In the past, adaptation was mainly considered a government issue, write Alina In the past, adaptation was mainly considered a government issue, write Alina Averchenkova and Florence Cric

Averchenkova, Alina

Crick, Florence

LSE Research Online

10/13/2015Where do multinationals fit in global efforts to adapt toclimate change?blogs.lse.ac.uk /businessreview/2015/10/13/where-do-multinationals-fit-in-global-efforts-to-adapt-to-climate-change/Climate change is widely recognized as one of the critical global challenges on the political agenda and isnot a new topic for the boardrooms of multinational corporations (MNCs) either. Ahead of the upcoming climatechange summit in Paris in December governments and companies are pledging emission reduction targets and areworking on new initiatives to lower their carbon footprint. However, given the scale of current and future climatechange impacts, another big topic for Paris is adaptation.Much too often adaptation to climate change is considered anissue for governments to worry about and an area for publicfinance. Yet, as a new framework for international climate actionis about to be adopted, is there a role for the private sector inimproving the resilience of societies? Can governments andbusiness work together on adapting to climate change given thepotential of MNCs to finance projects, develop and deploytechnologies and innovative solutions and their impact on localeconomies, in particular in developing countries?These questions drove the research we have recently conductedwith colleagues at the Grantham Research Institute,“Multinational corporations and climate adaptation – Are weasking the right questions?“. We sought to understand howMNCs are responding to the risks from climate change, what isdriving this response and what outcomes their actions lead to.While businesses seem to have a clear understanding ofmitigation, they seem less clear about the meaning of adaptationand in particular, confuse adapting to mitigation policy regardinggreenhouse gas (GHG) emissions and adapting to future climateimpacts. Therefore, we define adaptation by MNCs as theprocess of adjustment by companies to actual or expectedclimate and its effects through changes in business strategies, operations, practices and/or investment decisions. Inour study we considered relevant evidence on responses to the impacts of climate change even if not explicitlylabelled as adaptation, as companies use a wide range of terms: resilience, business continuity, enterprise riskmanagement, or flood risk management, to name a few.Adaptation appears to be motivated by a range of drivers external and internal to a business. Internally it is driven bychampions and leadership within the company, and the desire to maintain profitability, reduce costs and minimisedisruption to operations in a changing climate. External factors include past experience of climate impacts andextreme weather events, regulatory and legal factors, reputational, corporate citizenship and stakeholder/investorpressure, and market drivers including the demand for new products and services. 1/3Fig. 1 This figure presents the framework used in our research: drivers, responses and outcomes of MNC adaptation to climate change. The framework summarises the keyelements we identified within those three components, includes additional feedback loops between these elements that characterise MNC adaptation, and emphasises thebroader societal context which can have a constraining or facilitative effect on MNC adaptation.Regulation, for example, already requires water supply companies in England and Wales to incorporate climatechange in the water supply assumptions they use in their 25-year plans. Financial disclosure rules for companieslisted on exchanges in the US, Australia, Denmark, South Africa, Sweden and the UK can require companies todisclose the physical risks from climate change when these risks impact their financial situation. On the other hand,several sectors, including agriculture, consulting, water and insurance, have recognised that adaptation alsorepresents new business opportunities. Several of the leading global insurers and reinsurers, for example, consideradaptation as part of their quest for new growth markets.Yet many adaptation initiatives are still in their infancy, and reactive responses dominate over anticipatory action byMNCs. Few companies appear to be adopting a structured approach to incorporating adaptation into businessstrategy, activities and operations. Moreover, given the complex, non-linear and potentially irreversible nature of someclimate impacts, new approaches to deal with this discontinuous change may be needed in addition to traditional riskmanagement tools. More analysis is required to understand the full impact of climate change on businesses andvalue chains and how to build innovative and resilient organisations. Our review shows that there is a paucity of workanalysing adaptation actions by companies, their motivations and even less so their contribution to improving theresilience of societies. Nor is there much consideration given yet to the possible instances where actions bycompanies may increase their own vulnerability or the vulnerability of their suppliers or communities they operate in.We see this as an important area not only for future research across business and sustainability disciplines, but as akey topic that deserves more attention from risks analysts and strategists in the private sector. First movers can savecosts through early learning and action and gain competitive advantage by preparing for and influencing future policychange working in partnerships with policymakers.2/3From a policy perspective it is critical to understand how synergies between MNC-led and government-led adaptationefforts can be amplified and potential adverse impacts minimised. Considering the growing demand for private sectorengagement and finance, it is worth evaluating policies that can support and incentivise private sector adaptation andpartnerships between MNCs, governments, NGOs and academia that can enhance the capacity of companies andcommunities to adapt.♣♣♣Note:  This article gives the views of the author, and not the position of LSE Business Review or the London School ofEconomics.Featured image credit: Jorge Láscar CC-BY-2.0 Inside photo: NASA Goddard Space Flight Centre CC-BY-2.0Alina Averchenkova  is co-head of climate policy at LSE’s Grantham Research Institute. Sheholds a BSc in Geography from Moscow State University, and an MSc and a PhD in Economicsand International Development from the University of Bath. She was previously Global Director forClimate Change and Carbon at KPMG, and worked for a carbon-asset manager, First Climate, inZurich, focusing on policies related to carbon markets. Before that, she was a Programme Officerat the United Nations Framework Convention on Climate Change. Her professional experiencealso includes work for the Environmental Defence Fund in Washington, DC; for MetroeconomicaLtd and for the Bureau of Economic Analysis. She tweets at @averchenkovaFlorence Crick joined the Grantham Research Institute on Climate Change and the Environmentin March 2013. Her work focuses on climate change adaptation, including the role of the privatesector in adaptation. Florence holds a PhD in Geography from the University of Oxford, UK. Priorto joining LSE, she spent three years as a Research Fellow at Griffith University, Australia. Shehas also worked at the National Climate Change Adaptation Research Facility (NCCARF),Australia, and at the OECD in Paris.Copyright © 2015 London School of Economics3/3

Where do multinationals fit in global efforts to adapt to climate change?

Abstract

Similar works

Full text

Available Versions

LSE Research Online