Elaboration of business strategies on adaptation based on the framework and tool developed under Business for Climate Platform (EPC) in Brazil

Submitted by Mariana Nicolletti 30th March 2015 15:08
551e43f195a0bscreen-shot-2015-04-03-at-8 - climate adaptation.


Figure from report: Framework - A Path to Elaborate Business Agendas for Adaption to Climate Change

Introduction

The Business for Climate Platform (EPC) is one of GVces’ projects on Climate Change. GVces is the Center for Sustainability Studies of Getulio Vargas Foundation (FGV-EAESP) in Brazil, it was founded in 2003 and has been working for the development of sustainable strategies, policies and management tools, both public and private, in the local, national, and international realms. Its programs are guided by four lines of action: Capacity Building; Research and Knowledge; Articulation and Interchange; and Communication and Outreach.

Launched in partnership with The Prince of Wales Corporate Leaders Network For Climate Action (CLN) and supported by its 27 Founding Companies, EPC today counts with the participation of 33 companies that have been mitigating their emissions, evaluating their risks and opportunities, jointly discussing practical solutions and contributions to the country’s legal milestone. This effort contributes to:

  • Strengthen the competitiveness of national industry within a new global economic context.
  • Ensure access of Brazilian products to foreign markets which are increasingly demanding in regard to social and environmental standards.
  • Build a favorable domestic market for technological development, innovation and business practices with a lower potential of emitting greenhouse gases.
  • Promote Brazil’s energy security.

Since 2011 the theme Adaptation has been part of EPC’s agenda. In a workshop the member companies were invited to debate the main concepts, reflect about the importance of the subject, strategies of adaptation and the role of private sector and to work on a real case. It got evident that adaptation was very new subject to most of private sector and the reasons and consequences of businesses involvement in this agenda were not clear at all.

At COP17 it got evident that the theme could not be postponed anymore, its relevance would increase dramatically in following years and the main players in this agenda were not ready to invest and actuate. That was the case of private sector, not just in Brazil, which believed that Adaptation was only public policy agenda and represented only losses that should be avoided or responded by governments. It was from this panorama that emerged the motivation to promote a mobilization event in partnership to Private Sector Initiative (PSI) of United Nations Framework Convention on Climate Change (UNFCCC).

The Latin America Adaptation to Climate Change Forum was held at FGV on 26th July of 2013 bringing together more than 150 representatives of private sector, governments and civil society organizations. From the presentations about concepts, initiatives and cases, as product there was collectively drawn a framework with the steps that should be followed by companies in order to elaborate business strategies on adaptation. More than this, other outcomes were the participants aiming to stay in contact and deepen the exchange of experiences and the main players of this agenda in Latin America identified.

In that way, the path was ready to initiate a consistent, hand on track of work in EPC. The favorable context was not just this inside one, but specially the national panorama. The Brazilian Environmental Ministry (MMA) was in the first steps of its hard task of elaborating the National Adaptation Plan and GVces, through its Environmental Policy and Economy Programme (PEA), was defined as the partner to elaborate some of the technical studies required. One of these studies delivered to the Ministry was about the motivations, barriers and elements to foster the actuation of private sector on adaptation. This work includes a conceptual research with advisory tone and a deep dive, applying Economics of Climate Adaptation (ECA) to water resources analysis.

In parallel, internationally it gets evident the significant and growing demand for financial resources to face the impacts from climate change, reducing vulnerabilities and increasing resilience, especially in the developing countries. While the adaptation component of Green Climate Fund may be reinforced in next years, in Brazil, there is the Climate Fund with refundable and non-refundable lines of credit. A clear agenda with defined adaptive measures is the first indispensable step to companies access available resources to mitigate risks and explore opportunities.

