30+ years ago a few companies started measuring their greenhouse gas (GHG) emissions and footprints, experimenting with the first carbon offsets, committing to the first corporate emissions reductions, and including climate change as a chapter in their corporate social responsibility (CSR) reports. The Climatographers, who established the first U.S. business climate risk consultancy in 1991, worked with many of those companies.
Electric utilities anticipated as early as 1991 that their GHG emissions would soon be regulated, as soon as the mid-1990s’s, but at the time they weren’t particularly concerned about the physical impacts of climate change. As recently as 2011, companies were being told by their management consultants that while climate policy was already potentially material, the physical impacts of climate change were still decades away.
It’s a different world today. Everyone recognizes that climate change has arrived, and physical risk conversations dominate the business and climate change conversation. Voluntary business responses are widely seen as a potential alternative to public policy, GHG footprinting is everywhere, and emissions reduction commitments have “gone big” with science-based, net-zero, and even carbon-negative targets.
Business and climate change conversations, however, are only getting more complicated:
- Five years ago there was almost no discussion of systemic climate risk, but today it is frequently characterized as the risk elephant in the room.
- Corporate initiatives and strategies that stakeholders once applauded may now be labeled as #greenwashing, or by the brand-new term #greenwishing.
- Brand risk, market transition risk, and even liability risk are all increasing in potential business materiality (as readily illustrated by several recent court rulings around the world).
- Complicating business decision-making even further are calls for business to lead the charge on tackling climate change, in effect substituting for national and international policy-making.
The whole “business and climate change” arena has to be approached, however, with an understanding of the “deep uncertainty” created by still rising global GHG emissions and average global temperature illustrated in the slide above. Those trends have persisted through decades of efforts to mitigate climate change, creating fndamental questions for business decision-making:
- Just how bad will (or could) climate change get, and how soon?
- Just how sudden or draconian will (or could) policy responses to climate change end up being?
- What are the known knowns, known unknowns, and unknown unknowns that will determine climate change outcomes?
Best available answers to these and other questions are key to assessing the materiality of climate change for any given company or sector. (We use “materiality” to encompass both risks and opportunities; a climate risk for one company may be a climate opportunity for another.) These are among the many topics we’ll help you come up to speed on, and dig deeper into as desired.