Business as Usual in an Unusual World: Planning For The Future

In the second instalment of this two-part essay, Genevieve Wright reflects on last month’s event Climate Change, Business and Finance, where a panel of industry experts explored what it would take for Australian business to take climate science seriously.

[Continued from part one]

Scenario Planning

With collated climate data that paints varying probabilistic futures of a warming world, scenario planning, which maps the financial impacts of these different scenarios and their strategic responses, is vital for the effective implementation of Taskforce on Climate-related Financial Disclosures (TCFD). A consensus amongst the panel was that communicating the urgency and legitimacy of probable futures is crucial, but the message must be delivered through positive and constructive formats for businesses. It was evident that for Cate Harris, scenario planning based on data from the Intergovernmental Panel on Climate Change (IPCC) and International Energy Agency (IEA) had transformed Lendlease’s attitude and public reputation towards sustainability action, embracing a more proactive response as the methodology shifted their thinking and broadened their horizons in terms of how the sobering climate datasets could be prepared for. “It is critical,” she says, “to find a balance where we’re not paralysed with fear, but there is still a message of hope around action”.

“It is critical to find a balance where we’re not paralysed with fear, but there is still a message of hope around action”

– Cate Harris

Ms Harris outlined how the scenario planning methodology empowered and brought together Lendlease’s financial, risk and legal functions as well as sustainability professionals and business practitioners into a rich conversation about the future of the company in a worsening climate. Dr Nick Wood also acknowledged that he had had similar success with this workflow when he worked with the Commonwealth Bank of Australia (CBA) last year on climate risk planning and its impact on agriculture. He was surprised when CBA responded to his data analysis and future projections with a desire to know the solutions, rather than the risks.

Scenario planning beyond industry

Given the clear success of climate-risk scenario planning across several sectors, there could be potential to expand the methodology outside of the corporate realm and into government and education. Cate Harris reflected on the potential powerful change that could ensue if state and local governments were to engage with long-term scenario planning strategies given the assets, policies and legislation they control. In a similar vein, Dr Tanya Fiedler advocated the importance of preparing the future workforce to be climate-ready by integrating climate-risk thinking into all aspects of university education. She already teaches principles and elements of management accounting through the lens of a real-life case study of a Hunter Valley winery where direct and indirect costs have changed because of climate change. Ultimately, decision-making in all areas of society should be made with the world’s climate future in mind.

Not only do such practices benefit a company’s outputs but they also strengthen relationships with stakeholders. Cate reflected on the time when Lendlease took a strong sustainability stance, they began to attract and retain the best employees who were passionate and inspired, their professional identity elevated by recognising the climate risks. It also increased their social license to operate by connecting them with communities who are now more informed about business, holding them accountable for the responsibilities they hold.

“[A strong sustainability stance] created a new way for different people across the organisation to engage in the topic and be terrified about what those future scenarios could look like, but also give them hope that if we do our part, that maybe we can play some part in shifting and changing that future as well.”

– Cate Harris

Cate Harris reflects on Lendlease’s success with scenario planning. | Image by Christopher Wright, IG: @chriswrightau

What to do during this crisis time?

However, given the worsening pandemic and the resulting economic contraction that has followed, what space is left to further develop the focus on climate risk for business? In moments of panic, the most familiar response is to just hit the pause button, go into damage control and hope that normality will return soon. Of course, “business as usual” cannot continue in an “unusual” world, but perhaps now is the perfect time to embrace a “business not as usual” approach and shift previous behaviours and attitudes to reflect changing times and the need to prepare for a new future in which the frequency and severity of global crises fuelled by climate breakdown are only going to increase.

Even though this event was held during the early days of the COVID-19 pandemic, Professor Mann couldn’t help but liken the coming threat to the other catastrophe Australia had been battling with over the summer.

“[COVID-19] will call into question the resilience of our basic infrastructure… we’ll look back on [this past summer] as a critical juncture when it comes to the larger effort to act on climate change.”

– Michael E. Mann

Therefore, if we have arrived at this critical juncture, what should businesses be doing? A strong first move would be to understand the risks that exist, especially the multiple threats that climate change poses to all facets of society. Once engaging with TCFDs, proactive preparation can ensue through the interaction with scenario planning. Scenario planning’s transformative scope is largely subjective, although recently many researchers have argued that this state of limbo, we currently find ourselves in, serves as the bittersweet opportunity to lay out the foundations for a more encompassing Green New Deal in which government, business and communities can come together to chart new solutions to our worsening climate crisis.

An economic crisis is perhaps the perfect time to undertake large-scale government spending that revitalises the economy and addresses systemic structural challenges. Climate change, if targeted, meets both these demands. As environmentalist Bill McKibben recently argued, government bailouts for businesses should come with conditions. For instance, banks that are rescued from the current crisis need to pledge an end to funding expansionary fossil-fuel projects. Airlines could use this stasis period and government money to better prepare their services for a changing climate by creating more logical flight routes and investing in more efficient aircrafts. The recent nosedive in oil’s worth could herald the necessary shift of the fossil fuel industry, which has been dropping in value for decades, towards the increasingly more financially favourable, renewable energy sector. This current lockdown period could be harnessed as the optimal time to upskill recently unemployed workers in redundant industries and kickstart the just transition communities have been yearning for, for years. If anything, this crisis has highlighted how vulnerable the casual labour force is. This time could be used by businesses to reimagine and repurpose its labour force to be more resilient to the fallout of climate change impacts. As McKibben implores, “Our goal can’t be simply a return to the status-quo ante, because that old normal was driving a climate crisis that will eventually prove every bit as destructive as a pandemic”.

As Professor Mann pointed out during his presentation, “There is no economy on a lifeless planet.” If there’s anything businesses should be investing in, it’s to ensure we’re not signing our own death sentence by not acting at all.

Climate Change, Business and Finance: What Is the Latest Science and How Worried Should We Be? was held on March 2, 2020. The event brought together an esteemed panel of industry leaders to review the latest climate change science and the potential impacts on capital markets, corporations and industry.

Speakers included Dr Tanya Fiedler, lecturer in the Discipline of Accounting at the University of Sydney, Cate Harris is the Group Head of Sustainability at Lendlease Foundation, Mark Nagle is the Executive Director of Treysta Wealth Management, Dr Nick Wood an associate at Energetics, Zoe Whitton (Chair) leads the Asian arm of Citi’s ESG Research team, and Dr Michael E. Mann, Distinguished Professor of Atmospheric Science at Penn State, and a Lead Author of the Intergovernmental Panel on Climate Change (IPCC) Third Scientific Assessment Report in 2001.

Genevieve Wright is part of the professional staff team at the Sydney Environment Institute. Genevieve recently graduated from a Bachelor of Communications majoring in both Media Arts and Production and Journalism at the University of Technology Sydney. With a keen interest in the psychological responses to the climate crisis, She hopes to imbue her creative film background into community programs that centre on transforming school curriculum and empowering communities to lead the way to a renewable future.