Corporate Climate Adaptation Framework: A Structured Approach to Climate Adaptation
The "Corporate Climate Adaptation Framework" enables risk managers and sustainability officers to develop climate adaptation measures in a structured manner. The model correlates the temporal phases of adaptation with various stages along the value chain.
While the framework for reducing greenhouse gases is well-defined by initiatives like SBTi, and although achieving "Net Zero" is challenging, most stakeholders understand the actions required across Scope 1-3 emissions. This is not yet the case for climate adaptation. Where to start? And what are viable measures?
In our first article, we distinguished between different climate risks ("Climate Realism"). Now, we present a model that enables companies to take action: The Corporate Adaptation Framework by DSR & Partners integrates the four phases of climate adaptation into a corporate context. A simplified value chain analysis results in a 4x4 matrix that structures climate adaptation measures.
4x4 Matrix of Climate Adaptation
We can differentiate the following four stages of climate adaptation, which provide a clear temporal demarcation:
Analysis: Using climate data and forecasts to identify potential risks and assess individual risk levels.
Preparation: Developing and implementing plans and measures to minimize identified risks.
Direct Protection: Quickly and effectively responding to realized climate risks to limit damage.
Restoration: Restoring operational capability and adjusting strategies to better prepare for future events.
Example: After a detailed risk analysis by Jupiter Intelligence, a major US food manufacturer implemented new flood protection measures at its production sites, leading to significant cost savings during the 2022 floods. The corresponding building design facilitated a quicker resumption of business activities.
Different Stages along the Value Chain
These stages have different manifestations along the value chain. For the second axis of the matrix, we define:
A. Supply Chain / Raw Materials: How are suppliers and raw materials affected, and when? How flexibly can this input be planned? B. Facilities / Infrastructure: How exposed and ultimately secure are my own sites? What would be the impact of a failure? How quickly can I resume production if needed? C. Products / Services: How are my products demanded in times of climate change? D. Employees / Stakeholders: How does the climate affect the people in my company?
Matrix: The 4x4 Matrix of the "Corporate Climate Adaptation Framework" can be further differentiated within each action field:
Temporal dimension (short, medium, long-term)
Type of measure (Technical, Strategic, Nature-based, Software, etc.)
Industry-specific
Geographical
DSR & Partners has analysed >150 corporate adaptation case studies within that framework.
Beyond Technical Solutions
Adapting to climate change requires more than just technical solutions and measures. It needs a comprehensive organizational approach involving various levels of a company:
Corporate Culture: While many companies currently prioritize sustainability reporting, it is crucial to also understand climate adaptation as a central task. A culture of proactive risk management and continuous improvement must be established. Example: A multinational retailer conducted internal training and workshops to raise awareness of climate risks and promote a company-wide culture of resilience. This allowed them to replace certain products with less risky ones at specific times.
Finance: The financial dimension of climate risks must be integrated into investment planning. This includes evaluating the potential costs of climate risks and developing financial strategies for risk mitigation. Various insurers predict that the costs of climate adaptation and damages could rise to $23 trillion per year globally by 2050. Simultaneously, the International Monetary Fund (IMF) has calculated that many adaptation measures offer a 10:1 return on investment, with some even higher. Example: A global industrial company restructured its finance department and established a dedicated team for climate risk assessment and investment planning. This team collaborates closely with other departments to ensure that all investments are climate-resilient.
Governance and Skills: Responsibilities for climate adaptation are often dispersed across different departments. Clear assignment of responsibilities and the training of skilled professionals are necessary for coordinated and effective adaptation. Example: A leading logistics company implemented a central governance system that coordinates all climate-related decisions. This system helped the company better protect its supply chains and minimize disruptions from extreme weather conditions.
Knowledge and Implementation: Companies need not only knowledge of climate risks but also the ability to translate these insights into concrete actions. This requires training, sharing best practices, and developing scenarios to be prepared for various climate risks. Example: A construction company in California developed training programs for its employees to prepare them for the challenges of rising temperatures and more frequent wildfires. These trainings helped the company make construction projects safer and more efficient.
Conclusion
Adapting to climate change presents significant challenges for companies but also offers opportunities for innovation and resilience. The recent floods in Germany underscore the urgency of preparing for an increasingly unpredictable future. Companies must go beyond sustainability reporting and develop comprehensive climate adaptation strategies based on solid data that encompass all areas of the organization. Only then can they secure their value chains and achieve long-term success.
Companies are complex systems where many aspects must interlock for change to work. This applies to climate adaptation as well. Therefore, we are organizing the first corporate conference on this topic on November 6th: www.theshift-conference.com
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