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Climate Change is a Stakeholder’s Business

Climate change is deemed as one of the major environmental problems that the world faces today. Its impact is seen through the melting polar ice caps, heavier than normal rainfalls and thunderstorms, rising sea levels and the increase of the Earth’s temperature. The recent United Nations Intergovernmental Panel on Climate Change (UN IPCC) reiterated this fact and reported that the world is already experiencing the impacts of climate change as it continues to endanger the Earth, along with its vulnerable populations, industries and ecosystems.

According to the United States Environmental Protection Agency (EPA), climate change is a threat to the world’s basic needs because it affects our food and water security. Therefore, businesses should seriously evaluate mitigation efforts as climate change poses a significant impact on everyone. Droughts, heat stress and floods cause farmers to experience reduced crop yields and livestock productivity affecting global food production. This also puts pressure on water resources and water quality causing an increase in water demand as the world’s water supplies slowly decline. Some areas, especially in the coastal and island regions, may have problems with the rising sea levels, increases in runoff and massive flooding due to climate change effects.

The 2014 UN IPCC report supported these assertions as it showed how human beings all over the world are vulnerable to extreme weather conditions induced by climate change, primarily referring to the effects on lives, livelihoods, health, ecosystems, economies, societies, cultures, services and infrastructures.

Extreme weather events also increase the rates of transmission of infectious diseases through the consumption of unclean water and contaminated food. These conditions may force people to migrate to other areas trying to avoid such incidences. Some nations are more likely to experience the adverse effects of climate change than the others. The UN IPCC report noted in their findings that there are potential humanitarian risks that climate change poses for the world’s vulnerable populations. For instance, climate change has already cut into the global food supply with the recent decline of global crop yields like wheat production. Accordingly, the report associated climate change to the rising food prices and political instability in Asia and Africa after the food price inflation in 2008.

Climate change has indeed brought several changes to the Earth's ecosystems and natural resources. Thus, the ability to adapt to climate change will greatly influence how it affects individuals, communities, countries and the global population. This is why it is crucial for both the government and the private sector to monitor the ever-changing effects of climate change as it presents a range of environmental risks that will significantly affect their operations, regulations, policies and stakeholders. In fact, a study conducted by the World Bank shows that the cost to adapt to climate change is around $70-100 billion annually; an expensive fiscal cost that governments around the world cannot meet alone.

In order to initiate efforts that will help mitigate climate change, the world needs the technical and financial resources of the private sector to make vulnerable countries and communities more resilient to climate change. Climate change should be, therefore, the stakeholders’ business.

Organizational Engagement Strategies in Response to Climate Change

The private sector’s response to climate change mitigation stemmed from the need to protect their businesses from the adverse effects of the changing climate. Organizations have long been at risk due to the impacts brought on by climate change such as the disruption of business operations, increased costs of maintenance and materials and rising insurance prices.

Over the past decade, companies have started to include climate change in their corporate agenda, realizing that climate change mitigation and the reduction of greenhouse gas (GHG) emissions is no longer a corporate objective, but rather a global concern. Despite the increasing pressure from consumers to create more environmentally-friendly products, it is essential to foster strategies that engage organizations to disclose and address the impacts brought about by climate change.

According to the United Nations Environment Program (UNEP), strengthening the ability to adapt to climate change can help improve the health of the world’s ecosystems. One such strategy is through the integration of climate change adaptation measures into development planning and management practices. Organizations adapt this strategy by promoting sustainable land use management and reducing GHG emissions. In addition, supporting local government efforts on programs against deforestation and land degradation also supports climate change adaptation and mitigation.

Another strategy is the support of the use of low-carbon materials and facilities that help reduce GHG emissions by lowering the organization’s carbon footprint. Consequently, organizations that shift to new technologies by using renewable energy resources and more efficient energy systems help foster the development of low carbon societies all around the world.

Lastly, raising climate change awareness by working alongside governments and non-government organizations (NGOs) strengthen the advocacy against climate change by conducting awareness-raising campaigns, outreach and education to the different stakeholders of an organization. Through the promotion of climate change programs, best practices and success stories, organizational stakeholders will be more exposed to climate-related stories, as well as its causes and consequences. These awareness campaigns will eventually drive stakeholders to take informed actions when it comes to climate change.

Stakeholder Engagement: An Essential Component to Climate Change Mitigation

Instead of applying the “wait and see” attitude, organizations are now taking a proactive approach as they pay more attention to the risks, threats and consequences of climate change. In line with this, companies are starting to see the importance of including stakeholder engagement as one of the strategic responses of organizations in the battle against climate change.

