by Judith Curry
Perspectives on climate change adaptation from Coca Cola, SwissRe, and Acclimatise.
In Part I UK-US Workshop on Climate Science Needed to Support Robust Adaptation Decisions, we considered presentations from the ‘demand’ side, presenting perspectives from the UNFCCC, development, public health, and security. Part II focuses on perspectives from the private sector.
Adams shared private sector examples of climate adaptation from agriculture, retail, transportation, and energy, Peter will provide early insights into how climate data and information are used by business decision-makers to build resilience to climate variability and change in their supply chains and infrastructure. Business sectors that are vulnerable to climate change include those with long-lived fixed infrastructure, financial services, and sectors with extensive or climate-vulnerable supply chains.
What triggers climate adaptation? Within the business fence line: previous direct experience of impacts, awareness of climatic sensitivity of business objectives and financial performance, changing views of sustainability. Outside the business fenceline: reputation; regulation, legislation and standards; enhanced reporting requirements from stakeholders; litigation.
Business can manage uncertainty, but do not always have the power to manage risk (i.e. some things are beyond their fence line). Within business fencelines: assets and infrastructure, production. Beyond business fence lines: community and ecosystem resilience, raw materials sourcing, market conditions, geopolitical conditions.
Businesses want tools and guidance: e.g. risk screening tools, managing risks in supply chains. Businesses want to understand tradeoffs – making adaptation decisions requires business-specific analysis of costs and benefits of action vs inaction; how much adaptation to do and when? Where are the win-win solutions? Most businesses are focused on the short term, need weather/climate information this year out to +10 years. Need to tailor climate science to the needs of business: encourage development of data/information in formats & resolution useful for business; professional bodes and business organizations can help translate available data/information into business-relevant resources. Businesses need guidance, tools and entry points into their existing practice.
Accept uncertainty and plan for resilience, focusing on robustness to today’s and tomorrow’s potential climate – not necessarily the optimal solution. Some businesses are seeking opportunity, e.g. improved process efficiency, rainwater harvesting, renewable energy, green roofs, surface water drainage systems, etc.
Greg Koch provided a fascinating perspective on recent observations across Coca Cola’s global operations, the company’s water strategy and specific climate adaptation responses, and modeling study results that help drive their decision making. This statement from Coca Cola’s CEO puts water into perspective re Coca Cola’s business: “Our business can only be as healthy as the local communities where we operate; access to clean water is one of the most important barometers of a community’s health.”
To serve Coca Cola’s world wide market, local water supplies are used in 1000 plants worldwide. Water is the biggest part of Coca Cola’s supply chain, and it is under growing stress. Stresses include physical availability and sustainability of water resources, available water resource infrastructure, water pricing, droughts, competing uses and increasing water demand, climate change, regulatory limits and social acceptance. Water supply risks are greatest in these manufacturing locations: western US, north Africa and the middle East, Australia, and South Asia. Flooding can also impact water treatment plants, impacting their water supply. Water problems in recent years have resulted in plant closures, the need to deal with water resource reduction and find new water sources, and improve waste water treatment.
In context of their Global Water Stewardship Strategic Framework, Coca Cola undertakes extensive global risk assessment and analytics, that includes water resource availability and sustainability, wastewater compliance, supply economics and efficiency, and social acceptance and engagement. They operate in a risk management framework, whereby the assess the water and related social risks, ecological risks and risks to human health and well-being, and make decisions on investments to support watershed protection, water access & sanitation, water for productive use, and education & awareness. To date, they have made investments in 468 community water projects in over 100 countries. A key framework for their analysis is the food-energy-water nexus, in context of climate change, population growth, and global development. IPCC scenarios out to 2025 are used in this analysis. His talked focused on the water stress in South Asia associated with growing population, irrigation, and increased number of power plants.
Koch remarked that uncertainty about the magnitude of climate change ended up being a relatively minor factor in decisions related to investing in individual water projects, as other factors dominated the decision making rationale.
The time horizons for business interest in climate adaptation is mostly out to 10 years, although big infrastructure investments are generally made for a longer time horizon.
In comparing these three presentations, one thing that struck me was that Swiss Re and Coca Cola have moved beyond the traditional fencelines for a company in dealing with climate risk. Both SwissRe and Coca Cola are addressing climate risks to their companies through public/private partnerships – SwissRe through supporting government decisions for improving the resilience of infrastructure that it insures and Coca Cola through working to improve local water infrastructure.
Adams’ presentation and his company Acclimatise provide an example of climate services provided by the private sector, for the private sector. Big companies like Coca Cola with high vulnerability is managing this with in house expertise. Both Coca Cola and Swiss Re have developed very sophisticated risk assessment/management models.
All three companies seem to accept prima facie the magnitude of the near term climate risks as laid out by the IPCC. How vulnerable are these businesses to making a bad decision if the IPCC turns out to be wrong on the time scales of interest? Well, it seems like they are not so vulnerable. In the case of Acclimatise, they adopt the approach of looking for win-win or robust decisions, which are arguably decisions that make sense in any event, even if motivated by concerns about climate change. In the case of Coca Cola, other drivers seem to dominate the actual decisions. In the case of SwissRe, there is a clear advantage to them if property owners and local governments make decisions to increase the resilience of infrastructure.
In comparing the private sector perspectives with public sector perspectives presented in Part I (e.g. UNFCCC, DFID), it seems that the private sector focus is more consonant with the DFID framing of climate adaptation than with the UNFCCC framing.
Coming up in Part III: robust decision making strategies.
Atlanta weather update: Well, Georgia Tech is closed again today (tomorrow also), leaves me extra time for blogging (and to catch up on all the things I put off last week). We are hunkered down, about 100,000 people in Georgia are without power (Midtown Atlanta is ok). The biggest threat is that the ice storm will down trees, which is a bad thing for the environment and a really bad thing for power lines. The current precip is graupel (little ice pellets); the good news these bounce right off the trees. So as long as I have power, I will be able to keep blogging.