Isra-Mart srl:Managing climate risk offers businesses an "ocean of opportunities"

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Detailed planning for future climate risks can open up opportunities for companies as well as help them protect against potential damage, delegates at BusinessGreen's latest Sustainable Business Lecture heard last night.

Bjørn Kj. Haugland, chief operating officer for risk management firm DNV's sustainability division, advised the audience in London that simulating various climate risk scenarios can help businesses identify the direct and indirect risks their operations face.

"Managing the climate risk is just how you manage the enterprise risk for your company, and the methodology for doing it is as simple and as difficult as it is for basic risk management," Haugland said. "It is about identifying them, it is about assessing them, and finding a way to manage them – either a way to reduce the risk or adapt to the change and seize an opportunity. One practical way is to work through scenarios as the uncertainties are so big."

He urged companies to embed scenario planning into their operations, noting that firms face a wide range of physical climate risks such as extreme temperatures, sea level rises and disruption to water supplies, as well as related risks such as changes to legislation, political instability and reputational damage if they fail to improve their environmental performance.

He predicted that those who identify climate risks effectively would be better placed to protect their operations and secure a competitive advantage over less adaptable rivals.

"Going forward there will definitely be winners and losers depending on how you position yourself towards these risks, how quickly you act, how you're able to turn the risk to opportunities," Haugland said. "The winners see this as an opportunity and position their company in the right spot – and doing this by proactively working with the risks and working on scenarios.

"Already today you see winners – companies doing the right thing, [to] attract the right people and take competitive advantages. It is an ocean of opportunities ahead for those who work actively in this field."

However, Swenja Surminski, senior research fellow at the LSE's Centre for Climate Change Economics and Policy warned that many companies are ill-equipped to cope with a shifting physical and regulatory climate.

"Businesses are not prepared for current risks let alone future risks, so preparing for current risks would be a good start," she said.

Surminski said the recent tragic events in Japan demonstrated that companies needed to "think the unthinkable", when planning ahead. But she voiced fears that businesses were not taking climate risks seriously enough because the consequences of failing to act were seen to be unlikely or a long way in the future.

"[Communicating climate change] comes across as being quite long term–- and there's that view that if we all had a long-term view, everything would be better... but we're all short term [thinkers]," she said. "[Trying to change that] is the wrong approach, because by definition, businesses, individuals, policy makers are short term. The magic trick is to be short term and to see what is actually happening today and how your actions today are important for you, but also have an impact on the long term."

Julian Walker-Palin, head of corporate sustainability at Asda, and Dr Michael Sanderson, a senior climate consultant at the Met Office, argued that the complexity of the messages surrounding climate change often prove a stumbling block when communicating the risks to business leaders.

"You look outside and today you saw some fog, a little bit of sunshine, but the trees still had leaves and there was grass everywhere," Walker-Palin said. "If you looked outside the window and the sky was black and fractured and there was a dead squirrel at the bottom of the tree, you could relate it [more easily] to climate change. I suspect when we do start seeing that things have a real impact then the population will switch on [to climate risks]."