While climate change is something we need to stop accelerating, we also need to adapt to the effects it is already having on our planet, and our business. A sustainable transformation of your business takes both into account. Let’s examine these two parts of any transformation, which the IPCC refers to as climate change mitigation and climate change adaptation, and where they impact your finance team.
Adaptation recognises the risks posed by climate change, and seeks ways to anticipate and adapt. Supply-chain disruptions, increased energy costs, and decreased food security are all trends on the rise over the next decade that may affect your business.
Adaptation includes measures like installing solar panels to reduce the losses brought on by spikes in energy costs, insulating buildings to ensure lower energy use during heatwaves (way back in 2017 the lethal mix of heat and humidity, known as ‘wet bulb’ conditions topped 30 degrees 1000 times - more than double the number in 1979), and preparing contingencies for supply chains likely to be disrupted by extreme weather events.
Your finance team must be able to run scenarios and plan for these by examining both the cost to implement adaptive measures, and the financial consequences if you don’t implement. You also need to understand implications by location, and along your value-chain, because actions you take are going to be either bolstered or diminished by your suppliers and customers. Adaptation may require, for example, investment in higher collaboration, and real-time information sharing with upstream and downstream partners.
It also means understanding climate-adjacent risks, for example, with nature. Nature loss and attenuating ecosystem services (from pollinators, to water quality, and soil fertility) can cause revenue loss. The Sustainability Accounting Standards Board (SASB) provides sector-based climate-adjacent metrics. You need to be able to quantify to the board the risks in not proactively making changes now.
Many adaptation measures (such as renewable energy) also achieve emissions reductions, which leads us to mitigation.
Mitigation strategies lower greenhouse gas emissions to mitigate the ongoing effects of climate change. Ultimately, this means decarbonising your entire value-chain. They’re the proactive solution, and important long-term for the planet and ecosystems (known as natural capital), and short-term, for your emissions reporting and sales success.
The corporate Net-Zero Standard highlights rapid, short term cuts (quick-wins), followed by long-term reduction (foundational shifts in your business model), and only then residual emissions (as a last resort). The Science Based Targets initiative (SBTi) also encourages you to scale-up in climate investments in addition to cutting emissions.
"The Net-Zero Standard gives companies a clear blueprint on how to bring their net-zero plans in line with the science.“
Johan Rockström Potsdam Institute for Climate Impact Research
Mitigation brings benefits. You need a sound grasp of the economic impacts of climate change, and how a visible sustainability policy can deliver financial outcomes. From attracting and retaining staff, engaging with customers, to opening up new markets, mitigation can both protect and promote revenue growth
To understand the mitigation costs, you need to measure baseline emissions at every scope, plan aggressive but achievable targets, and invest in capability and resources to deliver tangible outcomes. To get started you can:
To build enduring capability book a planning workshop with Getting to Zero to discuss your target operating model for sustainability transformation and how to align your financial & climate reporting.
