Preparing your business for climate change

Climate change is becoming increasingly tangible through severe weather incidents. Floods, droughts, heatwaves and storms are occurring more frequently, compelling businesses to assess their preparedness for the changing climate and its effects. While organisations typically have plans to mitigate interruptions and disasters, climate change presents new challenges that need to be addressed. Additionally, the shift towards decentralised working patterns following the pandemic has introduced both advantages and disadvantages.

Whether you’re a business just starting up, looking to relocate, or are established, there are several factors that should be considered when preparing for climate change. These are areas to consider:

• Location
• Employees
• Cost of living
• Systems
• Supply chain/production/product
• Logistics
• Insurance and finances
• Environmental, social and governance (ESG) and sustainability
• Legislation

Location

Businesses have typically evolved to locate themselves where they can best meet the needs of their customers. As a result, the location of a business can be hard to change. The impact of climate change is creating new types of risks and scenarios for businesses to consider when considering their location plans. Factors to consider include:

• Location impact: understand risks such as flood potential, drying earth, mudslides, sink holes and coastal erosion
• Accessibility: ensure access to and from a critical location or facility
• Utilities: consider the availability of fast broadband, power supply (including renewables) and 5G connectivity
• Working conditions: you must account for potential temperature fluctuations, utility costs, stock storage and employee comfort
• Equipment location: consider the design of buildings and their ability to recover quickly from issues, and the possibility of locating critical equipment and services above predicted water levels or putting them offsite
• Collaboration: consider how you can use co-located facilities or shared office hubs which may have higher standards which may otherwise be outside your budget

Employees

The pandemic has fostered a more extensive working-from-home ethos and a shift to virtual teams, which has led to a dispersed employee base for many companies. Whilst businesses may have protections against power outages, a standard house does not, even in cases where the employees are still in the local area and could be hit by the same utility outages as a regional office. With colder winters increasing the demand on utility grids and the risk of rationing or outages, there is a higher risk that employees will need to plan how they work should an event occur. Businesses need to consider:

• Working conditions: collaborate with employees to address fluctuating temperatures and rising utilities costs
• Innovation: helping staff to consider renewable energy sources for their homes
• Work transfer: plan and cross-train so workloads can be redistributed when utilities are under threat
• Alternative working locations/accommodation: explore sharing facilities with partners or suppliers
• Talent and skills impact: if an incident did impact local staff, recognise and plan for the challenges of recruiting experienced staff and contractors at short notice

Cost of living crisis

High energy costs have dominated the recent cost of living debate. Working from home sees workers consume more energy compared with using shared facilities. Consider if you have the balance right between shared and worker-provided office space. Costs have shifted from businesses to employees, where workers have to pay higher utility costs on behalf of the company while working at home.

Business systems

The shift to online has necessitated hybrid capabilities using a mix of cloud and on-site services. With remote working, secure VPNs provide employees with secure access to key systems. For many businesses traditional on-site back-up and disaster plans remain in use as they have not transitioned to cloud. The evolution of these plans and IT strategies needs to consider:

• Access: consider how can you use SaaS or cloud to provide more uptime for users, and train users to use alternative processes where there is disruption to the public internet
• Affordability: be mindful of increasing costs of services due to rising utility costs (power, cooling) and power availability
• Increasing customer demands and legislation: account for evolving customer expectations of your green IT strategy and evolving regulations on sustainable technologies, perhaps including renewable power for your data centre
• Technology suppliers: ensure that as part of your procurement you ask about green IT and sustainability
• Communication: understand the sequencing of 5G roll-out when you make your plans or introduce new systems capabilities at the edge
• Enhanced disaster recovery plans: develop strategies that include off-site capabilities and measures to mitigate against climate change creating single points of failure

Supply chain/production/product

The supply chain can be subject to global issues of climate change and local incidents. Climate change can be seen in the news affecting many countries with flood and fires which in turn impact supply chains. Brexit and the pandemic exposed the inherent weaknesses in just-in-time supply chains. The pandemic made it incredibly difficult for organisations to buy laptops and web cams for their workers. Areas to consider include:

• Raw materials: what are their availability and location? Evaluate the ability to access critical supplies during an incident
• Robustness: supply chains are likely to become increasingly regulated, so assess routes and capabilities
• Employees/labour: account for disruptions caused by incidents and how they impact the supply chain
• Resilience: review regulations for resilient supply chains, evaluating any gaps and how to address them

