As the world counts down less than 90 days until COP27, conversations continue to intensify on the urgent actions that global leaders can take to limit the effects of the climate crisis. One of our contributions to the conversation is a new, limited edition blog series that will present key insights and reflections ahead of the major climate conference of parties in Sharm El-Sheikh, Egypt this November. This blog is the second installation of our “Road to COP27” series, authored by research analysts from WBA’s Climate and Energy Benchmark Transformation Team. Each blog will discuss a different topic of global importance related to global climate policy that will be on the decision-making table at COP27. Our Climate and Energy Benchmark methodology includes considerations for social indicators such as just transition, yet through this blog series, our researchers will begin to explore a wider scope of climate policy topics. These topics may reach beyond our benchmarks but remain highly critical to the global discussion on corporate responsibility to act on climate change.
Devastating impacts of climate change are being felt across the globe. This summer, extreme heat and drought in Pakistan was followed by extreme flooding from monsoon rains and glacial melt, impacting 33 million Pakistanis. As extreme weather events intensify and become more frequent, the need for climate adaptation grows more urgent. To address this need, a work programme was initiated at COP26 on the Paris Agreement’s global goal on adaptation, which aims to strengthen adaptive capacity and resilience and reduce vulnerability. Adaptation is also expected to be a key focus of COP27 in November.
While companies have taken greater responsibility for disclosing and reducing their greenhouse gas (GHG) emissions, companies should also account for their contribution to the costs of climate adaptation and loss and damage related to climate hazards. To truly close the accountability gap, the World Benchmarking Alliance (WBA) believes that there is a need to accelerate the understanding and discussion around companies´ wider impacts on adaptation and to collectively explore opportunities for action.
What is the current state of play?
Physical climate risks, such as extreme weather events, increasing temperatures and sea level rise, pose significant risks to human populations, plants and animal species and the environment. It is clear from the Intergovernmental Panel on Climate Change (IPCC) Special Report (2018) that while climate risks are projected to be less significant under a 1.5°C scenario than a 2°C scenario, there is an inevitable need for climate adaptation even under a 1.5°C scenario, especially for more vulnerable areas. Adapting to the impacts of climate change already seen across the world requires widespread mobilisation to protect human safety and ecological health. As vulnerable groups face disproportionate impacts of climate change around the world, so too do those populations bear the greatest challenges of adaptation.
There is an accountability gap in the efforts required to meet global adaptation needs. According to the International Institute for Environment and Development (IIED), between 2014 and 2018, the 46 least-developed countries (LDCs) received $5.9 billion from international public finance sources, constituting only 3% of the climate financing needed for them to adequately address adaptation over the 2020s. Furthermore, the IIED found that these public adaptation finance mechanisms largely failed to include vulnerable groups in decision-making, with only 3% of the funds dedicated to addressing gender inequalities and 2% dedicated to Indigenous Peoples. At COP26, countries signed the Glasgow Climate Pact, committing to doubling the financing available to developing countries for adaptation.
According to the IPCC, adaptation planning is outpacing implementation of adaptation solutions, leaving a gap in adaptation action by the private and public sectors. To address the adaptation accountability gap, companies have an important role to play. Standards and initiatives have been developed to support company action on adaptation. ISO standards 14090 and 14091 provide guidelines for organisations to assess climate change risks, identify uncertainties and implement adaptation planning. The Race to Resilience, a campaign led by the United Nations High-Level Climate Champions for Climate Action, is currently working to mobilise non-state actors to increase resilience of vulnerable groups to climate risks.
Furthermore, the Assessing low-Carbon Transition (ACT) Initiative recently published a draft of its Adaptation Methodology, creating a framework for assessing company action on adaptation. The draft methodology is currently being tested with company participants, after which the final methodology will be published in early 2023. The ACT Adaptation Methodology serves as a roadmap for companies in adapting to climate change within their own operations and participating in global adaptation efforts.
How can companies adapt to climate change?
Impacts of climate change threaten human safety and health, infrastructure and economic systems. To protect their employees and communities, companies have a responsibility to adapt to climate change. As outlined in the ACT Adaptation Methodology, a key piece of company action on adaptation is the assessment of physical climate risks. The ACT Adaptation Methodology provides a framework for physical climate risk assessments, outlining the expectation that companies assess their exposure and vulnerability to risks regarding their production and operations, energy and telecommunication systems and demand and sales, among other risk dimensions. In addition to assessing climate risks, companies can assess their relevant climate-related opportunities within adaptation action, covered within the ACT Adaptation Methodology framework as well.
Given the risks of climate change to a company, there is a need for companies to identify and enhance their capacity for adaptation. The ACT Adaptation Methodology provides guidance on various capacity-building strategies for developing financial, technological and human capacity for adaptation. Some of the capacity-building activities companies can adopt include research and development in adaptation, incorporation of adaptation into investment decision-making and training employees on physical climate risks and adaptation.
How can companies contribute to adaptation efforts globally?
Companies can also play a pivotal role in addressing the costs of adaptation by fairly distributing resources to vulnerable groups and involving local stakeholders in adaptation decision-making. As cited in the ACT Adaptation Methodology, the integration of adaptation considerations into corporate governance practices requires the development of a company adaptation strategy, engagement with stakeholders and collaboration with local actors.
An element of adaptation governance and accountability centres around the ‘Do No Significant Harm’ principle of the European Union taxonomy. The ACT Adaptation Methodology establishes the expectation that companies ensure that their adaptation strategies do not significantly harm climate change mitigation, biodiversity, health or other important matters, and possibly have a positive impact on such areas. As key players in global systems, companies must account for their negative externalities and increase their positive externalities, ensuring that they do not impede, and instead contribute to, climate adaptation.
As key actors in global systems, companies have a responsibility to account for all of their climate impacts that may help or hinder the global challenge of climate change adaptation. Through WBA benchmarks such as Climate and Energy, Nature (which includes biodiversity) and the forthcoming Urban Benchmark, WBA employs the theory of system transformations in envisioning companies’ responsibility in sustainable development. As with other sustainability challenges, corporate action on adaptation requires systems change. With the approach of COP27 amplifying the global conversation on adaptation, companies have an opportunity to step up their action now.
WBA welcomes you to join the conversation on corporate accountability in adaptation and follow the developments of the Assessing low-Carbon Transition (ACT) Initiative’s Adaptation methodology by reaching out the WBA and ADEME (the French Agency for Ecological Transition) teams via email@example.com. We also welcome you to reach out to our Urban Benchmark team via firstname.lastname@example.org to get involved in the public consultation on the development of the Urban Benchmark methodology.