February 14, 2014
Leaders Now Seeing Climate Change as Risk That Can Be Managed, Not Uncertainty That Can’t (New for Sustainable Brands)
Last month, a front-page New York Times story reported that global business leaders Coca-Cola, Nike, and others are factoring in climate change risks as threats to the bottom line. This news followed CDP’s December reveal that 29 major companies use a shadow carbon price in their finances for climate risk evaluation.
What do these stories have in common? Risk.
I’ve noticed a decisive pivot in business conversations about climate change impacts from uncertainty — as just cause for delay or inaction — to a core business competency: managing risk. For forward-looking companies, this pivot may signal a tipping point from academic discussion to business action that they can use to their advantage.
Simply put, this change moves the conversation from: “What if we’re wrong about potential climate change-fueled catastrophes?” to “What if we’re right? What do we stand to lose, and how can we manage those risks?”
As an example of how this conversation has shifted, look at how Talking Climate’s Adam Corner explored uncertainty versus risk as an academic finding in November 2012. Compare that to his forceful Jan. 31 Guardian piece calling for the framing of risk over uncertainty as a business imperative.
While this idea may be familiar to SB readers, it’s worth noting how fast and far the “risk rather than uncertainty” message is spreading to broader business audiences — and who is delivering the message.
Forward-thinking business leaders and influencers can leverage this momentum for action within their organizations, and with industry peers, supply chain partners, customers, government and civil society allies.
Here are 11 notable recent instances in which business conversations about climate-change impacts center on risk:
Sept. 9, 2013: Harvard Business School’s “Working Knowledge” site reports on shifting the debate about climate change from a political discussion to a practical conversation about risk and reward.
Oct. 3, 2013: Financiers Michael Bloomberg, Hank Paulson and Tom Steyer announce their year-long “Risky Business” initiative to measure U.S. economic risks from climate change impacts.
Oct. 24, 2013: Investors ask oil, coal and power companies for climate risk information.
Dec. 6, 2013: Climate scientist Tamsin Edwards reports her findings from a meeting called “Communicating Risk and Uncertainty around Climate Change.”
Jan 15: Ceres hosts the Climate Risk Investor Summit with 500 global financial leaders.
Jan. 23: Sustainability thought leader Bob Willard posts “Unleashing 3 Risk Arguments in the Climate Debate” article
Jan. 24: At the Davos World Economic Forum, World Bank president Jim Yong Kim calls for carbon pricing and climate risk disclosure by government, businesses and NGOs
Jan. 30: Citing fiduciary duty, 17 philanthropic groups pledge divestment from fossil fuels and investment in clean-energy technologies as a “prudent response to climate risks.”
Jan. 31: Bloomberg starts his new job as United Nations special envoy to help cities around the world prepare for climate-change risks.
Feb. 5: White House announces “climate hubs” to help farmers and rural communities respond to climate risk.
Feb. 7: A new Ceres report shows more companies reporting climate risk to CDP than to the SEC.
The scientific consensus on human-caused global climate change hasn’t changed that much in the past 10 years. In that time, there’s been very little climate action overall. But now that’s clearly changing.
It’s been said that, “When we change how we look at things, the things we look at change.” I’m encouraged that global leaders in business, finance, government and behavioral economics are shifting to talking about climate-change impacts as business risks that can be managed rather than uncertainty that can’t.
This is a powerful mindset we can use to help achieve broad, global sustainability gains at every level.