vigorous adaptation measures even as we strive to cut emissions because even with aggressive mitigation– can’t avoid further warming– benefits of mitigation not seen before 2040– ocean’s at least 0.6 degrees warmer due to inertia,
whatever we do• Key is to realize “triple dividend”
– Need integrate and/or synergize sustainable development, risk management and adaptation.
– This will integrate adaptation policies with sustainable development policies and disaster management.
What You Can Do: Why Mitigation is Not Enough
What you can do: The wait-and-see option
• Wait See Approach Predominates• North American Task Force FI, UNDP study of
costs of waiting by time periods• Wait and see is folly as issue is inescapable
carbon footprint responsibilities: it’s the market curve, not the regulatory curve; it’s a business imperative, not an environmental one
What you can do: Proactive and Reactive Matrix
Monitor
Follow
Lead
React Act
Wait for gov’t regulations
Adapt
Do risk analysis
What you can do: Collaborations (1)
• Industry collaborations– Insurance
• Academic/industry centres– Pew Centre– Tyndall Centre– Intergovernmental Panel on Climate Change
What you can do: Collaborations (2)
• Institutional networks or shared action-study mechanisms– Carbon Disclosure Project– Equator Principles– UNEP Financial Initiative– CERES– Investor Network on Climate Risk (INCR)– Institutional Investors Group on Climate Change
FUTURE WORK
Gaps in Knowledge: Literature
•Lack of consensus surrounding meaning of business adaptation•“early” literature: Not often literature address risks, opportunities and adaptation at firm level•Rarely reveal insights not only of actions •taken and why but also what action alternatives not taken, or why
Gaps in Knowledge: Decision Making
• Uncertainty re: statistically significant variations – climate change risk by region– Perceptions of climate change risk
• Actual risk exposure for each sector by country
• Lack empirical data carbon emissions/risk measure for each plant, office
• Lack transparency firm level opportunities analysis
Gaps in Knowledge: Meteorology
• Near absence projections beyond 2012• Weather and climate info needed across a
range of time scales• Need know impacts climate change on water,
weather, food, health and ecosystems at temperature increases 1 to 5 degrees
Gaps in Knowledge: Future Research Agenda
• Research collaboration– Industry associations– Multi-stakeholder networks– Academic-practitioner collaborations
• Assess efficacy various decision-making models
• Climate change scenarios– Disaggregate, sectoral
SECTOR STRATEGIES
Sector Strategies: Agriculture (1)
ADAPTATIONINITIATIVE
BUILDRESILIENCE
DECREASE VULNERABILITY
Drought and flood resistant seeds
New heat-tolerant goats
Invest in women as seed keepers
Irrigation, drip systems
New heartier crop strains
Exterminate cattle ticks
Cold tolerant plant species
On-farm genetic diversity banks
Water conservation
Challenge: drought in Africa
Sector Strategies: Agriculture (2)
ADAPTATIONINITIATIVE
BUILDRESILIENCE
DECREASE VULNERABILITY
New irrigation trading rights
Biodiversity conservation
Adopt plumbing fixtures
Fertilize oceans with iron (reduce CO2)
Revegetation for carbon sequestration
Grow more resilient crops
Use biofuels Improve rangeland management
Relocate activities
Challenge: increased incidence weather extremes
Sector Strategies: Automotive Sector
ADAPTATIONINITIATIVE
BUILDRESILIENCE
DECREASE VULNERABILITY
Set emission targets Design, use more carbon efficient raw materials
Design lower emission products
Build hybrids, more fuel efficient vehicles
Measure carbon footprint (total and plant basis)
Assess which types adaptation will increase GHG
Sector Strategies: Building and Construction (1)
ADAPTATIONINITIATIVE
BUILDRESILIENCE
DECREASE VULNERABILITY
