With the floods in Valencia in Spain in November a tragic reminder of the growing risks of climate change, a timely new report from ACCA suggests that too many businesses are not prepared for climate-related disasters.
ACCA’s survey report, Weathering the storm: building resilience against climate disruptions, finds that business resilience is not high on the agenda of many members. Two-thirds of those questioned said they are not interested in climate adaptation – despite the finance profession being ideally placed to drive the organisational transformation towards climate resilience through comprehensive risk-based planning.
The survey reveals a lack of preparation in every area
The report is a detailed exploration of the stages of resilience building, from continuity planning through to operational resilience, and the role of the finance function. It includes useful business continuity and crisis management toolkits and videos for finance and accountancy professionals. It is, however, the report’s findings, based on an extensive survey of members’ views, that raise cause for concern.
Cause for concern
A significant proportion of members said their own organisation (or clients) had already been disrupted by climate-related events, although the exact nature of the impact varied widely from region to region.
Globally, 32% said their organisation had been affected by power outages, with the figure rising to 54% in Africa. In North America, supply chain disruption has been experienced by 41% of respondents, compared with 28% in Western Europe. Overall, 27% of respondents said their organisation had experienced financial loss, and 17% that facilities had been damaged, as a direct result of climate-related events.
The report argues that climate risk and business continuity planning are integrally linked. However, the survey shows that only 22% have business continuity plans in place and less than 10% describe themselves as comprehensively prepared.
Off guard
Preparing for climate challenges, says the report, requires actions that include developing contingency plans for sourcing and operations, protecting organisational infrastructure, creating adaptable supply and distribution chains, and using predictive analysis to anticipate future events.
But the survey reveals a lack of preparation in every area. Only 17%, for example, regularly rehearse their response to environmental disruptions, and just 20% have identified climate-related risks across their operations.
‘It’s time for organisations to prioritise climate adaptation planning and invest in building a more resilient and sustainable future,’ declares the report. It recommends the following key actions:
- Update and exercise business continuity plans.
- Develop future-oriented strategies that account for climate-related risks.
- Conduct climate risk assessments.
- Implement climate adaptation methods.
- Invest in sustainable practices.
- Engage employees and stakeholders.
- Comply with evolving regulations.
- Diversify supply chains.
- Monitor and review climate trends.
Two-thirds are not investing enough to adequately address the physical risks
Beyond the obvious
The report also explores operational resilience, which focuses on protecting end-to-end services that may cross over functions and departments. ‘Put simply,’ it says, ‘incorporating climate-related risks into business continuity plans is crucial for future success.’
This involves looking beyond the immediate and obvious impact of climate-related events. One of the report’s main findings, for example, is that organisations need to consider the impact of a distributed workforce, and the societies and places they live in: ‘An organisation with a digital-first approach must consider the effect of working from home in relation to climate-related disasters, from installing power generators to monitoring employee wellbeing.’
Investing in resilience measures can help to minimise disruption costs, enhance customer confidence, foster agility and adaptability, and drive long-term sustainability. But while a third of the respondents to ACCA’s Global Economic Conditions Survey for the second quarter of 2024 said that the long-term survival of their organisation is a key driver for undertaking business resilience planning, the Weathering the storm report found that two-thirds of organisations are not investing enough to adequately address the physical risks posed by climate change, and only 37% plan to increase spending in this area in the future.
Our future will be brighter if we all work together
Taking the lead
The finance function plays a vital and leading role in sustainability transformation and in driving sustainable value creation. Finance has the advantage of an end-to-end perspective across the organisation, as well as the skills needed for resilience planning.
The report sets out a series of recommendations that will help businesses combat the challenges of climate-related risks:
- Understand and assess the business risks.
- Embed resilience in business strategy.
- Scale up investment in mitigation and adaptation.
- Communicate with stakeholders.
- Advocate for climate resilience.
But a challenge of this magnitude can be successfully overcome only if business, finance professionals, governments and policymakers work together.
‘Public and private efforts should be aligned, with businesses involved in planning at regional and national levels,’ says the report. ‘Governments should encourage business leadership in climate action and resilience.’ Our future, in other words, will be brighter if we all work together.
