Why climate risk management matters for businesses

Climate change adaptation is often described as a local issue and therefore the responsibility of local governments and communities. But the private sector has an increasingly important role in delivering effective and robust climate adaptation strategies and policies. Changing climatic conditions disrupt supply chains, but also provide space for new thinking and innovation in product development, delivery and the range of services people need. Thinking ahead in this space provides new opportunities for many businesses that can work jointly with governments and communities to develop stronger more resilient and equitable communities and economies. Australian businesses can show clear leadership in this space by demonstrating how their actions can deliver social and environmental benefits to communities while also ensuring business profitability in a changing climate.

Risk management is one of the core issues for any business. Today businesses have to understand and cope with a range of issues. For example, issues around technological disruption, such as how artificial intelligence is changing the way customers can engage with particular services, which new competitors and brands are entering the market, what kind of big data is available to analyse changing consumer behaviour that can be used to drive growth, and what emerging risks are likely to impact company’s services and product markets. While all of these areas are important to consider, increasingly there are also risks related to climate change, which can negatively impact key business operations across a range of sectors and markets.

For example, the 2018 World Risk Report identifies extreme weather events, natural disasters, and failure of climate-change mitigation and adaptation as the three top key risks with the most likely impact on the business community. While we have mastered our understanding around singular risks and effectively developed strategies to deal with these, the world we are moving towards is better described as a set of systemic risks, which are complex and increasingly interconnected.

These concerns and issues are not unfamiliar to those companies already working and investing in both Queensland and the broader Asia-Pacific region. In fact, one could argue that climate change often just raises the stakes and magnifies many of the existing challenges that relate to transregional trade and investments. Thinking in this way, many companies have already significant expertise and experience in how to invest and operate in a vast region that is full of diverse challenges and opportunities. So, the questions for Australian businesses operating in the region are what to do with the information and how to move forward in a changing climate.

Please click here to read the full “Climate adaptation and business: The case for private sector leadership in the Asia Pacific” article published in the 2019 State of the Neighbourhood report, written by Dr Johanna Nalau.