Adaptation to Climate Change and Private Sector

Historically adaptation has been considered and treated as government matter: the public sector should lead and implement this agenda mobilizing other players (specially the civil society) when needed. It is changing and the private sector is realizing that there are significant risks to their businesses related to climate change impacts as well as opportunities getting prepared to the new scenarios. UNFCCC, for example, has been working through its Private Sector Initiative (PSI) to foster the private sector action mapping and publishing cases; the step ahead that the sector is in developed countries gets clear when jumping into the cases available there.

Thereby, this is an important element of adaptation agenda: while the developing economies and poorest communities are most vulnerable, they are the ones with higher lack of resources to adapt. The deficiency does not just refer to financial resources, but to knowledge, scientific and technical information and regulatory and political encouraging scenarios. From the edition 39 of OECD Environmental Working Papers (2011), among the main barriers faced to the private sector to actuate on adaptation are: low level of awareness about the risks, difficulty to access and to interpret of specific information, high level of uncertainty complicating decision-making and the tendency to focus on short-term cash flows. 

At the same time, the private sector entrepreneurship is required to the necessary development of this agenda. As denoted in the study about the engagement of this sector delivered by Environment Ministry, there are some characteristics of this sector, processes and knowledge that may complement public sector actuation and respond to some needs. A good example of it is the insurance sector database and products, besides the knowledge about risk management, the capacity of action in short term and innovation.

Also, listed companies are hearing an increasing call from investors to access and communicate transparently their climate risks. In Brazil, the Corporate Sustainability Index (ISE), of BM&F Bovespa, included, in 2013, in its questionnaire adaptation elements, under Climate Change dimension. The EPC tool is an instrument that supports companies to attend these criteria considered in ISE assessment. Four out of six companies that we know are implementing the tool are listed on ISE in 2014 (Braskem, CCR, Natura and Suzano).

Moreover, big companies have a strong influence power over their value chains with the potential to guide and partner with small and medium business to respond to climate threats. EPC network is composed by a representative group of Brazilian big companies and have a team of specialists that has already conquered credibility with private sector. Thus, the conditions to foster the engagement and actuation of business on adaptation are given and GVces is performing its responsibility with positive results so far. 

Method

In order to achieve such objectives, the EPC Framework to support the elaboration of corporate strategies for adaptation to climate change was built together with EPC members based on Latin American Adaptation Forum´s outcomes. On the other hand, the EPC Tool[1] to support the Framework implementation, also designed with EPC members, is based on UKCIP studies and tools (such as Wizard and AdaptME)[2]. Both products have been co-developed and improved through an interactive and wealthy process with EPC members, which had different opportunities to learn, use and comment on the EPC Framework and Tool.

Furthermore, five pilots were elected from EPC members proposals and started to be implemented in June 2014, applying the EPC Framework and Tool with the close support of EPC team. During 2014 EPC promoted five meetings aimed to bring useful information on adaptation to members, specially about other initiatives in course and the national scenario, but mainly to promote the experience sharing and a wealthy debate on challenges and solutions for climate risk management. From those, two meetings were focused on the pilot projects, the three other included all member companies, which are elaborating, implementing their adaptation strategies or simply have interest in the theme.

Thus, the meetings promoted during 2014 were successful in keep other companies, besides the pilots owners, involved in this track. They have been sharing their experiences, knowledge and, sometimes, helping on the elaboration of solutions to common challenges. It happened, for example, at the 2nd working group meeting, on October 15th, when a design thinking method was applied to promote the build of solutions to the challenges presented by representatives of the companies running piloct projects.

Besides EPC members themselves, EPC has also exchanged experiences and shared results with other partners such as IntergaRSE, Low Emission Development Strategy for Latin America Network (LEDS LAC), GIZ Network, University of Cambridge Institute for Sustainability Leadership and the Prince of Wales’s Corporate Leaders Group (CLN). 




[1] Currently, companies are implementing the version 1.1. and the version 2.0 will be published in the second semester of 2015 based on comapanies and partners' contributions. The Framework and the Tool are available to download at EPC website.

