For businesses, climate adaptation is no longer a dirty word — it’s survival

It wasn’t long ago that “adaptation” was tantamount to “surrender” in the climate world, an assumption that bracing for bleak climate realities was an admission of the failure to mitigate them. “Al Gore, in 1992, called adaptation ‘a kind of laziness,’” wrote Molly Wood in Wired magazine. “It’s like saying we’ve lost, and the best we can do now is hunker down and hope to save as many as we can.”

Of course, those climate realities are here now — we have lost, at least to a point. We see our collective failure daily in extreme weather events, rising land and sea temperatures, and deteriorating habitats and ecosystems critical to sustaining our economy, security and overall well-being.

In that context, adaptation — the strategic adjustments and actions companies take to minimize risks and capitalize on opportunities associated with the impacts of climate change — isn’t surrender; it’s a rational choice. Failing to do so, on the other hand, means giving in to nature’s forces: surrendering.

Ready, resourceful and resilient

Most conversations and media coverage about adaptation to date have focused on developing nations and local communities, less so on the private sector. That’s changing. A growing number of business leaders are warming to adaptation, acknowledging the physical risks to their operations and seeking to be ready, resourceful and resilient in the face of more frequent climate-borne disruptions to business continuity.

This isn’t something companies tend to talk about. You won’t see many press releases or ribbon cuttings celebrating companies’ efforts to make themselves less vulnerable to climate calamities.

But the risks of inaction are growing. A climate-unstable world has severe implications for nearly every sector, from agriculture to automotive to apparel. “A sample of 100 major businesses reported that the financial impacts due to physical climate risks are equal to about 10 percent of annual sales and 4 percent of their market value,” according to PwC.

Reactive to proactive

Weighing those risks, companies are beginning to shift from a reactive to a proactive stance, according to the World Economic Forum, one of several groups advocating climate adaptation by the private sector. “Businesses must build adaptive capacity, create new business models and undertake a major upskilling drive to meet this challenge,” according to the Business Leaders Guide to Climate Adaptation and Resilience, published in April by WEF and Bain & Co.

The consultancy Arthur D. Little published a report in June identifying four primary business challenges to adaptation: securing raw materials and resources; adapting industrial processes; safeguarding assets; and meeting consumer needs in a changing climate. PwC published a framework for company action on adaptation that articulated the business case: avoiding economic losses, protecting communities and ecosystems, and “increasing revenue, cost savings and sustainability.”

Adaptation is also a smart investment. The World Bank states that every $1 invested in climate adaptation leads to an average $4 return. The global adaptation market could be worth $2 trillion per year by 2026, estimates Bank of America.

Nonetheless, “climate adaptation finance is not seen as profitable enough to attract private funding because it is a preventative measure,” according to Patrick Verkooiljen, CEO of the Global Center on Adaptation. “In accounting, it is hard to value what has been ‘avoided.’”

So, how can companies prepare? Here are five ways:

Manage risks

• Assess which aspects of the business are most susceptible to climate disruptions, including supply chains, infrastructure and markets.
• Develop scenarios based on multiple climate futures to understand potential impacts.
• Implement strategies to reduce vulnerability, such as diversifying supply chains, enhancing physical infrastructure and shifting business models.

Make operational adjustments

• Invest in energy-efficient technologies and renewable energy sources to reduce dependency on fossil fuels and stabilize operational costs.
• Optimize the use of water, raw materials and other critical resources to ensure sustainable supplies.
• Reinforce facilities to withstand extreme weather events, such as floods, hurricanes and heat waves.

Adapt supply chains

• Work with suppliers to improve their resilience to climate impacts, ensuring continuity of supply.
• Source materials and products closer to operational bases to reduce transport risks and emissions.
• Maintain strategic stockpiles of critical materials to buffer against supply-chain disruptions.

Monitor and reporting risks

• Include adaptation efforts in sustainability and annual reports to communicate progress and commitment to stakeholders.
• Develop key performance indicators to track the effectiveness of adaptation strategies and make data-driven adjustments as needed.

Provide leadership and governance

• Ensure that adaptation strategies are regularly reviewed at the highest levels.
• Create interdisciplinary teams to integrate adaptation into all aspects of business operations and strategy.

“Fundamentally, climate adaptation is about evolving organizational and institutional practices and infrastructures and technologies in places that most need them — which is everywhere that faces risks such as floods and rising sea levels, droughts and heat waves,” write Ravi Chidambaram and Parag Khanna in Harvard Business Review.

PwC puts it more bluntly: “Adaptation simply means common-sense investments in business continuity that all companies should be making.” Unfortunately, “Many are not.”