The Imperative of Adaptation and Resilience in Corporate Climate Strategies

The article discusses the need for corporations to prioritize adaptation and resilience strategies in addition to reducing greenhouse gas emissions. It highlights the interconnected risks posed by climate change to businesses globally, using Nestlé as an example of a company facing significant agricultural vulnerabilities due to climate variations. While emissions reduction remains crucial, developing resilience and adaptive capabilities are essential for corporate survival and innovation in an evolving climate landscape.

Current discussions surrounding corporate climate agendas predominantly emphasize the reduction of greenhouse gas emissions by large corporations, along with efforts to mitigate their adverse effects on the environment. Prior to COP28, the Alliance of CEO Climate Leaders—a coalition representing US$4 trillion in revenues and 12 million employees—strongly advocated for commitment to emissions reduction targets. However, it is crucial to also address the often-overlooked aspect of how quickly and effectively these corporations are adapting to the realities of a warming planet and building resilience against climate change. Climate change presents severe threats to infrastructure, energy systems, food and water availability, and human welfare. Prioritizing adaptation and resilience not only fosters innovation at a large scale but also protects organizations, their workforce, and essential assets from climate-related risks. Nestlé exemplifies the interconnectedness of corporate operations in the face of climate change, sourcing cereals and grains from eight countries including Argentina, Australia, and Brazil. Each of these nations’ agricultural sectors faces distinct climate risks, such as potential GDP losses in Argentina due to drought and diminishing crop yields in Brazil from decreased precipitation. These vulnerabilities amplify supply chain disruptions, influencing labor markets and prices across regions. Thus, incorporating adaptation and resilience into Nestlé’s global strategy is indispensable. It is imperative for corporations, particularly the largest entities, to pursue aggressive strategies for greenhouse gas emissions reduction. The Carbon Majors group identifies 57 major corporations responsible for approximately 80% of emissions post-2016 Paris Climate Agreement, predominantly originating from industrial sectors like oil, gas, coal, and cement. In the U.S. alone, the top 15 food and beverage companies emit roughly 630 million metric tons of greenhouse gases annually, surpassing Australia’s total emissions. Though the technology and communications sectors contribute only 2-3% to the global GHG emissions, notable increases—such as the 13% rise in Alphabet’s emissions in 2020—highlight a pressing need for comprehensive action across all industries. Nevertheless, numerous adaptation and resilience challenges remain under-discussed in the broader corporate sustainability dialogue. Companies in sectors such as tourism and agriculture that depend on outdoor labor must address the risks rising temperatures pose to employee safety. Those with logistics reliant on waterways vulnerable to storms must reassess their supply chain management. Furthermore, pharmaceutical firms face challenges related to climate change impacting temperature-sensitive products and hindering drug development. Large technology firms, reliant on data centers, must confront diminishing water and energy resources amid the growth of artificial intelligence operations. Certain corporations have begun to implement adaptive strategies. For example, AstraZeneca has invested USD 20 million in enhancing inventory capacity for its Puerto Rican manufacturing facility. BASF has developed a forecasting system to anticipate how rising water levels could disrupt its supply chains. Similarly, Anglo-American established fire warning systems in Brazil, and Coca-Cola has adopted water conservation technologies in Mexico to mitigate water scarcity risks. Failing to cultivate adaptation and resilience capabilities not only endangers corporate operations but also adversely affects populations relying on these entities for essential services. As global temperatures continue to rise beyond the critical 1.5 °C threshold, businesses must address climate risks extending beyond mere emissions management. Investments in adaptation and resilience become critical not just for corporate survival but also for ensuring operational continuity. Jackie Roberts, former Chief Sustainability Officer of Carlyle Group, states, “The adaptation element is critical and corporations need to prioritize it.” Roberts emphasizes the need for companies to evaluate their climate risk frameworks through the lens of various business functions, such as environmental health and safety, and the procurement of essential resources. The landscape of climate risks is populated with concerns that are not unknown but rather underfunded and insufficiently addressed. Corporations should recognize that their assets, workforce, and supply chains are under threat from climate change. The evolution of strategies to manage these risks, including understanding when and how damage will occur, represents a vital ongoing process. Adaptation and resilience can also drive significant innovation. Climate technologies provide an avenue for addressing various risks and creating competitive advantages. For example, in the energy sector, increasing temperatures and natural disasters threaten stability and infrastructure, costing businesses approximately US$300 billion annually due to power outages in low and middle-income countries. Innovative solutions—such as smart grids and energy storage systems—are essential for fortifying the resilience of energy infrastructures. The agricultural sector, facing numerous climate-related threats, requires innovations ranging from drought-resistant seeds to precision farming techniques. No corporation possesses all the necessary tools to effectively adapt and establish resilience amidst climate change independently. The climate technology sector is poised to support these efforts, having attracted billions in investment in recent years. While much funding has historically targeted decarbonization initiatives, expanding the focus to include adaptation and resilience must now become a priority. Corporate investments in adaptation and resilience technologies will, in turn, facilitate their growth, offering startups opportunities for market expansion and product development. The partnership between established corporations and innovative startups can expedite technology deployment, which is crucial for mitigating climate risks. According to Roberts, “Fundamentally, these companies need to expand their aperture.” This implies a need for corporations to become catalysts for change by seeking novel solutions and collaborating with diverse stakeholders to navigate both mitigation and adaptation. To ensure future resilience, corporations must leverage burgeoning climate technology to accelerate the deployment of innovative solutions. An emphasis on innovative financial mechanisms to facilitate adaptation processes will be paramount in fortifying resilience capabilities. Neglecting the importance of adaptation and resilience could lead to costly disruptions, both short-term and permanent. While rushing corporate decarbonization agendas remains vital, parallel efforts to strengthen adaptation and resilience strategies are equally essential.

The global conversation around corporate climate action often emphasizes emissions reduction, highlighting the urgent need for businesses to lower greenhouse gases and their environmental impact. However, there is an increasing recognition of the need for corporations to adapt to the effects of climate change and develop resilience strategies to safeguard their operations against climate-related risks. As climate variables become more volatile, understanding the interdependence between adaptation, corporate strategy, and technological innovation becomes crucial. This article seeks to illuminate these considerations, presenting a balanced view of the corporate responsibilities with regards to both emissions and adaptive strategies to foster sustained growth and operational safety.

To summarize, it is paramount for corporations to undertake robust adaptation and resilience strategies concurrently with their decarbonization efforts. With climate change posing imminent risks to infrastructure, supply chains, and human resources, business leaders must prioritize investment in climate technologies and innovation. As organizations broaden their focus from mere emissions mitigation to developing comprehensive resilience frameworks, they will not only safeguard their interests but also contribute to a healthier global climate ecosystem. By reshaping their operational approaches and forming partnerships with emerging climate technology firms, corporations stand to be at the forefront of climate innovation while ensuring their sustainability in an increasingly unpredictable climate landscape.

Original Source: www.forbes.com