[2] For more information check the website: http://www.ukcip.org.uk/wizard/

Objective and expected outcomes

As mentioned before, although climate impacts have already been impacting Brazilian business operations, adaptation to climate change is still an issue not fully understood and not considered strategic on companies´ planning. Therefore, the broad objective of EPC adaptation track is to promote awareness in business sector and strength business actions related to climate risk management, engaging companies to build an adaptation culture aligned with mitigation.

In this way, EPC co-developed, with member companies, a framework and tool to guide and base the elaboration of corporate strategies for adaptation to climate change, and supported five pilot projects applying them. The development of pilot projects aims to provide important insights on the challenges related to corporate strategies for adaptation, but also to promote interesting reflections and debates between all EPC members.

The main outcomes expected from this process are:

  • business decision-makers qualified to deal with adaptation challenges;
  • a robust and useful framework and tool to support companies;
  • a start point of a culture of business proactive actuation on this agenda;
  • the notion that consistent actuation and investments on adaptation to climate change require internal and external articulation; and
  • Brazilian business case studies on adaptation to climate change.

Pilot projects and main challenges and solutions

The five companies that are implementing the framework and tool are: Braskem, CSN (Companhia Siderurgica Nacional), Grupo Boticário, Grupo CCR and Suzano.

Those pilot projects planned to end the first cycle of elaboration of their adaptation strategies in May of 2015. It means that at this point they will have an action plan drawn and aligned with strategic areas and stakeholders as well as the monitoring and evaluation plan. Nevertheless, there are already important challenges and solutions mapped from companies experiences so far: 

  • To get the recognition and incentives from high management – it has been mentioned and debated many times at meetings and on the calls with the pilot projects. Companies are dealing differently with this same challenge, while to one of them it is seems to be a barrier to a consistent project and specially to scale it afterwards, other one takes as a motivation to draw a consistent strategy with as much information as possible that can be use as a showcase with the high management level.

Solutions

- to start with a scope that is really material to the business, as hydric resources for some of them. In that way it is easier to show quantitative evidences of the strategic level of the agenda;

- estimate the potential losses and costs for the business from the inaction, even if there is no information available internally or in the sector, it is possible to get more general information in studies and reports that could be taken as a initial reference for sensitization. 

  • The involvement of different areas of the company – it has been insisted as part of the support to the pilots that is highly important to involve strategic areas of the business in the projects, but companies has responded differently to this recommendation. While two of them have a lean team for the pilot, other has been involving several areas and collaborators in the process. The difficult here is, first of all, to explain adaptation to climate change and its relevance for the business, secondly to make clear the connection of the project to the specific areas of each collaborator.

Solutions:

- to promote an introductory workshop with the main areas to be involved presenting the international and national relevance of the subject and mainly the connection to the sector and to the business; and

- to articulate with other companies of the same sector in other to gather and systematize consistent information to be used to engage the different areas; and

- to link the elaboration of the adaptation strategy to other project that is already in course and that already has the adherence of relevant areas.

 

  • The articulation and engagement of stakeholders – it is, at the same time, a challenge and a solution. In the meetings of working group it has been suggested as a way to overcome some of the barriers brought by the pilots as, for example, the gathering of specific climate projection and costs and losses information. On the other hand, there is the fear that in this approach internal strategic information is required by the other side, the stakeholders. Also, the investment of time and effort to articulate some stakeholders from different sectors, as government and civil society organization is usually significant.

Solutions: to start mapping the network of stakeholders already involved in other social and environmental projects of the companies and identifying the contributions that they can bring to the strategy. 

 

  • Difficulty to choose a climate scenario and to deal with the intrinsic uncertainty – depending on the business sector, the companies have technical areas in their structure. Those teams can help a lot with specific climate historical information, but in general even they have difficult to read future climate scenarios based on climate models. The unanimous challenge here is to firstly access the information for the geographic scope and the same time horizon, secondly deal with the uncertainty intrinsic and, sometimes, with dissonant projections presented by two or more studies and, finally, to translate the weather phenomenon projection in impacts to the business. Companies that can hire external consultants to support with this task, but most cannot approve a budget for that because the high-level management is not convinced about the relevance of the initiative.

