Climate change creates diverse new issues for large organisations. Directors are faced with new opportunities and at the same time, the prospect of an increased risk profile. There is potential to save costs through efficiency improvements and to gain a competitive advantage through the development of new products and services.

To leverage new opportunities effectively, Boards will need to have a comprehensive understanding of the carbon exposure of the organisation and ensure that appropriate action is being taken by the executive to consider alternative strategies. Decisions need to be made on how to best address the management and the reduction of carbon in the company’s supply chain.

Given the changing landscape, scenario planning could play a critical role in mitigating risk and assist the company to being well positioned to take advantage of new opportunities.

Many managers of large investment funds are turning to specialised ratings companies (Carbon Disclosure Project and Dow Jones Sustainability Index) to rank a company’s performance in this area.

Raw materials and energy price volatility resulting from climate change will have the potential to impact product margins. Companies that are able to reduce the impact of these inputs will gain a stronger competitive position.

Recently introduced carbon reporting requirements, renewable energy targets and imminent introduction of carbon trading will unfortunately place a greater compliance workload on the Board.

Climate change should be integrated within the company’s existing risk assessment framework either through full Board oversight or via the Board Risk Committee.

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