SDG #13: Climate action | Strategic Risk | Deloitte

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SDG #13: Climate action

Sustainable Development Goals Blog Series

On January 1st, 2016, the 17 Sustainable Development Goals (SDGs) of the 2030 Agenda for Sustainable Development officially came into force. Over the next 15 years, with these 17 goals, countries will combine efforts to end all forms of poverty, fight inequalities and tackle climate change. In this article we aim to familiarize you with SDG 13: Take urgent action to combat climate change and its impacts.

By Jennifer Muller | 02-03-2017

What?

To address climate change, countries adopted the Paris Agreement at the COP21 in Paris on December 12, 2015. All countries agreed to work on limiting global temperature rise by striving for 1.5 degrees Celsius. This agreement shows the main focus of SDG 13: reducing the effects of, and combatting climate change, by reducing emissions.

Many SDGs are interconnected, SDG 13 being no exception. Climate change affects, for example, water resources (SDG 6), health (SDG 3) and biodiversity (SDG 14 & 15). The interconnection is therefore a clear two-way relationship: SDGs can reinforce each other, which makes it possible to create a positive, upward spiral.  

Why?

There is no country in the world that does not experience the effects of climate change. Ecosystem changes (rising sea levels, drought, biodiversity loss) and health & safety damages – and the costs associated with that – hurt society, including businesses.

Regulatory developments
Recent regulatory developments show the importance of climate change measures and policies. The fact that the Dutch Ministry of “Economic Affairs” has recently been adapted to the Ministry of “Economics Affairs and Climate”, shows that climate (change) is becoming a higher priority.

Furthermore, an emission reduction target for 2030 of 49% has been included in the coalition agreement of Rutte III. For sectors covered by the EU emissions trading system (EU ETS), there is currently an EU reduction target of 43% by 2030 compared to 2005. There are about 450 Dutch companies that are categorized under the EU ETS. These companies represent about 45% of the Dutch greenhouse gas emissions. They should therefore take emission-reducing measures in order to achieve the target of 49% by 2030.

The impact of climate change on your business model
The effects of climate change put pressure on almost every revenue stream of businesses, directly and/or indirectly. Business models can be affected when the direct production process of a business/supplier is related to or depends on agriculture or water. Rising temperatures may, for example, decrease water resources or harm agricultural processes. One could also think about air pollution harming business processes via polluted water or other natural products. Especially for suppliers in non-western countries, natural disasters or extreme weather can impact their business processes.

How?

SDG 13 is about the core of the Paris agreement: how to prepare for the impact of climate change and reduce this impact by reducing greenhouse gas emissions. Creating clarity on how business strategy can impact both the consequences as well as the causes of climate change is therefore essential. Below, we will discuss that sufficient financial resources and the use of technologies are key in contributing to SDG 13.

Risks and measures 
As stated by the Taskforce on Climate-related Financial Disclosures, global warming caused by greenhouse gas emissions poses serious risks to the global economy and will have an impact on many economic sectors1. On global as well as national level, extensive research has been performed on the impact on floods, draughts, etcetera. Although conducted with the best intentions, these reports are often used by policy makers rather than businesses. This is a shame, since it can help estimate risks for businesses as the (financial) implications of damage to assets, bottlenecks in the supply chain or logistic issues can be quite impactful. By going through the process of such a risk assessment insight is given on how to prepare, and on how to create or adjust opportunities for efficient development of new products/services or access to new markets.

Energy technologies and its challenges: reliability of energy supply
Technologies are on the rise, and can help businesses to reduce greenhouse gas. Reducing greenhouse gas can, among others, be found in switching from fossil fuels to renewable energy. Challenges are, however, still connected to this transition. The current challenge of renewable energy is to supply energy in the same reliable way as the current grids do. This unfolds the discussion of keeping coal and gas as a backup plan as long as a solution is not yet implemented at a high scale. Technology exists to transition to renewable energy though. However, since this development is still in its infancy, a solid comparison with the current, reliant energy supply cannot be made. Changing to these new technologies therefore takes courage. For businesses, it means their contribution can be found in setting up pilots in their organizations’ eco-system in order to boost the renewable energy experience. Room for innovation should be present to achieve this breakthrough though, in which financial perspectives play an important role.

Financing technologies
Although the technologies are often available, adopting the technologies often depends on the return on investment, which often takes longer for new, innovative solutions. Innovative solutions are frequently compared to more conventional technologies. This causes the prevalence of conventional methods over innovative methods due to short term financial opportunities.
If businesses want to make a stronger cause for energy reduction technologies, one should try to see those investments more as an exploitation on the long term, and take long term impact into account. An example of this can be found in current projects in which systems are being set up to enable households to trade electricity with Blockchain without a third party2.

Gaining support for climate targets from stakeholders
In order to gain support for decisions on climate change outside and inside the organization, it is important to create visibility on this topic. Firstly, it is important that businesses integrate climate change into their strategies with clear targets to monitor on. These targets should ideally match with the demands and preferences of the organization and its stakeholders. This way, clear actions can be taken and it also creates support for achieving the targets.

Secondly, it is important to create clarity on the opportunities of investments for both the business and its stakeholders. To create this clarity, it is recommended that risk-scenarios are formulated in order to show in what way climate change and the business are related to each other. Identifying different scenarios can be done following the Task Force on Climate-Related Financial Disclosures (TCFD) guidelines: voluntary, consistent climate-related financial risk disclosures3. These different risk scenario’s show which types of climate change risks businesses are most vulnerable for, and which opportunities for investment are present.

Matching the goals and targets with the needs and ideas of the business and its stakeholders, increases the opportunities for investments and the achievement of targets, resulting into a clear contribution to SDG 13.  

Sustainable Development Goals Blog Series

This blog is part of the Sustainable Development Blog Series: a blog series that highlights the 17 SDGs one by one on a biweekly basis. In these blogs you will find more information about each SDG, why it is important for your organisation to contribute to the achievement of it, and specific examples of how you can do that.

More information?

For more information about the Sustainable Development Goals and what your organisation can do to contribute, please contact Anne Huibrechtse-Truijens via ahuibrechtse@deloitte.nl / +31882882071

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