The Ultimate Guide to Climate Risk Management in 2023
Discover how to create a successful climate risk management strategy to help you prepare for uncertainty and climate-proof your company.
What is Climate Risk Management?
Climate risk management is a formal process to identify potential hazards from climate-related events, trends, forecasts and projections, and to propose controls to avoid or minimize their impact.
Although the term “climate risk management” is relatively new, the concept is not. In fact, many risk managers already practice it every day — from an insurance analyst evaluating flood risk and premiums, to an engineer calculating the effective height of a new sea wall.
The same principles you apply to everyday risks also apply to the risks created by greenhouse gases and extreme weather events. A risk management approach to climate problems can help your organization incorporate climate information into the decision-making and planning process to better prepare for uncertainty.
What are the Benefits of Climate Risk Management?
There are many benefits and reasons why an organization should take a proactive approach to climate risk management. These include:
- Reduce costs by dealing with business threats before they arise, rather than allowing them to develop into bigger problems
- Demonstrate compliance with current and future climate regulations
- Improve company reputation among customers, stakeholders, and employees
- Identify new business opportunities in shifting markets
- Achieve immediate business objectives by incorporating environmental issues into strategic planning
- Gain a competitive advantage by operating efficiently
Climate Change Management Strategies
There are three key types of climate change management strategies: climate change mitigation, climate change adaptation, and climate change resilience. Let’s take a look at each:
Climate change mitigation focuses on reducing the amount of greenhouse gases in the atmosphere. Reducing vehicle emissions, conserving electricity, switching to renewable energy sources, and capturing landfill gas emissions are all strategies to mitigate climate change impacts.
Climate change adaptation involves adapting to the impacts of climate change like drought, hurricanes, and rising sea levels. Some ways to adapt to climate change include diversifying into climate change resistant crops and finding ways to reuse water in manufacturing.
Climate change resilience is closely related to adaptation, but it’s not the same thing. Resilience emphasizes strengthening a system to withstand climate-related effects. For example, building structures that are designed to withstand hurricanes or hardening the electric grid to deal with severe floods. Organizations that develop climate resilience are in a better position to bounce back quickly from the effects of a natural disaster or other climate-related event.
Climate Risk Management Examples
To understand what climate risk management is, it can be helpful to study some real-world examples of climate risk management in action.
- Oil & Gas
Risk Management Software
Using risk management software to plan and manage your efforts can help you be more effective. Not only will software store all of your risk and environmental data in one place, it will also support collaboration across your organization, improve accountability and transparency, and allow you to report on your performance to key stakeholders.
A few vital aspects of climate risk management include carbon management, energy management, environmental data, risk assessments, and mitigation action plans.
With Lisam’s unified EHS risk management software, you can plan, measure, track, and report on your results all in one place. Here are some of the ways you can use our solutions:
– Capture emissions and energy usage data at the source, calculate GHG emissions and trends, and manage carbon reduction plans
– Capture and track water usage, manage water reduction plans, and monitor action plans with periodic assessments
– Conduct risk assessments to evaluate climate change impacts, and use the risk registry to track ongoing climate risks at a glance
– Benchmark your performance to ensure ongoing improvement