According to the Harvard Law School (HLS) Forum on Corporate Governance and Finanacial Regulation, stakeholders are individuals or groups of individuals who have a potential impact and interest in the company. Having the power to influence the success or failure a company, the purpose of a stakeholder engagement is to build relationships with organizational stakeholders and have a better understanding of their concerns on key issues such as climate change.

The HLS Forum on Corporate Governance and Finanacial Regulation reported that an organization’s key stakeholders include shareholders and investors, employees, clients or customers, suppliers, communities and governments. Through stakeholder engagement, organizations coordinate with their key stakeholders to understand their concerns on various environmental issues such as climate change. Organizations then address the views and opinions of the company’s key stakeholders and integrate it into the company's corporate strategy on climate change.

Stakeholder Engagement and Financial Performance

According to the Guardian News, stakeholder expectations have driven organizations to raise the bar higher when it comes to the battle against climate change. This is why stakeholder engagement and the understanding of stakeholders’ climate change concerns have become crucial for shareholders and investors as they consider environmental, social and governance (ESG) factors when analyzing investment decisions.

Investors have realized that a society's social and environmental conditions have a direct impact on the business operations of a company and its long-term viability. According to an article by The Economist, investors have the largest influence on firms when it comes to the disclosure of environmental data such as GHG emissions. This increasing demand from investors have made organizations voluntarily disclose their environmental data report such as their emissions-reduction initiatives and emissions-reduction targets.

Studies also indicate that there is a positive relationship between environmental, social and governance (ESG) factors and financial performance. A report by the Institutional Shareholder Services Inc. (ISS) showed that during the 2013 proxy season, there was an increase in the number of environmental and social (E&S) resolutions filed by shareholders of US companies. Shareholder support for E&S resolutions also escalated to 21.7% in 2013, from 18.6% during the previous year, a continuation in the general upward trend of increasing shareholder support for E&S issues.

Another study by Harvard Business School suggested that sustainable companies that have a better stakeholder engagement regarding their environmental and sustainability issues tend to have higher stock performance, lower volatility, and greater return on assets (ROA) and return on equity (ROE).

Stakeholder Communication for a Better Climate Change Management Strategy

Communicating an organization’s climate change strategy helps them gain consumer loyalty which will then help gain competitive advantage. According to an Environmental Leader article, stakeholders offer different perspectives, values and expectations that enable businesses to build a better understanding on the best way to approach climate change and the nature and scope of the climate risks and opportunities. Therefore, stakeholder engagement and communication is an important element to consider when organizations tackle climate change.

There are various ways in which an organization engages stakeholders and communicate their programs on climate change, such as:

  1. 1. Citing best practice examples

    Organizations have their own programs and activities that help mitigate climate change. Reporting best practices and creating a series of case studies on climate change mitigation is one way of demonstrating the progress that companies have on climate change. Companies can begin citing best practice examples by providing an annual report that shows their GHG emissions reductions across their value chain, both upstream and downstream, and through all the GHG scopes (1, 2, and 3).

  2. 2. Conducting awareness-raising programs

    Raising awareness is part of the important foundation for climate change mitigation. Awareness programs that promote a better understanding of the cause and effects of climate change can be implemented among internal and external stakeholders of an organization. Whether it be for employees, investors, suppliers and clients, providing awareness-raising efforts help communicate the long-term vision and future initiatives that companies have for climate change mitigation.

  3. 3. Initiating change in organizational behavior towards climate change

    For many companies, their goal is to foster behavioral change towards climate change. For both internal and external stakeholders, facilitating change in a stakeholder’s behavior is a big challenge. This is why organizations need to promote and publicize policy initiatives for climate change mitigation. A change in organizational behavior must happen both from within and outside the organization. Companies create policies for their employees by promoting proper energy and waste management, recycling and sustainability. They can also ask their suppliers to commit to a climate change pledge or agreement. And at the same time, organizations can also offer their support to government polices and partner with non-government organizations to help mitigate climate change.


FirstCarbon Solutions' (FCS) Climate Change Solutions for Organizations

As a reputable climate change solutions provider to a wide range of industries, FCS can talk about the risks and opportunities associated with climate change and provide expert advice and cite best practice examples on how to incorporate climate strategies into your business agenda. As industries and governments manage through the challenges posed by climate change, FCS’s environmental specialists have developed solutions that support regulatory compliance efforts, environmental impact assessments and mitigation programs for sustainability across the entire organization.