7 Steps to Adapt Your Business to Climate Change
Being sustainable is a licence to operate, but business continuity will depend on how well you’ve adapted to climate change
You might be doing all the right things as a business to be ‘sustainable’, but if you haven’t prepared for the consequences of climate change then it might not help you. We’ve added 1.1C of heat to the atmosphere since 1880, with around another 2C to be added by 2100 based on current trajectories. Even whilst we bend our global will and effort towards mitigation, we’re still going to be forced to adapt to the changes already locked in.
Climate adaptation has to date been the poor cousin of climate action, but for a business the prospect of climate risk is going to force us to have the adaptation conversation whether we like it or not.
Until we start to see a fall in global emissions and a reversal in the global heating trend, it will only be the climate adapted business that will continue to prosper.
But here’s the good news — a business can adapt to climate change and still grow, still gain market share, still attract amazing talent. A business can become more effective, more efficient and more attractive by better adapting to the changing conditions.
I know there are some good tools and frameworks around that break down the management of climate risk and adaptation into organised processes, including those generated by the IPCC, but I’m sharing something that addresses the silent gap in how to apply the theory to the busy, dynamic, chaotically competitive context of a business. I’ve distilled this from over two decades of working in that messy space between climate action and business management.
This approach is focused on business adaptation, not mitigation, because even the best sustainability strategy, Net Zero plan or climate pledges don’t necessarily do anything to prepare your business for the actual consequences of climate change.
To get the right mindset in place first — treat your business climate adaptation as an Innovation program. It’s an opportunity to innovate across your business processes, products, customers, and industry engagement. This is not about retreating or having less but about innovating your way to an adapted business that will still be trading in a changed climate.
These steps must all be completed, and must be completed in sequential order, working upwards from your Mission.
Mission
Our first step in adapting is to establish our Credibility as an organisation that authentically commits to acting on climate. This IS the stuff of Sustainability (mitigation) Strategies. This starts as back-of-house and is all about getting our own house in order so that we can — hand on heart, walk the talk. And we can prove it.
Governance — Management and Boards have a duty of care to manage business risk and therefore climate risk. Craft an authentic action plan and deliver on that plan — authentically and transparently. The market is quickly learning and will see through any greenwash or token efforts.
Board Readiness — Ensure the Board is on-task and well versed in climate risks, opportunities and actions required. Hold management continuously accountable. Instil a culture of curiosity and the desire to do well by doing good. If your Board doesn’t have the requisite knowledge to understand how climate change poses risks to the business, then enlist help.
There simply won’t be enough climate-skilled Directors in any market, so we’ll see the rise of specialist Advisory Boards.
Divest — any investments, banking, and employer contributions away from fossil fuels. This step is often overlooked but can undermine your credibility if you haven’t attended to it. This is just as vital for a Net Zero commitment as it is for your adaptations to the risks of stranded assets.
Brand Alignment — aligning your climate action with your brand, staying on message. Build a strategy that embeds adaptation into your business plan, including your governance behaviours and physical adaptation or asset management programs. Include quantifiable targets and timelines. Communicate with your entire business and share your Climate adaptation strategy with your customers.
Not long ago I did some work for a large multi-national engineering firm in their sustainable buildings team — I was doing great work, but to be honest I hadn’t done my due diligence properly and belatedly discovered that this firm was still pursuing large contracts with oil companies.
To be honest I was devastated. I’d learned that the brand wasn’t what I’d though it was. I left shortly after.
Have a clear position on who you will and won’t buy from as mistakes can lead to reputational damage. We are now at that time where you will be judged by the company you keep.
Brand matters greatly. But my approach is to not waste effort focusing on your brand itself, but to focus on your Cultural Capacity. Read on to find out what I mean.
Manage Risk
This step can be commenced at the same time as your Mission work and can be thought of as ensuring your business is built on rock rather than sand. The catastrophic failure of a building, the collapse of a supply chain or the bankruptcy of a major customer can pull your business down with them. Managing climate risk is an essential addition to your enterprise risk management process.
Physical — Assess climate risks for your assets and premises and incorporate climate adaptations into your asset management plans. This is an entire field of expertise in itself, but to keep things simple here — understand direct physical risks to your buildings, and the risk of business interruption due to building or equipment failures. You’ll also need to review and update your insurance coverage for property, professional services and public liability — insurers are beginning to strike out coverage for known climate-driven events.
