The lessons we have learnt from the impact of COVID-19 may help businesses manage climate risk in the future.
The COVID-19 pandemic has had far-reaching consequences, changing society as we know it.
Before the crisis hit, Australia was facing a climate emergency with the worst fire season to-date – taking lives, devastating towns, decimating forests and wildlife, and causing widespread fear about the future.
There has been a push for governments and companies to continue their focus on sustainability. But is it appropriate to be talking about climate risk during a global pandemic that is barely contained?
The impacts of climate change will be far-reaching for organisations, both government and private, but the repercussions of COVID-19 show that many are not ready to manage the climate risks.
Throughout May, UNSW Business School’s Responsible Business Program coordinator, Dr Louise Fitzgerald, with Tanya Dellicompagni presented four online discussions titled 'Future-Proofing Business', bringing together researchers, academics, business leaders and practitioners.
For the first discussion, four experts spoke about what can be learnt from the impact of COVID-19 about the capacity of business to manage climate risk.
What climate risk means for businesses
Honorary Associate Professor Mark Diesendorf, a scientist from the Environment and Governance Group at UNSW Sydney, says there are two main types of climate risk – the physical risks and the economic and financial risks they cause.
The physical climate risks include natural disasters, which are increasing in frequency and have direct impacts on tourism, agriculture, infrastructure and more.
These impacts impose economic and financial risks in the insurance sectors and banks, cause stranded assets, impact credit ratings and reputation.
A/Prof. Diesendorf explains COVID-19 is connected to these risks as the pandemic reduces imports and exports, impacts employees and the global oil and gas sectors.
“As far as imports are concerned, there is a reduced availability of products and components and a disruption of our supply chains, reduced overseas earnings,” he says.
A/Prof. Diesendorf says there has been a huge drop in global demand of oil with an international price war which has seen prices plummet.
“Some would say that might be a good thing to assist the transition to renewables.”
Challenges in addressing climate risk in Australia
Professor Jeremy Moss from the Climate Justice Research Program at UNSW Sydney says one of the challenges businesses face is how to decarbonise their operations and switch to renewable energy or cease operating altogether.
“The climate transition in Australia is operating with one hand tied behind its back because of the way in which fossil fuels are subsidised and treated favourably in Australia,” Prof. Moss says.
A recent report by the International Monetary Fund noted that Australia spends around $47 billion every year on subsidising the fossil fuel industry, for example through the diesel fuel rebate scheme and accelerated depreciation of assets.
“This poses all sorts of challenges for businesses who aren't directly receiving those kinds of subsidies,” says Prof. Moss.
What direction should businesses take?
“I think we need to tell businesses and show businesses that there are actually huge opportunities in responding to climate change,” says A/Prof. Mark Diesendorf.
He says the world's largest asset manager BlackRock (which controls about $10 trillion in assets) has announced it is taking all active investments out of the thermal coal industry. Mining companies such as Rio Tinto, Fortescue Metals and BHP are shifting to renewable energy for their mining processes.
However, Prof. Moss wonders if this change will occur in a way that is timely enough to avert disaster.
“It seems to me that’s not the case at the moment.”
He says manufacturers or small business might be able to transition to renewable energy, but he is not sure if bigger companies will make the switch quickly enough.
Corporations such as BHP have committed $US400 million to deal with all the emissions that it produces.
However, he said the products that BHP produces would cause emissions greater than those emitted by 25 million Australians.
What can we learn from the government’s response to COVID-19?
Prof. Moss said the government framework has been crucial for what we do and cannot do but now we need to have a clear analogy with our response to climate change.
“We need a clear framework for all of our governments and in particular in relation to the supply of fossil fuels,” Prof. Moss says.
Professor Martina Linnenluecke from the Centre for Corporate Sustainability and Environmental Finance at Macquarie University says COVID-19 has made us realise just how much we must cut in terms of our own day-to-day trivial patterns to achieve emission cuts.
She says there already is momentum gathering to get us back to where we essentially were, without undertaking fundamental changes to the way that we globally operate.
Australians have been trained to see a political landscape that is very divisive and combative but Denise Shrivell, founder of Mediascope, which maps the Australia media and marketing landscape, says during the pandemic we have witnessed both sides of government work together with more unity.
“Hopefully, we'll see people start to reject that kind of combative politics on the other side of this and they'll want to see agreement, and they'll want to see evidence-based policy.”
Ms Shrivell says during COVID-19 society has been encouraged to pull together and to download the app but when faced with climate change “we’re a little more encouraged to be 'well … what can we do?' ”
She says it has been quite a significant difference in the way the government and the media are both trying to manage and sell both issues.
This content was created from the UNSW Business School’s Future-Proofing Business Series webinar.