Logistics

Logistics is a crucial part of both the supply chain and product/service delivery to customers. Consider:

• Product availability and location: assess how and where to keep stocks of finished and intermediate products during disruptions or incidents
• Robustness: evaluate logistics chain routes and capabilities
• Demand: anticipate changes in demand due to switching to other more sustainable alternatives

Insurance and finances

Climate change has a material impact on the willingness of underwriters to insure you, especially in flood-risk areas. Once there has been an issue, it becomes increasingly challenging to arrange cover for losses due to the risk of a rising number of incidents and claims. This has a knock-on effect on businesses securing finance to support new plans, and for employees in housing affordability. For example:

• Loans: business may find it difficult to raise money against assets that could be impacted by climate change
• Rebuilding: the impacts of costs and finances to resolve problems after an incident can be significant
• Insurance: premiums may rise or become unavailable in certain circumstances or areas
• Costs: the costs of utilities may rise and impact margins and profitability

ESG and sustainability reporting

Environmental, Social and Governance (ESG) and Sustainability reporting now forms part of business annual reporting and is being requested in bids and tenders. These reports require businesses to:

• Establish goals and chart their progress to help impact climate change
• Assess their data management and systems to record and report on requirements and obligations
• Evaluate what their plans might be if larger and heavier targets were introduced
• Ensure they have plans for key IT assets and core processes that reduce CO2 and miles travelled

When businesses are reporting environmental impacts, they often use a tool called greenhouse gas (GHG) scopes. GHG scope refers to the categorisation and measurement of GHG emissions associated with an organisation's activities. It helps determine the extent and boundaries of responsibility for emissions, providing a framework for managing and reducing GHG impacts. There are four scopes, which differ based on the source and control of emissions, against which businesses are measured:

• Scope 1: emissions include direct greenhouse gas emissions from sources that are owned or controlled by the organisation. This typically includes emissions from combustion of fossil fuels, such as from on-site vehicles, boilers, or industrial processes
• Scope 2: emissions encompass indirect greenhouse gas emissions resulting from the generation of purchased electricity, heating, or cooling consumed by the organisation. These emissions occur at the facility where the energy is generated but are attributed to the consuming organisation
• Scope 3: emissions cover all other indirect emissions that occur in the value chain of the organisation. This includes emissions from sources not owned or controlled by the organisation but are associated with their activities such as business travel, employee commuting, purchased goods and services, waste disposal, and transportation and distribution of products. For many small businesses who use co-working spaces, much of their utility consumption falls in Scope 3
• Scope 4: these emissions were introduced more recently, and are more complex. Scope 4 refers to avoided emissions, so implementing a new process that reduces emissions would result in Scope 4 reporting. Most organisations only need to focus on Scopes 1-3

For you

BCS members can read the very latest F-TAG technical briefings and reports.

Understanding and assessing emissions across the first three scopes is crucial for organisations to develop effective GHG management strategies. By identifying and quantifying emissions from various sources, organisations can prioritise areas for reduction, set emissions reduction targets, and implement measures to minimise their carbon footprint and overall environmental impact.

Greenhouse gas emissions versus carbon emissions: while similar terms, GHG emissions and not carbon emissions are not identical. Carbon emissions are significant part of GHG emissions, but other GHG emissions also contribute to global warming. This is why the scopes focus on GHG emissions rather than carbon emissions.

Evolving legislation

Legislation is constantly being introduced and update across the world to help drive the effort to slow climate change. These have an important role in helping to reduce the impact of climate change, and they impact businesses by requiring them to comply with certain changes. For example:

• The Climate Change Act 2008 sets out the UK’s approach to tackling climate change and targets for carbon reduction by 2050
• The Paris Agreement 2015 was adopted by 196 parties on 12th December 2015 at COP21, the UN Climate Change Conference. This is a legally binding international treaty on climate change which entered into force on 4th November 2016

It is important to keep up to date with the changes and work that may be going on in your key operating areas as a result.

Edited by: Max Hemingway FBCS CITP, Margaret Ross MBE FBCS Contributions: Christine Ashton FBCS, Martin Cooper MBCS, Adam Smith FBCS CITP