Redesign roofs and windows
New product, materials, markets
Flood prevention equipment
Modular systems Invest in better water treatment
Watertight storage
Design for safer living
Larger drain pipes Measure carbon footprint
Challenge: high tides and storm surges
Sector Strategies: Building and Construction (2)
ADAPTATIONINITIATIVE
BUILDRESILIENCE
DECREASE VULNERABILITY
Redesign roofs and windows
Increase use local power supply
Better water storage
Modular systems Prefabrication Move offices
Better emergency planning
Better drainage(material, sewers)
Improve insurance coverage
Challenge: droughts, less water
Sector Strategies: Chemicals
ADAPTATIONINITIATIVE
BUILDRESILIENCE
DECREASE VULNERABILITY
New agricultural, health products
“No till” farming herbicides
Exit some businesses based on carbon emission grounds
Assess, invest in biotechnology
Use less carbon intensive fuels
Better insulation, energy efficiencyReuse heat from manufacturing
Sector Strategies: Electric Utilities
ADAPTATIONINITIATIVE
BUILDRESILIENCE
DECREASE VULNERABILITY
Catastrophic event bonds
Reduce water for cooling
Reduce air travel
Zero air and water emission plants
Reconfigure data centre
Reduce carbon emissions through supply chain
Reuse heat to make electricity
Sector Strategies: Energy (1)
ADAPTATIONINITIATIVE
BUILDRESILIENCE
DECREASE VULNERABILITY
Water acquisition strategy
Contingency planning
Cut carbon exposure
New exploration fields, locations
Low impact vehicles Report carbon emissions
Set CO2 output targets
Drill ships Deep injection water to recover oil
Challenge: lower water levels, less water
Sector Strategies: Energy (2)
ADAPTATIONINITIATIVE
BUILDRESILIENCE
DECREASE VULNERABILITY
Diversify location critical functions
Pollution to reflect sunlight
Run wires into stations at roof level
Reflect sunlight back into space
More generation from renewables
Recycle CO2 into fuel (hydrogen)
Target outage reduction timing
Tougher anchor platform specs
Relocate vulnerable operations
Challenge: extreme events, melting permafrost
Sector Strategies: Finance
ADAPTATIONINITIATIVE
BUILDRESILIENCE
DECREASE VULNERABILITY
Facilitate emission trading markets
Catastrophic events bonds
Measure carbon footprint
Invest in clean power, renewables
Weather derivatives Energy efficient lighting, sensors
Climate change investment fund
Conservation throughout operation
Sector Strategies: Fisheries
ADAPTATIONINITIATIVE
BUILDRESILIENCE
DECREASE VULNERABILITY
Fish farming Diversify into other species
Build better climate models
Conservation
Challenge: more severe floods, droughts, storms, spread of disease
Sector Strategies: Food and Tobacco
ADAPTATIONINITIATIVE
BUILDRESILIENCE
DECREASE VULNERABILITY
Set water use targets
Seed research Abandon storage facilities in hot climates
Invest in sustainable agriculture
Investment in water management
Measure carbon footprint
Use more resistant seeds
Educate supply chain
Sector Strategies: Forestry
ADAPTATIONINITIATIVE
BUILDRESILIENCE
DECREASE VULNERABILITY
Plant climate resistant species
Process dead trees Community reforestation
New reforestation partner strategies
Plant forests to sequester CO2
Increase urban (waste) sources
Convert wood damaged by pine beetle to biofuel
Plant trees reduce urban heat islands
Sector Strategies: Health
ADAPTATIONINITIATIVE
BUILDRESILIENCE
DECREASE VULNERABILITY
Invest in water treatment and storage
Introduce climate resilient seeds, food varieties
Increase mangrove swamps (hurricane protection)
Better emergency management
Social protection Disaster responses foe epidemicsPest management
Sector Strategies: Industrial Products
ADAPTATIONINITIATIVE
BUILDRESILIENCE
DECREASE VULNERABILITY
Rainforest skin: analyze carbon sequestration
More sophisticated thermostats
Telecom substitute for travel
Set carbon footprint targets
