Chapter 7

Adapt

  1. Introduction
  2. Step 1: Establish a continuous process for climate risk analysis
    1. Get started: Define the scope and required data for your climate risk analysis
    2. Start analyzing your climate risk
    3. Assess exposure and vulnerability across assets and value chain and quantify your risk
    4. Ensure alignment with regulation, benchmarks, and reporting requirements
  3. Step 2: Formulate adaptation goal, and prioritize and implement adaptation pathways
  4. Step 3: Continuously re-evaluate the performance of adaptation options
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Get started: Define the scope and required data for your climate risk analysis

The initial step of risk analysis serves to prioritize the focus points for action on adaptation with your company’s structure. It should provide clarity on which of your assets or parts of the value chain are expected to suffer significantly from climate-related hazards and what their respective exposure and vulnerability is. These insights provide the foundation for meaningful adaptation planning.

As basic consideration, it is important to mention that risk, in the context of climate adaptation and resilience, involves understanding the potential for adverse consequences resulting from climate-related hazards. It is determined by the interplay of three key components: hazard, exposure, and vulnerability. Hazard refers to the likelihood and scale of a peril that has the capacity to damage or destroy a particular asset, such as cyclones, wildfires, floods, droughts, or heatwaves. Exposure involves the extent to which assets, including property, vehicles, and workforce, are subject to these hazards. Vulnerability is the degree to which these assets are susceptible to damage at a given intensity of a hazard, influenced by their sensitivity and adaptive capacity and considering specific characteristics like construction methods and materials used. The relationship between these components is complex and non-linear, requiring a comprehensive approach to accurately assess and manage risk.

The first step in risk analysis is to define the scope of the assessment by engaging relevant business units (BUs) in the design process. For some organizations, the risk is concentrated within company assets, making BU heads key stakeholders. For others, such as consumer packaged goods (CPG) companies, the primary risk is found upstream in the supply chain, making procurement teams the key stakeholders.

After defining the scope, gather the appropriate data to kick off the analysis. This includes collecting geo-spatial data on the sites in focus, including supplier sites where relevant, and identifying the relevant perils to assess, such as fire, wind, and rain (for example, see Nestlé’s process in the WBCSD Business Leaders Guide). Additionally, select climate scenarios that are issued by recognized organizations, such as the Intergovernmental Panel on Climate Change (IPCC) and the International Energy Agency (IAE).