More and more companies are developing corporate climate strategies and setting climate targets. For many organizations, risk is the central focus of these discussions as many wonder how to best mitigate the potential impacts of a changing climate and transitioning economy.
Yet the upside of risk and uncertainty is opportunity. As climate-leading organizations are discovering, getting serious about climate is not just a box to tick in a risk management exercise — it’s also good for business.
This article explores the risks of failing to adequately accelerate corporate climate strategies to meet the needs of a rapidly evolving economic and physical climate. But it also explores the opportunities available for those organizations that leverage technology to adopt a proactive climate transition plan.
Why climate opportunities are business opportunities
The benefits of taking a leadership role on climate are numerous, and in many cases, would be beneficial even outside the context of a changing climate and economy. Sustainability-driven decisions can improve brand reputation, foster stakeholder loyalty, improve operational efficiency and cost, and attract new revenue streams.
Stakeholder engagement
A strong corporate climate strategy, paired with an effective plan for communicating it, can create real value and help to win over key stakeholders. Investors increasingly place higher valuations on climate-forward companies, leading to increased capital availability for these organizations. Customers demonstrate stronger loyalty toward brands with a positive record on environmental issues. And data reveals that employees increasingly favor organizations with good climate governance, even going so far as to accept lower pay to work for more sustainable companies. Good climate management doesn’t just mitigate the risks of poor climate management — it elevates your brand into a position of climate leadership and can result in increased demand for your products and services.
Efficiency gains and resilience
Identifying climate risks often reveals ways to improve efficiency, including how your organization consumes critical resources like energy, water, and materials. It also shows how to enhance operational efficiencies across production and distribution. Many of these changes result in cost savings and improve your organization’s resilience to both physical and transition risks, resulting in both short-term and long-term benefits.
For example, switching to renewable energy can significantly reduce energy costs, while safeguarding companies against the vulnerabilities of fossil fuel price changes and potential carbon pricing. Investing in more efficient transportation, production, and distribution processes can improve production capacity (thereby increasing revenue), and reduce operating costs. Meanwhile, investing in energy-efficient upgrades such as LED lighting — or retrofitting buildings entirely — can improve the valuation of fixed assets. For example, highly-rated energy-efficient buildings are more attractive to buyers or investors than their less efficient predecessors.
New products and services
The low-carbon economy will see unprecedented demand for new products and services. Changing consumer and client preferences offer greater scope for low-carbon or environmentally-friendly products and services, which can directly lead to higher and more diversified revenues.
The opportunity for innovation is endless, with changes needed across all industries and all parts of the supply chain, from raw materials, to packaging, to logistics. Consumer goods advertised as having low carbon footprints are likely to better satisfy changing consumer preferences, while sustainable producer goods that help B2B clients improve their scope 3 metrics can give suppliers meet procurement requirements and gain a competitive advantage over their peers.
Companies may even be able to reach new and emerging markets by partnering with governments and financial institutions and capitalize on public-sector incentives to fund innovation and R&D. The companies that capitalize on the twin opportunities of consumer-driven demand and institution-based incentives are likely to win out in the decarbonization economy.
How Manifest Climate can help
Climate risk management software like Manifest Climate help organizations capitalize on the opportunities of a changing climate. By automating critical and time-consuming tasks — such as research, benchmarking, and planning — Manifest Climate optimizes workflows to allow sustainability teams to focus on what matters most. This means teams can spend more time on implementation, such as making supply chains more efficient and developing new, low-carbon products and services. AI-based technologies can also expand traditional benchmarking exercises outside of your industry and sector in order to surface the ‘best’ of best practice climate management worldwide.
Managing climate risk is a competitive advantage
Companies that identify and manage climate risk don’t just safeguard against financial risk — they also enjoy the competitive advantages of more resilient supply chains (a powerful advantage over the competition during climate-driven instances of supply chain breakdowns), higher credit scores, better capital availability, and efficiency gains and operational cost savings.
Transition risk
Failing to adequately progress climate management can quickly lead to brand fallout in an age where the private sector’s impact on climate change is a highly public concern. Consumers are more likely to avoid unsustainable brands and investors are becoming increasingly focused on pricing climate risk. Organizations that take climate risk seriously don’t just safeguard themselves against backsliding reputations — they also stand out against their not-so-climate-focused competitors.
Additionally, rapidly evolving policy and legal risks can catch unprepared firms off-guard. In an extreme example, Eccles and Mulliken estimate that a carbon price of $100 per ton would send ExxonMobil bankrupt virtually overnight. Proactive measures such as putting an internal price on carbon can be a crucial element of a strong corporate climate strategy and help to mitigate the impact of these kinds of risks.
Finally, the move to a low-carbon economy will bring significant changes in supply and demand for products and services. Companies that accelerate their climate strategies can turn market changes into opportunities.
Physical risk
A changing climate exposes corporations to a number of physical risks. These include the acute risks of extreme weather events that threaten to damage physical assets and property, disrupt supply chain movements, or impact the availability of key resources. There are also longer-term physical risks, referred to as chronic risks, resulting from changes in climate patterns. These include rising sea levels that may flood sites and transport routes, and recurring heat waves that affect employee health and well-being and disrupt operations. A company that is aware of these risks and takes steps to future-proof its assets and operations will improve resilience and reduce the risk of climate-related financial hits.
How Manifest Climate can help
Climate risk management software like Manifest Climate help organizations identify and manage climate risk. AI-driven data assessment can analyze thousands of data points; far more than a manual process can manage. This makes exercises such as benchmarking and disclosure gap analyses far more thorough and wide-reaching, ensuring all your vulnerabilities are identified, and uncovering proven best-practice examples and next steps for managing climate risk.
It’s never been easier to move forward on climate
Ultimately, taking a progressive approach to corporate climate management is not just an exercise in risk management; it’s also a key driver of new opportunities. Companies that safeguard their operations and reputations against physical and transition risks, while capitalizing on the financial opportunities of a strong climate reputation, will win out in the low-carbon economy. Accelerating progress on corporate climate strategies has never been easier with the rise of software like Manifest Climate. With the right technology at their disposal, companies can move beyond simply managing climate risk and toward capitalizing on the opportunities of a net-zero economy.
