Article: Climate-proof entrepreneurship: strategies for success

There is a growing realization within boardrooms and executive suites: the changing climate has become an undeniable factor shaping the corporate landscape. It is estimated that $125 trillion in investments will be needed by 2050 to achieve net zero emissions. This recognition underlines the urgent need to make climate resilience of companies a core activity. However, the outcomes of COP28, the latest international climate conference, show a worrying gap between global climate ambitions and immediate corporate actions. Only companies that are adept at identifying both physical and transitional climate risks, and seamlessly integrating them into their strategic and operational blueprints, will be able to not only weather the storms of change, but also thrive in the new era of sustainability and resilience.

The COP28 outcomes further highlight the urgency for companies to reassess their climate risk management strategies. It is estimated that 16.9% of global assets worth approximately $24.2 billion are at risk due to climate change.

Amid escalating climate challenges, organizations must assess climate risks to their financial health and announce plans to address them. This article examines key strategies for increasing business resilience, with an emphasis on climate change and sustainability.

In its core definition, resilience translates to “an entity’s ability to withstand and adapt to adverse conditions, absorb shocks and uncertainties, and ultimately emerge from adversity stronger and better equipped for the future.” Resilience is not a static state, but a methodical process of identifying potential risks and opportunities, innovating and evolving to thrive in a dynamic and unpredictable environment.

Five pillars of resilience:

The characteristics of a resilient company vary depending on the specific industry and market conditions. However, companies that are most resilient to the effects of climate change take into account the five pillars of resilience:

1. Strategic: It depends on the ability to respond quickly to shifts in the economic, social, regulatory and political environment.
2. Financial: A company’s financial health determines its ability to weather crises, adapt to new circumstances, innovate and invest to seize opportunities that may arise.
3. Operational: This pillar measures a company’s ability to withstand disruptions and continue to function even after shocks.
4. Ecosystem: A company’s success is linked to the well-being of the communities and natural environments in which it operates. This includes supply chains, customers, contractors and clients.
5. Culture and well-being: The effectiveness of the workforce and the overall culture and structure of the organization play a crucial role in dealing with disruptions and transformations.

Strategic blueprint to achieve climate resilience

Translating the pillars of resilience into objective and results-based models to ensure consistent preparedness would ensure that the organization is always ready to proactively address long-term risks and secure the future vitality of the organization. As a starting point, a strategic blueprint can help shape an action plan to be adopted to increase climate resilience, as follows.

Comprehensive value chain assessment: Understanding climate resilience requires a holistic approach. Organizations can start by mapping themselves against the five key pillars of climate resilience. This method exposes vulnerabilities and critical nodes, laying the foundation for a resilient framework.

Embrace TCFD reporting: The reporting of the Task Force on Climate-Related Financial Disclosure (TCFD) is not just a legal obligation, it is a strategic asset. Organizations can delve into their unique climate risks and opportunities through a mature TCFD report. This initiative not only meets compliance, but also increases stakeholder confidence in their climate resilience strategy. 90% of investors and other users include climate-related financial disclosures in their financial decision-making,

Anticipate future changes: Long-term growth requires constant adaptability. Conducting horizon scans can decipher emerging trends and ecological shifts. This proactive approach prepares companies to seize opportunities and mitigate threats, keeping their business strategy resilient in changing environments.

Strategic climate assessment: Once the organization has mapped out its roadmap, it is important to ask itself whether it can withstand external climate influences. Participating in strategic climate assessment workshops can be useful. These sessions assess how climate factors can impact a company’s ability to achieve its objectives, and provide valuable insights into adaptation strategies.

Digital risk analysis: 72% of the 8,000 suppliers surveyed said climate change poses risks that could have a significant impact on their operations, revenues or expenses. Equipping companies with improved scenario planning and real-time risk analysis capabilities gives organizations the upper hand in building a climate-resilient environment. By doing this, organizations can join the evolving landscape of climate resilience.

Standard-driven approach for sustainable transformation

Climate resilience extends beyond business. It involves the development of social-ecological systems and organizations capable of meeting the challenges of climate change while promoting sustainable development. Standards play a crucial role in guiding this complex undertaking:

Integrated approach: Embrace a fluid outlook, moving from mere adaptation and mitigation to full transformation. This must take into account tradeoffs such as resource allocation, technology adoption, and co-benefits such as societal stability, employee health, and long-term cost savings.

Extensive risk assessment: Addressing both acute (e.g. extreme weather events) and chronic (e.g. rising temperatures and sea levels) climate risks. Transforming organizational strategy and business models is critical to discovering opportunities amid these challenges.

Using standards: Leverage powerful frameworks such as the Carbon Disclosure Project (CDP), Task Force on Climate-Related Financial Disclosure (TCFD) and Corporate Sustainability Reporting Directive (CSRD) to embed climate risks and opportunities into core business strategies, facilitating necessary transformations.

Stimulate change: Standards should not only influence business operations, but also influence the broader environment, potentially changing worldviews and paradigms. For example, promoting low-carbon production requires supportive policies, deeply held beliefs, and leaders who champion such initiatives.

Research coordination: Bridge the gap between climate science and business by participating in solutions-oriented research. Look for insights that can effectively inform and shape strategic initiatives.

To thrive in a changing climate, companies must be proactive and flexible. Integrating these principles strengthens their ability to overcome challenges and seize opportunities. This extends beyond individual companies and underlines the transformative power of standards, which should drive a change in mindset, not just compliance.