What keeps the Resilience Manager up at night? Could climate change disrupt your business model?

Abstract

The most significant challenge posed by climate change may not be extreme weather events, but rather the gradual transformation of markets and business models. The availability of raw materials, shifts in demand, new customer needs, energy costs, plant locations, asset insurability, and supply chain resilience are all factors that will influence companies’ strategic decisions. In this article, we explore the concept of “Strategic Resilience” and propose some questions that every Board of Directors should begin to ask itself to understand whether its business model will remain sustainable and competitive in the climate context of the coming decades.

When it comes to climate risk, most organizations immediately think of extreme events: floods, heat waves, hailstorms, wildfires, or infrastructure disruptions. These are real and increasingly common risks.

But there is an even more important question that every Resilience Manager should start asking their management:

What if climate change were to alter our business model?

For many years, the primary goal of business continuity has been to ensure the resumption of operations following an outage.

Climate change, on the other hand, presents a different challenge. It does not always trigger a sudden crisis. Much more often, it slowly changes the environment in which the organization operates, affecting markets, resource availability, customer behavior, production costs, investments, and competitiveness.

For this reason, climate risk should not be evaluated solely through traditional operational risk assessment, but also as a factor in strategic decision-making.

From Operational Resilience to Strategic Resilience

A resilient organization is not simply one that is able to recover quickly after an event. It is the one that manages to adapt to changes in the environment before those changes compromise its ability to create value. Climate change is probably the best example of this trend.

Companies that today focus solely on the probability of a flood or a power outage risk overlooking much more profound changes.

Questions the Board Should Start Asking Itself

This discussion should begin with a few fundamental questions.

Will our market change?

• Will customer needs be the same in ten or fifteen years?
• Could climate change alter the demand for certain products or services, thereby increasing the demand for others?

Let’s consider the energy, cooling, water management, resilient construction, insulation materials, and energy-saving technologies sectors.

But this phenomenon also affects industries that seem unrelated to these issues.

Will our raw materials still be available?

For a food company, climate change could directly affect the availability of grains, fruits, vegetables, cocoa, coffee, wine, and other agricultural products. It’s not just a matter of rising prices. Some crops could see their productivity drop dramatically or shift to different geographic areas.

The same applies to natural fibers, timber, water, bio-based chemicals, and numerous other raw materials. Supply chain resilience may therefore depend not only on the continuity of suppliers, but also on the availability of natural resources themselves.

Are our plants still in the right location?

Many manufacturing facilities were designed decades ago based on vastly different climatic conditions. Today, it may be necessary to reassess aspects such as:

• water availability;
• flood risk;
• increasingly intense hailstorms;
• wildfires;
• extreme temperatures;
• availability of the power grid;
• logistical accessibility.

Real estate decisions and industrial investments will increasingly need to take these factors into account as well.

Will our employees be able to work under the same conditions?

This issue is not limited to health and safety. High temperatures can affect work schedules, reduce productivity, increase absenteeism, require new cooling systems, or accelerate the automation of certain tasks.

Human resources management, too, thus becomes an integral part of climate resilience.

Will our insurance coverage still be adequate?

The insurance market is already changing its approach to natural hazards. Rising premiums, higher deductibles, coverage limits, and, in some cases, reduced insurance capacity are trends already evident in various parts of the world.

Organizations should therefore consider not only the probability of events, but also the future transferability of risk.

Climate change also creates opportunities

Talking about climate risk inevitably means talking about threats. But it would be a mistake to stop there. Every economic transformation creates new opportunities: new markets; new technologies; new services; new business models.

The most resilient organizations will likely be those capable of recognizing these changes before their competitors, thereby turning risk into a competitive advantage.

A Thought for Top Management

Climate change is not just an environmental issue. It is one of the key factors that will influence the competitiveness of businesses in the coming decades.

For this reason, the dialogue cannot be limited to the Sustainability Manager and the Resilience Manager; it must involve the Board of Directors, the Chief Executive Officer, the Chief Risk Officer, Operations Management, the Supply Chain, Research and Development, and all the departments responsible for shaping the organization’s future.

Strategic resilience is precisely this: understanding that climate change not only tests a company’s ability to respond to a crisis, but can also redefine the very way in which a company creates value. The question every organization should start asking itself is therefore not whether climate change will affect its business.

The real question ishowthis will affect it and whether the organization is already preparing the necessary responses today to tackle tomorrow’s market.

This post is also available in: