How to Better Engage Businesses in Climate Change Resilience
A version of this post also appeared on ACCCRN.org.
By 2050, 75 percent of the global population will live in cities, and Asian cities are likely to account for more than 60 percent of this increase. Medium-sized cities, which are seeing some of the fastest population growth, are among the least prepared for tackling new climate changes. Risks—such as coastal flooding that could produce damages costing $1 trillion a year by 2050—affect the competitiveness, profitability and viability of many industries. It also exacerbates urban issues, particularly in poor and vulnerable communities that lack adequate infrastructure and services. One of the key steps a city can take to build climate resilience is to engage the private sector—which often has the skills, finance and influence—to mobilize resources and solutions for climate change adaptation.
Here’s a look at several pathways for improving and scaling private sector involvement, which were identified at the 8th Community-Based Adaptation Conference in Kathmandu:
First, it is important to recognize that the private sector is a broad and heterogeneous group. They are entities as diverse as local individually owned businesses to multinational corporations. All have different levels of climate exposure and sensitivity as well as different assets and capabilities, thus requiring different strategies.
In order to manage risks, the most basic approach to engaging the private sector is to encourage businesses to climate proof their own footprints and value chains.
Companies can start by assessing the potential impacts of climate shocks and longer stresses on operations, assets, supply chains, logistics, workforce, productivity, competitiveness and markets. Additional measures could include business continuity planning, incorporating robustness and redundancy into value chains and production systems, and improving safety measures for workers.
As the 2011 flooding in Thailand revealed, businesses that fail to take into account weather risks can suffer significant losses. Organizations such as Business for Social Responsibility and Resilient Organization have developed guides on how to address these challenges tailored to the specific needs of different industry groups and organizational structures.
A second pathway to engaging the private sector is by utilizing innovative products and services to support resilience.
As Thomas Loster, Chairman of the Munich Re Foundation, noted the insurance industry can play an important role in adaptation far beyond just providing financial compensation for losses. They can provide more accurate understanding and pricing of risk, gather and improve data quality, and support risk reduction activities. Similarly, Luke Colavito of IDE-Nepal, also shared how agribusinesses and farmer organizations can support community based adaptation by providing information on climate resilient crops, improving micro-irrigation, and the methods for effectively collecting and storing crops.
Expanding private sector investment to support resilience of the most poor and vulnerable is also crucial. This can be done by decreasing risk for small and medium firms and increasing opportunities for businesses to enter markets that serve the poor by giving low or no interest loans, grants, or a mix of both. However, this has to be done carefully and with due diligence so as to ensure products and services are appropriate for the local context and ecology, benefit the poor, respond to community needs, and build off lessons from prior successes.
It’s also important to understand the scope in which the private sector operates and to have clear expectations for what can and cannot be achieved. A report from PwC further analyzes how the private sector can be engaged in resilience building products and services, including technology transfer and green funds.
The third pathway to engagement is for private sector entities to be a stakeholder in resilience building processes.
By providing an important voice and perspective, they can ensure that their climate vulnerabilities are addressed, learn about other groups’ vulnerabilities that may also affect their own business operations, and participate in co-creating innovative approaches to building resilience. This type of engagement is key to building resilience, as it helps identify areas of common cause between private and public stakeholders, and it builds trust and longer term commitments between stakeholders. Through the Asian Cities Climate Change Resilience Network (ACCCRN), we have seen the Surat Chamber of Commerce in India become a critical leader in the development of the city’s Climate Resilience Strategy and a stakeholder in implementing resilience building projects such as a flood early warning system and a resilient housing competition.
Finally, the private sector can be engaged as a co-investor through philanthropic mechanisms, such as Corporate Social Responsibility funds and employee volunteer programs.
While multiple examples of this type of engagement exist, it would be a mistake to seek private sector engagement purely in the role of donors. The private sector should be involved more strategically, as active partners and stakeholders.
Private sector actors are important players in resilience efforts, who should be engaged in multiple ways so that cities can build greater resilience to the most significant effects of climate change. Many challenges exist in effectively engaging the private sector including the short-term interests of private companies versus the long-term vision needed to cope with climate issues. There is also a lack of common understanding of climate issues, especially by public actors of the business needs of the private sector. However, the benefits of resolving these challenges far outweigh the costs. Overcoming these challenges will require constant communication, the management of expectations, and a long term commitment to working together.
For more information, read the Intellecap report, “Opportunities for Private Sector Engagement in Urban Climate Change Resilience Building“.