The master stonemasons who built the great cathedrals of medieval Europe relied partly on experience, partly on copying previous successful constructions, and partly on a whole lot of luck. When a cathedral collapsed (which they not infrequently did), it was chalked up to experience and another approach tried.
The risk of collapse was acceptable in a world where the parameters of that risk were difficult to measure and analyse. With the industrial revolution, the world’s understanding of the causes of and mitigations against failure improved, and the acceptance of risk shifted with it.
Now, sophisticated models can draw on data from groundwater surveys, wind shear calculations, measurements of seismic activity and many other sources. And even though we are now able to reach heights our medieval predecessors would never dream of, structural failures are rare.
Profound shift
Mildly interesting, you might think, but so what? My point is that a far more profound shift is now happening in how we model, measure and analyse the risks of climate change and ecosystem collapse. Scientists, academics, economists, investors: the brightest minds in many fields are considering how we can understand and manage the existential risks we face.
Do some hard thinking about what measures will – and won’t – work to monitor progress
The urgency of the challenge means these new paradigms are flowing through to regulation and reporting with unprecedented speed. Right now, leaders should be thinking about how they position their organisation to respond.
Review your risks
Make sure you have a firm understanding of the impacts of climate change and the risks and opportunities around natural capital specifically for your company. Get whatever help you need to do so: robust models and external expertise will often be required to shift established mindsets and build new understandings.
Define your ground
Do some hard thinking about what measures will – and won’t – work to monitor progress. This is not just for your own governance purposes, but also to protect yourself and others from poor reporting requirements that create perverse outcomes or destroy value.
The type and scale of the risks we face will demand new kinds of collaboration
Invest whatever time you can in initiatives to develop measures for external reporting, for example by providing feedback to the International Sustainability Standards Board’s exposure draft of climate-related disclosures or to the Taskforce on Nature-related Financial Disclosure’s draft framework.
Build it now
Review your internal reporting systems for opportunities to create flexibility to cope with new measures, particularly non-quantitative ones. Most companies’ reporting systems are already creaking under the strain, and things are only going to get worse.
Any build that allows for flexibility of data gathering, verification or reporting models is likely to be a no-regrets investment.
Reprioritise expertise
The type and scale of the risks we face will demand new kinds of collaboration. Hierarchies and sign-off authorities will need to change to ensure the right expertise is applied to the right stage of decision-making.
It’s not just a question of hiring more analysts: these skills are important but subject matter expertise is even more so. Check that you have the right mix of skills in the right places with the right incentives to reach the solutions you need.
