By Megan Rowling
IKEA, the world's biggest furniture retailer, grabbed the headlines this week with a promise to produce as much renewable energy as it consumes by 2020 and grow at least as many trees as it uses to make its products by that year too.
Environmental groups have welcomed the move. But in the same week, a U.N. report warned that the number of people and value of assets exposed to climate hazards in the Asia-Pacific region has risen fast, with economic losses from disasters close to $300 billion last year.
These two pieces of news suggest that while companies may have woken up to the need to make their businesses more environmentally sustainable, they're not moving fast enough to cope with the damage that's already happening, partly as a result of less responsible approaches in the past.
Few think the private sector should be charged with solving climate change on its own. But many experts say firms could be doing more to protect their own operations and staff from climate impacts, such as floods, storms and excessive heat. And they could also step up their provision of goods and services to help local communities - particularly in developing nations - adapt to the changes that are already making it hard for them to stay in their homes, grow crops or make a living.
The chief executive of Unilever, Paul Polman, made waves earlier this year when he estimated that the impacts of climate change had cost the food and hygiene giant an additional 200 million euros ($260 million) in 2011 alone.
"When the CEO of Unilever says (this)...we start to really get momentum behind this agenda," Su-Lin Garbett-Shiels, climate and environment advisor for Britain's Department for International Development (DFID), told an online seminar this week.
Last year's major floods in Thailand - which hit industrial areas in and around Bangkok - brought home to the world the havoc disasters can wreak on the corporate bottom line.
The floods tripled the international price of some hard disk drives, and affected supply chains across the globe, as some factories had to suspend production, the U.N.'s new report on disaster reduction in Asia-Pacific notes.
As a result, the direct risks climate change and related hazards pose to businesses is something they can no longer afford to ignore, consultants say.
CHIPS OUT OF WATER
James Crask, senior manager for business continuity services at PwC, told a separate seminar last week that shareholders are now looking for a "robust response" to disasters.
If a company is well prepared, it will lose some shareholder value in the immediate aftermath of a disaster, but win it back as recovery plans pay off. But those caught unawares will never get shareholder value back to the same level, Crask said.
"If you respond effectively, you will increase the level of trust," he said, adding that the impact on a company's reputation is becoming increasingly important - especially for those that deliver critical services such as water treatment.
Jeremy Richardson, head of climate change and sustainability services with URS, a multinational engineering and construction consultancy, said the risks from disasters like the Thai floods can be managed, "but we really do need to be aware of these exposures".
Some businesses are learning lessons that will protect them against repeat disasters. Richardson cited the example of a British fish and chip shop that was flooded in 2008. With the insurance payout, it bought frying machines with hydraulic jacks, raising them up out of harm's way when floods hit again a couple of years later.
Nonetheless, communicating uncertain climate change projections in a way that is meaningful for business plans and investment cycles is "not easy at all", Richardson said. A bank, for example, might make a loan of five to 10 years, and have no interest in looking at risks further into the future.
DFID's Garbett-Shiels said the main barriers to corporate action are a lack of awareness and information about the impacts of climate change; a lack of finance, skilled labour and expertise; and a lack of policy and fiscal incentives. This is where government needs to play a part in developing a conducive policy environment, she noted.
CONFLICT OF INTEREST?
Most experts agree that there is considerable untapped potential for collaboration between the public and private sectors in tackling climate change - and many are still feeling their way. DFID, for one, is bringing in private-sector people to help craft its planning around disasters and climate change adaptation.
In addition, there is considerable enthusiasm - especially among government donors whose budgets are under pressure from the financial crisis - for tapping private-sector finance to mobilise the tens of billions of dollars researchers say are needed each year to help poorer countries adapt to climate change.
Some environmental campaigners and aid workers are not so keen, worrying that private-sector interests may be at odds with those of vulnerable communities grappling with the frontline consequences of climate change.
This is an ideological battle that is going to be played out as discussions ramp up over how to fill the fledgling - and so far, empty - Green Climate Fund (GCF), a new global financing mechanism backed by the United Nations that could channel a large proportion of the annual $100 billion richer countries have pledged to mobilise for climate change adaptation and mitigation by 2020.
Activists who attended a forum on the GCF ahead of its second board meeting in South Korea last week said its focus was on how the fund could attract private-sector investment, rather than how it could best serve the needs of people in developing countries dealing with climate change.
"Attracting private finance and meeting the needs of poorer countries very often are not overlapping goals, and the clear purpose of the GCF is to meet the needs of poorer countries," Karen Orenstein of Friends of the Earth U.S. told AlertNet.
Others including Karl Schultz, executive chairman of the Higher Ground Foundation, believe the two can be aligned, and must be, because governments and aid agencies simply do not have the resources to tackle the problem on the scale required.
His organisation is working to develop a system of credits for activities that reduce people's vulnerability to extreme weather and longer-term climate shifts - credits that could be bought, and even traded, by companies and governments.
Schultz says the main risk involved in engaging the private sector in adaptation is "doing it in a vacuum of appropriate governance and insufficient clarity regarding its role, incentive regime and outcomes that are considered acceptable".
Yet if those concerns can be allayed, business can bring creative solutions, financial resources, talent and drive to the table, he argues.
Making sure companies work to protect the world's poorest and most vulnerable people, as well as their own profit margins, is going to be a tough challenge, but one that climate experts are clearly gearing up to tackle.