A newly published book by Davine Roessingh, Eva Schram and Tom Wetzer offers a deep dive into the business world’s strategic shift towards focusing on adaptation and not just mitigation alone. They argue companies must align with the evolving environmental and regulatory landscape. I’ve read it and thought I might share some reflections on its contents and its implications.
The document focused on the design and implementation of climate transition plans. It suggests that these plans must be integrated into the core business strategy, not treated as a peripheral activity urging companies to proactively engage in developing comprehensive climate transition plans. A key part of this is understanding the shifting regulatory landscape. In many regions, particularly the European Union, what were once voluntary climate transition plans are becoming mandatory. Regulations are increasingly requiring companies to not only disclose their carbon footprints but also to implement concrete plans to reduce them. This regulatory push is a clear signal to businesses: adapt or face potential legal and financial consequences. This is already the case in Switzerland where oil distributors face heavy fines if they do not shift from unregulated carbon credits to Internationally Transferred Mitigation Outcomes (Paris-Agreement-compliant carbon credits which are heavily regulated ).
The authors propose a two-pronged strategy for companies wishing to define and implement climate transition plans. Firstly mitigation, which focuses on reducing greenhouse gas emissions. Secondly, adaptation involves modifying operations and strategies to withstand the impacts of climate change. The key difference lies in their approach: adaptation deals with coping with the effects of climate change, whereas mitigation addresses the causes of climate change. And they propose some concrete actions companies can take to do so:
- Transition to Mandatory Climate Plans: Companies should prepare for the shift from voluntary climate transition plans to mandatory regulations, especially in the EU.
- Mitigation and Adaptation Efforts: Develop plans that incorporate both greenhouse gas emission reduction (mitigation) and strategies to adapt to climate change impacts (adaptation).
- Align with Regulatory and Policy Developments: Stay informed and align plans with evolving national, regional, and sector-specific climate regulations and policies.
- Engagement with Stakeholders: Engage with a range of stakeholders, including investors, policymakers, and customers, to inform and validate the transition plan.
- Comprehensive Disclosure and Transparency: Emphasize transparent reporting and disclosure of climate-related actions and strategies in line with evolving EU disclosure regulations.
- Risk Management Focus for Financial Institutions: For financial institutions, specifically develop transition plans focused on managing financial risks related to climate change.
- Integrate Climate Goals into Business Strategy: Ensure that the business model and strategy are compatible with the transition to a sustainable economy and align with climate objectives such as the Paris Agreement goals.
A key part of this is transparency in businesses’ climate-related actions. Companies are now expected to provide detailed reports on the steps to reduce their environmental impact. This level of disclosure is crucial not only for regulatory compliance but also for maintaining trust with stakeholders. This brings the spotlight on quantifying impacts: While Mitigation is relatively straightforward to measure and invest in (e.g. tons of CO2), adaptation is more complex to tackle. This is due to several factors:
- Diverse and Localized Impacts: Climate change effects vary greatly across different regions, requiring localized adaptation strategies. This diversity makes it challenging to develop and measure universal adaptation metrics.
- Uncertainty of Climate Predictions: Adaptation often relies on climate models, which have inherent uncertainties, especially at local scales. This uncertainty complicates planning and measuring the effectiveness of adaptation strategies.
- Integrating into Existing Systems: Adaptation requires integrating new strategies into complex, existing social, economic, and ecological systems, which is inherently more complex than implementing specific mitigation actions like reducing emissions.
- Long-term Planning and Feedback Loops: Adaptation strategies often involve long-term planning with delayed feedback, making it difficult to measure immediate effectiveness or adjust strategies promptly.
- Subjectivity of Success Criteria: The success of adaptation measures can be subjective and context-specific, unlike mitigation where quantifiable reductions in greenhouse gas emissions often measure success.
I suspect these form a big part of the reason why there is so little investment in adaptation.
During Cop28 we talked about measuring adaptation effects and benefits with Gareth Philips, Manager of the Climate and Environment Finance Division at the African Development Bank.
We realised that our (ClimateGains) approach and tech for measuring mitigation could work well for measuring the impact of investment in adaptation across a range of projects.
We now have a formal cooperation in place with the African Development Bank. A pilot to look into how this could work in a “live” context within some of the projects they are running. We are open to engaging with future-forward organisations that might want to partner with the initiative. Let me know if you are interested.