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The Business of Adaptation
Amanda Reed, 19 Apr 10

Most large institutions today aren't planning for climate change, beyond perhaps engaging in mitigation strategies like reducing carbon emissions or improving environmental sustainability. Despite the fact that we already live in a rapidly changing climate, most businesses and governments rarely incorporate big changes in their long-term strategies.

It's not that information about the changes occurring and anticipated is lacking: more than enough insight is out there to begin weaving climate foresight into strategy.

Just as a for instance, check out these two pieces on designing waterfront areas in response to foreseeable sea-level rise: "Environmental Restoration in the Age of Climate Change" and "How to Prepare Ports and Waterfronts for Climate Change." While uncertainties about sea level and climate impacts abound, we do know enough to start practicing precaution. The same is true for everything from forestry to energy to transportation: we have the capacity to start thinking through, and preparing to adapt to, the realities of a climate-changed world.

Given our ongoing interest in adaptation as a necessary and productive response to climate change, we were excited to see a thought provoking article by Felix Salmon at the new Climate Desk project, on why corporations are still not planning for change. Salmon argues that some clear institutional logic lies behind the reality of adaptation strategies remaining "scant" in the mainstream business world:

First:

Start with the superficial: Adaptation strategies have essentially zero PR value. They have nothing to do with saving the planet. Instead, they're all about trying to thrive if and when the planet starts to fall apart. That's not something any savvy company wants to trumpet to the world.

Second:

...there is the mismatch of time horizons. Climate change takes place over decades, and corporate timescales generally max out in the five-to-seven-year range. Businesses typically won't spend significant money planning beyond that period, especially because the effects on business models and future profitability are so difficult to predict.

Third:

It's easy to talk about how hotel companies with coastal property might have to face more hurricanes, or rising sea levels. But it's quite hard to know what is going to happen to any given beachfront resort with a sufficiently high degree of certainty. Given the enormous amount of variability in any complex model, if a company spent a lot of money carefully mitigating the risk of X, it could end up getting blindsided by Y instead.

Fourth:

Finally, even if the effects of climate change are foreseeable, they can be impossible to hedge...A classic hedging strategy is to buy insurance...But insurance doesn't work very well as an adaptation strategy. Policies only last for one year, or at most two. The insurance companies don't need to charge higher rates now if they see big and nasty things happening to the global climate in 20 years' time—they can continue more or less as they are for the time being. It's easy to forget that if you're simply renewing an insurance policy every year: The existence of the insurance market gives companies a sense of false security that their risks are hedged.

Salmon's list complements past discussions of this topic at Worldchanging. For more information on the insurance issue see: "The Great Warming and The Greening of the Reinsurance Industry." For another perspective on what's preventing widespread adoption of adaptation strategies in the business world see Alan Atkisson's article "Climate Change Adaptation: From Big Taboo to Business Opportunity." Atkisson reports on how there has been a growth in business interest in adaptation, but that there are still big obstacles in financing, communication and networking. Salmon argues that businesses need to overcome those obstacles and make it common practice to treat "climate change as an ominous reality, or even as an opportunity." Hear, hear!

Click here to read Salmon's full article "Risk Mismanagement."

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Comments

It seems at least a little likely that corporations are acting responsibly by not spending money on adaptation until it is clearer what may happen. You can't really expect an organization to plan for every possibility. In a decade it will be clearer what is happening, or if The Age of Histeria has ended instead.


Posted by: Rick Wolnitzek on 20 Apr 10

Thank you for raising this issue. Please could you consider posting something about a very important new service which seeks to challenge the established and environmentally abhorrent yellow pages print industry which is responsible for the destruction of 19 million trees every year in the USA alone.

The service is called www.nuyello.com and is aimed at bringing sustainable, meaningful online advertising to the business world by making the environment everybody's business.

Please visit the website www.nuyello.com, join the affiliate program and become an agent of change with this groundbreaking new service.


Posted by: Charles on 5 May 10

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