Background
On Wednesday 16 June 2021, the Climate Change Committee (CCC) published its third UK Climate Change Risk Independent Assessment (CCRA3). CCRA3 evaluates the key impacts that climate change could have in the UK and provides recommendations on how the country should prepare to adapt to these changes, setting out the priority climate change risks and opportunities for the UK. The CCC’s advice to the Government is presented on their website in a series of different outputs.
A series of themed and sector briefings has also been prepared to accompany the CCRA3, including a Business Sector Briefing that may be of most interest for non-executive directors and business leaders.
Key climate risks facing the UK
The CCC assessment indicates that even if the world takes ambitious climate action, the UK will face notable risks from climate change by 2050, for which it is not currently prepared. The UK cannot wait to adapt to these risks, and it is already facing the consequences of inadequate adaptation efforts.
The CCC has identified eight key risk areas for the UK as a whole, and six risk areas for businesses. The business-specific risk areas identified are:
- Risks to business sites from flooding.
- Risks to business locations and infrastructure from coastal change.
- Risks to businesses from water scarcity.
- Risks to finance, investment and insurance including access to capital for businesses.
- Risks to business from reduced employee productivity due to infrastructure disruption and hotter working environments.
- Risks to business from disruption to supply chains and distribution networks.
The broad environmental consequences of climate change are clearly reflected in its potential to negatively impact multiple dimensions of UK businesses.
How can the UK adapt?
The CCC offers ten principles for adaptation that should guide the UK’s adaptation efforts. Recommendations of particular relevance to business are:
- Integrate adaptation into other policies and goals.
- Prevent ‘lock in’ by avoiding decisions that lead to change that is either irreversible or too costly to revert.
- Prepare for unpredictable extremes.
- Assess interdependent risks.
- Understand threshold effects.
- Consider opportunities from climate change.
The CCC notes that in addition to mitigating physical and financial damage from climate change, effective adaptation plans can also bring co-benefits to human wellbeing, the natural world, and the built environment. Similarly, businesses may benefit from changes in demand for goods and services due to climate change.
Implications for businesses
The CCC has also published a technical report, which includes a chapter on business and industry.
Key findings for businesses:
- Difficulties in understanding and measuring indirect risks and risks affecting international supply chains. These risks are significant, and current business decisions may ‘lock in’ future climate risks by making them irreversible or costly to revert.
- Corporate awareness and action on climate adaptation remain low when compared to mitigation. SMEs in particular need to be better equipped to deal with these challenges.
- Changing demand patterns and new markets may present business opportunities, but these opportunities still remain largely unexplored.
- Government action and regulation will be important in raising awareness and creating an enabling environment for businesses to address climate risk.
In summary, reducing greenhouse gas emissions is only one part of addressing climate change. Without appropriate action on climate adaptation, the UK will struggle to deliver both societal goals and net zero goals. The CCC’s recommendations provide a framework through which NEDs can address their companies’ adaptation plans and improve their own understanding of climate-related risks. This would mitigate financial loss, present potential business opportunities and see UK business leaders playing a vital role in the country’s urgent response to climate risk.