Design products made from carbon-efficient materials
Reduce carbon emissions through supply chain
Design products that consume less energy
Sector Strategies: Insurance (1)
ADAPTATIONINITIATIVE
BUILDRESILIENCE
DECREASE VULNERABILITY
Public-private partnerships
Association networking
Manage supply chain expectations
Finance low carbon technology
Innovative financing Invest in GHG credits
Weather derivatives Client risk education Enhance design standards
Challenge: increased incidence of catastrophic losses
Sector Strategies: Insurance (2)
ADAPTATIONINITIATIVE
BUILDRESILIENCE
DECREASE VULNERABILITY
Reduce reliance on historical losses info
New insurance products, underwriting procedures
Increase attention water-related property damage
Corporate responsibility partnerships
Better predictive models of climate change
Support carbon footprint disclosure
Catastrophic event bonds
Customized insurance policies
Protect high value property in vulnerable areas
Challenge: increased natural catastrophe exposure
Sector Strategies: Mining and Metals
ADAPTATIONINITIATIVE
BUILDRESILIENCE
DECREASE VULNERABILITY
Sturdier buildings, machinery
Close loop operations systems
Increase maintenance of rail, roads
Emphasize recycled sources for metals
Catastrophic insurance coverage
Water strategy
Curtail building roads
Challenge: more extreme weather events
Sector Strategies: Oil and Gas
ADAPTATIONINITIATIVE
BUILDRESILIENCE
DECREASE VULNERABILITY
Invest in offshore, onshore wind turbines
Multi-fuel (not just gas) stations
Better climate change data, scenarios
Invest in hydrogen fuel cells
Shift to alternative energy
Review drilling station risks
Challenge: extreme weather events
Sector Strategies: Pharmaceuticals
ADAPTATIONINITIATIVE
BUILDRESILIENCE
DECREASE VULNERABILITY
New tropical disease products
“No till” farming herbicides
Trap factory fugitive emissions
Low GHG emission production
Water recycling
Sector Strategies: Real Estate
ADAPTATIONINITIATIVE
BUILDRESILIENCE
DECREASE VULNERABILITY
New forms of catastrophic insurance coverage
Relocate new investment in less risky zones
(No literature)
Reposition asset portfolio
Sector Strategies: Retail
ADAPTATIONINITIATIVE
BUILDRESILIENCE
DECREASE VULNERABILITY
Reduce power consumption
Buy, use green/ renewable energy
Buy local
Location decision models include climate change
Reduce emissions throughout supply chain
Combine heat, power (use waste heat): on-site energy production
Measure, target carbon footprint
Purchase carbon offsets
Energy efficient lighting, sensors
Sector Strategies: Tourism & Recreation
ADAPTATIONINITIATIVE
BUILDRESILIENCE
DECREASE VULNERABILITY
Develop off-site activities
Snow farming and fencing
Ski slope design
Invest in more indoor facilities
All year round tourism
Invest in artificial snow
Create artificial beaches
Develop higher terrains
Flexible ticket pricing
Sector Strategies: Transport (1)
ADAPTATIONINITIATIVE
BUILDRESILIENCE
DECREASE VULNERABILITY
Year-round roads Ice class vessels Apply higher emission standards
Scenarios re: marine, land transport systems
Climate research Maintenance and safety standards
Strategic marine services
Water treatment Relocate railroads to new growing areas
Sector Strategies: Transport (2)
ADAPTATIONINITIATIVE
BUILDRESILIENCE
DECREASE VULNERABILITY
NorthWest Passage Thermosyphons Improve insurance coverage
Eject CO2 from atmosphere at poles
Water tight storage Improve supply chain management
Move offices
Challenge: change in permafrost, sea and lake ice, and snow cover
Sector Strategies: Water Utilities
ADAPTATIONINITIATIVE
BUILDRESILIENCE
DECREASE VULNERABILITY
Promote conservation
Catastrophic event bonds
Reduce water for cooling
Better risk forecasts data
More resources on climate change from nbs.net
• Reports from this study• Other resources on climate change