It’s also no longer a defence to claim that you weren’t aware of the climate risk after an event, which is why climate adaptation is first and foremost about managing your business and personal liability.
Supply Chain — Climate change will impact production and availability of materials and goods, and may force your cost of goods to increase through influences like border carbon price adjustments and carbon tax mechanisms. Analyse your entire supply chain and identify the points of climate vulnerability.
Your business may experience increases in the costs of electricity and water due to climate-driven demand or shortages. By building adaptation plans for your premises you can also manage this supply risk.
Customers — Who we work with or for now matters. In the past I’ve left organisations because of a misalignment of values — I didn’t agree with having major fossil fuel companies as customers. Our customers present not only this governance risk, but also the risk of their own business crashing due to inaction on climate risk. On this topic it makes absolute sense to join up, share resources, help each other, seek opportunities together.
If your business is in manufacturing or selling goods, your customers now care about the climate impact of those goods. From the harvesting of raw materials, through manufacture, distribution and sales, every single movement on your supply chain has an environmental and social impact — and your customers know it.
A solid adaptation plan can turn this market risk into a huge opportunity.
Addressing climate risks is quite simply good business practice, but in my experience the vast majority of organisations are yet to truly consider the risks across all parts of their business, particularly beyond their physical assets and premises. If you’re strategic you can turn this fact into opportunity.
Cultural Capacity
Now that we have our own house in order, we’ve built the platform to adapt our business culture. The preceding steps will have already seeded the cultural change that is now necessary, and now it’s time to pour your energy into it.
Cultural Capacity is about cultural growth, about a process of maturation and gaining awareness — cultural wisdom if you like. I see this as a combination of Knowledge, Motivation and Agency.
Knowledge — Build Your Own Capacity
This one is going to be vital to the all but small handful of organisations who can attract and secure one of the rare sustainability experts in their market. By expert I mean those seasoned and deeply experienced practitioners of sustainability strategy, the ones with a decade or more of hard-won experience.
There simply aren’t enough experts to go around, especially in the climate adaptation space. So, building your own knowledge culture is going to be vital, not to mention sustainable.
And here’s where your climate adaptation strategy begins to scale your brand development, market leadership and customer attraction — because as soon as you’re building your own capacity your staff will be taking that to the table with their clients and customers… it starts becoming part of your brand. And it’s as exciting as hell because now you’ve built an army of inspired marketers who authentically want to go out there and build the tribe even more.
They want to find awesome customers to work with.
It’s priceless.
Motivation
This is where your culture aligns with your Mission, your Why. Bring all of your employees into the Mission, let them help you grow your business. For the majority of employees their motivation comes when they can see that your Mission to act on climate is authentic.
Climate Action is quickly becoming the determining factor in the war to attract the best talent. Whether or not you know what to do about climate is irrelevant — it’s the caring that matters, and when I’ve seen an organisation’s employees trust in the Mission, I’ve seen them do amazing things.
So, motivate your business to do good business.
Your people will then do what’s needed to act on climate. Besides, you’ll need all hands on deck. Adaptation is an ongoing effort on all-fronts, rather than a set task that has a finish line.
Agency
Empowering your people to be industry leaders, to lead clients, to stand up for climate action when others lack the courage. Give your people the inarguable licence to go out into the world on behalf of the business to tackle climate change.
Let them drive outward-facing industry engagement, marketing, brand development and customer engagement.
To be honest, when I see the traditional heads of industry talking about how they’re now being sustainable and acting on climate — the very same captains of industry that helped get us into this mess in the first place, I switch off.
I don’t believe them.
It’s inauthentic.
But when I see a group of young employees speaking about climate action on behalf of their business, I think ‘wow — these guys have been given agency, they’ve been given licence to speak on behalf of the organisation. This is a front page I want to turn!’
Agency only comes when your people have been armed with sufficient knowledge to know what they’re talking about and have been given permission to speak on behalf of your business. Your people need to know that you back them, and that support needs to be consistent and public.
Give your people Knowledge, Motivation and Agency — they’ll take your brand to new heights.
If you plan these adaptation steps well — Mission, Managing Risk, and building Cultural Capacity, it’s possible to holistically and authentically adapt your business over a 12-month program.
It won’t be easy, but it will be necessary.
