Extreme weather is listed as the No.1 global risk this year by the World Economic Forum. In addition, the draft recommendations from the Task Force on Climate-related Financial Disclosures call for a transparent and consistent process for identification of climate risks and climate action. DNV GL today releases a timely research paper exploring the role of standards in helping businesses to withstand the challenges associated with climate change.
Climate resilience is about building socio-ecological systems as well as organizations that can withstand the coming stresses of climate change and mitigate the severity of future impacts; it is about setting companies and societies on the path of sustainable development. As DNV GL reveals in its position paper, standards can help give direction and dimension to this complex undertaking.
The Paris Agreement, which entered into force on 4 November 2016, has made it clear that there is no return to business as usual. Dr Asun Lera St Clair, co-author of DNV GL’s research paper and member of the Working Group for the Technical Examination Process on Adaptation under the UNFCCC Adaptation Committee, states that, “Adapting to change is nothing new for business, but climate change generates a new set of challenges and opportunities. In the next few decades, business success will be strongly associated with how well climate risks and opportunities are integrated into core business and strategic planning.”
Fellow researcher, Kjersti Aalbu, explains that, “Businesses already rely upon management and corporate governance systems. These systems must now be deployed to deal with the greatest change driver of them all: the uncertainty, complexity and systemic nature of climate impacts. This encompasses both physical and non-physical risks, including policy and legal, technology, market and reputation risks. These risks have the potential for substantive financial impacts.”
Standards key element
Standards are key elements of corporate governance. They are the world’s invisible infrastructure – rules established by expert bodies prescribing the quality or performance of a given practice, procedure or product. They need to be carefully and co-operatively designed to ensure socially desirable outcomes while remaining pro-competitive for businesses.
DNV GL believes that, with broad consensus, standards could be powerful tools for integrating climate risks and opportunities into the very core of companies. Procedural standards could, for example, guide companies on how to identify and manage multiple climate risks, and on how to integrate this work into existing risk management processes.
The position paper outlines how the power of standards can be used to capture opportunities and promote rapid change, while at the same time ensuring societal benefits and minimizing the negative side effects of climate action. This will require a perspective shift, from company-level adaptation and mitigation to a broader view that seeks co-benefits and trade-offs with wider sustainability goals.
“What we have done with this paper is present a high-level conceptual framework on how standards could contribute to the required transformations,” says David Walker, chief development officer at DNV GL. “We believe standard-setting processes must be transparent and equitable, and must involve the participation of many stakeholders. Thus, the next step for us is to drive close coordination between multiple stakeholders including business, scientists and governments. To this end, we are minded to set up a Joint Industry Project (JIP). While we will directly approach key players, we look forward to expressions of interest from all comers.”