Companies must learn to collaborate to shelter from climate change
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Companies must learn to collaborate to shelter from climate change

Helping to mitigate climate change is one thing for companies, but adapting to it is much harder. Sharing costs could be one answer.

The advance of global warming, highlighted by the Intergovernmental Panel on Climate Change’s report this week, not only demands that the private sector accelerate efforts to cut carbon emissions. Companies must also adapt to the changing climate —and this will involve interacting in new ways, experts have told GlobalMarkets.

The IPCC’s report Global Warming of 1.5°C re-emphasises what those alert to climate change already knew: if the world warms another 0.5°C from its present level, already 1°C above pre-industrial levels, it will cause severe consequences. At 2°C of warming the effects are far worse. If the Paris Agreement commitments are kept, the world is on track to heat by 3°C by 2100.

Although much of the corporate sector now recognises this immense challenge, it has done little yet to reshape the economy. “The major barriers are the very human tendency to not like change, and also there are vested interests in the current economic system,” said Pedro Faria, strategic adviser to CDP, the carbon reporting platform.

Adapting to climate change is widely seen as harder for companies than trying to mitigate it — meaning cut their emissions. Energy efficiency brings an early monetary return, but building flood defences is pure sunk cost — until the storm comes. Sharing those costs may help.

“Companies need to start to work pre-competitively on some of these issues,” Faria said. “Think of the floods in Thailand [in 2011]. The world’s biggest IT companies and car manufacturers were highly exposed to companies in a flood area. They could have avoided that, if they had realised that risk and worked together to reduce it.”

Chris Brown, global head of environment at Olam International, the Singapore-based food commodities group, explained “pre-competitive” collaboration as “trying to identify what best practice looks like”. The competitive part, he added, was “how well we implement”.

In Tanzania, where Olam has an irrigated coffee farm, it has set up a water users’ association for the local river basin, to help the community manage this shared resource efficiently and fairly.

The Sustainable Apparel Coalition, a San Francisco-based trade body, is creating an institute to fund development of shared programmes to improve the clothing industry’s environmental impact. Since this includes water efficiency, it will have an adaptation benefit.

Lewis Perkins, executive director of the Apparel Impact Institute, said it hoped to use “creative funding vehicles” to attract institutional investors to finance investments in cleaner plant, not just for single companies, but groups of them.

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