In presenting the findings of its latest assessment, a delegate from the Intergovernmental Panel on Climate Change (IPCC) asked a rhetorical question: have we lost our chance to address climate change? The answer given: yes, and no. Yes, because climate change is already a devastating reality for many of us, and will continue to impact everyone. No, because we still have the opportunity – just – to save our future.
It’s easy to be fatalistic in the face of the daunting findings of the IPCC’s latest report, released on August 9, 2021, particularly because climate change often feels too big, with solutions that seem out of reach or require decisions that are too overwhelming.
But we must avoid the dangerous idea of defeat.
We must look ahead and set ambitious plans to jump-start the changes that science requires us to make. To paraphrase a goal from Microsoft, a company that has already set its own determined climate path: we need a climate plan on every desk and in every home. In this, businesses will play a key role. Although governments set the rules, businesses – particularly businesses that innovate – have an outsize impact on consumer perception and choice. It is therefore incumbent on businesses to lead the way. Here, the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) can help. Businesses can use the TCFD recommendations to rapidly develop powerful climate plans that, collectively, can help chart a course to avoid the worst outcomes highlighted in the IPCC’s report.
What is the IPCC telling us this time?
In many respects, the findings of the latest IPCC report echo past assessments. However, the report represents a significant step forward in the confidence and precision of climate science. To illustrate:
- For the first time, the IPCC presents the link between human activity and climate change as an “established fact”.
- Also presented for the first time as an “established fact” is the link between human-caused warming and increasingly severe extreme weather; individual fires and floods can be directly attributed to human activities.
- Getting to net-zero emissions by 2050 is now table stakes to stabilize human-induced global warming; every new release of greenhouse gases from here on out matters.
The calls to action from the IPCC’s report are louder, more definitive, more immediate, and should – if we are paying attention – catalyze action. Our biggest takeaways? Climate change is happening faster than we thought, and everyone is affected. But we can – just – still realize the promise of a productive low-carbon future that is resilient to climate shocks. The critical message? We need climate plans now that are both ambitious and can be deployed rapidly.
Why should businesses care about the IPCC report?
IPCC assessments have a huge impact on the international community, and the latest release strengthens existing calls to accelerate governmental ambition, both on the need to reduce emissions, and the need to adapt to climate change. An increase in governmental ambition should morph into regulation, impacting businesses and consumers (e.g. additional restrictions or carbon-intensive industries and products, increased carbon pricing, broader requirements to report emissions, or changes to building codes etc.). However, that process can take time, and the latest science provides at least two reasons why businesses should act now instead of waiting for new rules to be finalized.
First, climate change used to be seen as a “future” issue. The latest IPCC report reaffirms – with ever more compelling evidence – how wrong this thinking is. Climate change has already affected every region on earth, and the choices businesses make today will have profound impacts both in the next decade and far beyond. Many businesses are already vulnerable to extreme weather and changing climate patterns. Building a climate-aligned and climate-resilient business should therefore be in the “NOW” column of any business strategy.
Second, the science identifies formidable risks, which often dominate the headlines. But with risk comes opportunity. In fact, the ability to leverage climate opportunities is rapidly becoming – if it is not already – critical to the longevity of any business. As we have said before, there are already compelling economic reasons to act: the organizations that promote net-zero and climate-resilient businesses will emerge as the economic powerhouses of the new climate-constrained world.
How should businesses respond to the IPCC report?
The findings of the latest IPCC report are daunting, but we cannot allow the dangerous idea of defeat to undermine our efforts to combat climate change. Instead, businesses should take inspiration from the latest science to generate ambitious climate strategies and develop credible mitigation and adaptation plans.
But what makes a good climate plan, and how should a business approach one?
A good climate plan addresses all the things a business must do to reduce its emissions, to improve its resilience to climate shocks, and to identify the climate opportunities that are critical to success.
That means, first, identifying the climate-related risks and opportunities that affect the business. This is where the TCFD framework comes in. The four pillars of the TCFD – governance, strategy, risk management, and metrics & targets – are designed to allow a business to break down the complexity of climate change risks and opportunities into manageable pieces, and embed climate into its core processes and thinking.
The recommendations of the TCFD are designed to solicit decision-useful and forward-looking information on the impact of climate risks and opportunities and provide a view today of tomorrow’s challenges through scenario analysis. This forward-looking approach is what the science demands.
The TCFD therefore provides the foundation on which to set an ambitious climate strategy and identify the real risks, costs and opportunities of responding to climate change. It’s a foundation that can then (quickly) be developed into an effective climate plan (see Box). The TCFD framework was developed to improve and increase reporting of climate-related financial information. But it can do so much more than this. By surfacing data on climate risks and opportunities, it can also inform collective actions by the public and private sector alike.
Developing an Effective Climate Plan
Because climate change impacts businesses in different ways, an effective climate plan must be tailored and specific. But the development of a good plan, using the TCFD recommendations as a guiding framework, typically follows four steps:
- First, an organization must understand how it is impacted by climate change. This is critical. An effective climate plan does not start with emission reductions; it starts with knowing how extreme weather events and the transition to a net-zero economy will hit (e.g.) supply and value chains, manufacturing facilities, worker housing, the probability of litigation, the cost of financing and insurance premiums.
- Once an organization understands the potential impact of climate change on its business, it can then assess (credibly): the extent to which it must, and is able to, adapt to climate change; the extent to which it must, and is able to, reduce its emissions; and the opportunities that it can seize in a climate-constrained world.
- Once it has identified options to act, the organization can then prioritize action, to target both quick wins and longer term goals. In many cases, this will involve shifting human capital and finance toward climate-aligned initiatives, such as fuel switching, energy efficiency and climate-resilience. In some cases, actions may include becoming vocal in demanding regulatory change. In all cases, the actions prioritized must be realistic but ambitious; they should anticipate the continuing climate disruption identified by the IPCC; they should pre-empt the regulatory change that will follow the science; and they should be as precise as possible. An effective climate plan is not marketing, and it’s not a vague intent. It’s about how the organization is actually going to be part of a future that includes achieving net-zero and climate resilience.
- Finally, a good plan should be shared. Not just internally, although that is critical; it’s not possible for a company to develop a credible climate response through its sustainability department alone – it requires buy-in from the CEO and CFO to procurement and legal. But also externally, so that climate ambitions – and the cost of those climate ambitions – become common knowledge.
Where do we go from here?
The IPCC report compels us to act fast and with resolve, and the best way to incite collective effort is to be transparent about what each of us is doing. Here, climate plans from businesses have a flywheel effect.
Microsoft’s goal of getting a computer onto every desk and into every home was originally set in the 1970s. Today, its climate goal is to become carbon negative by 2030. That is the type of ambition we need, and other companies have started to develop climate plans that are similarly, or even more, ambitious.
Effective climate plans, informed by the recommendations of the TCFD, tell the world that “yes”, we understand the gravity of the situation, and “no”, we will not admit defeat; we will make the choices necessary to be part of the solution, and we will accelerate change.
How Manifest Climate can help
Manifest Climate helps businesses respond effectively to climate change by cutting through the noise to identify business-specific climate-related risks and opportunities. Manifest Climate works with organizations around the world to align with the TCFD and develop effective climate plans. Call us today.