Solutions: companies have been advised to assume that the uncertainty is unavoidable and that it has to be assumed and registered. A guideline that part of the companies has adopted is to analyze the possible adaptive measures under their positive results in other areas, independently of the climate change events.

  • To gather assertive and financial data for analyses – the EPC tool guides the companies to assess potential risks and opportunities and to reflect about how they would impact the business. It is a crucial exercise to the following step that is to prioritize the risks and opportunities and define those that will be translated into activities in the action plan. The challenge is to register the impacts as potential financial costs and losses in order to compare to the investments required as a response to the inaction.

Solutions: two different ways are being adopted by companies:

- basement of future costs and losses on the history data; and

- definition of ranges of costs and losses to be assigned to each risk accordling to it’s magnitude. 

In order to support the companies in the efforts of involve the high management, different areas and stakeholders in the agenda, EPC has issued an "engagement package" contending an introduction material; a table with areas to be involved, why and when; and a presentation with main concepts of adaptation, the relevance of it, how and why to get involved.

Conclusions

The adaptation is being recognized as a relevant and unavoidable agenda by the private sector in Brazil, specially by the sectors more vulnerable by to the climate change. Nevertheless, generally it is considered just by the negative impacts and potential losses, the opportunities are disregarded and there are several challenged faced in order to really internalize this agenda. 

Some of there were mentioned here as well as the solutions that are being addressed by the companies implementing the framework and the tool for the elaboration of business adaptation strategies, developed under EPC. It is getting clear for the sector that the adaptation agenda has to be integrated to the mitigation one and that the abilities and resources of companies are required for a consistent advance in the matter. For example, the entrepreneurship and planning skills of the private sector is precious for timely and consistent action. 

Moreover, big companies have a strong influence over their value chains with the potential to partner with medium and small business to respond to climate change threats.

From the Latin America Adaptation Forum, held by FGV in 2013, it got evident that there are gaps in the regulatory context, information, cases of reference, but also tools for the effective entrance of private sector in adaptation agenda. Is considering this panorama that the Business for Climate Platform (EPC), of GVces, has developed and published a framework and tool for the elaboration of business strategies on adaptation and is supporting the implementation of project pilots. 

Further resources

Access report here

Further resources

References

·         Adaptation Scotland. Adapting to Climate Change: A Guide for Business in Scotland, 2010. Available at: http://www.adaptationscotland.org.uk/3/82/0/Adapting-to-Climate-Change--A-Guide-for-Businesses-in-Scotland.aspx

·         Füssel, H. M. Climate change vulnerability assessments: an evolution of conceptual thinking. Climatic Change(75(3)), 301-329, 2006.

·         GVces. Diagnóstico preliminar das principais informações sobre projeções climáticas e socioeconômicas, impactos e vulnerabilidades disponíveis em projetos e trabahos dos atores mapeados, 2014. Available at: http://www.mma.gov.br/images/arquivo/80182/Estudo_Mapeamel%20_Impactos%20_Vulnerabilidades_FGV.pdf

·         INCAE Business School. Herramienta de Identificación de Riesgos, Oportunidades y Acciones de Adaptación al Cambio Climático, 2013.

·         Risk Management Guidelines Companion to AS NZS, 2004. Available at: http://bch.cbd.int/database/attachment/?id=12285.

·         UK Climate Impacts Programme (UKCIP), Adaptation Wizard, 2012. Available at: http://www.ukcip.org.uk/wizard/

·         UK Climate Impacts Programme (UKCIP), BACLIAT: Business Areas Climate Assessment Tool, 2012. Available at: http://www.ukcip.org.uk/bacliat/