A growing number of companies are realising that they must move beyond the mindset of 'what can we do?' to 'what do we need to do?' and are transparently articulating the impact that climate change could have on their strategy. Industry leaders are acknowledging the constraints and opportunities that may result from adhering to limits, and the unavoidable risks that will result from inaction. In our conversations with senior executives and board directors, many expressed strong support for this level of transparency and emphasised the importance of publicly declaring how their company's long-term success is dependent on operating within sustainable social and environmental limits.
Example 1: "As a global food company, General Mills recognizes the risks that climate change presents to humanity, our environment and our livelihoods. Changes in climate not only affect global food security but also impact General Mills' raw material supply which, in turn, affects our ability to deliver quality, finished product to our consumers and ultimately, value to our shareholders."14 (General Mills)
Example 2: "We have assessed the risks associated with climate change and their potential impact on our business. Physical risks include supply chain disruption due to severe weather impacting a facility, or commodity disruption for specific geographically concentrated ingredients such as cocoa from West Africa or almonds from California. We have active mitigation plans in place to address and minimize these types of disruptions. Reputational risks could arise from not addressing the emissions in our supply chain. We are doing our part to reach an aggressive greenhouse gas (GHG) emissions reduction target and positively influence the broader value chain."15 (General Mills)
Example 3: "Climate change influences our global business strategy due to its direct impact, risks, and opportunities. Our energy and climate change strategy fosters value creation in the long term through effective risk management and by taking advantage of the opportunities… The most significant risks are related to extreme weather events and, in the midterm, temperature increase. An increase in temperature could affect the energy consumption of our infrastructures for additional cooling needs, but also we could have indirect risks related with a potential increase in the energy costs, dependent on the hydroelectric power in some countries."16 (Telefónica)
In alignment with the TCFD recommendations, your company should identify the climate-related risks it has identified over the short, medium, and long term. Explain the strategic impact these risks and opportunities could have on your business and describe the resilience of your company by taking into consideration different climate-related scenarios, including a 2 oC limit or lower scenario.
Example: "We use scenario planning to assess the future and believe that the "autonomy" scenario best represents the technology and policy context that would be essential to meet "450 ppm." However, all of our scenarios point to the need for us to continue to aggressively lower costs and carbon intensity throughout our business. This is not only good for the environment but we believe it is also good for business."17 (Suncor)
Your position statement will benefit from performing scenario analysis both prior to and during development. Scenarios are a useful and well-established tool for developing input for strategic planning, and particularly for evaluating present and future potential risks and opportunities. They enhance the flexibility and resiliency of corporate climate strategies and inform stakeholders of the ways in which your company is positioning itself in light of future climate-related uncertainty.
Companies are becoming increasingly transparent when reporting on their contributions to the issue of climate change, and in explaining how they determined what is within their responsibility to address. For example, thousands of organisations around the world are using the Greenhouse Gas Protocol's concept of Scope 1, 2, and 3 emissions, with many now highlighting their most impactful activities. Companies leading in sustainability are also exploring and reporting on the full lifecycle implications of their products and services, from material sourcing to disposal or repurposing and releasing more detailed data on their direct and indirect impacts on climate change.
Example 1: "General Mills has assessed that 92 percent of the GHG emissions associated with our value chain can be considered Scope 3 - occurring in entities not owned or controlled by the company. Nearly 2/3 of the GHG emissions and 99 percent of water use throughout our value chain occur upstream of our direct operations in agriculture, ingredients and packaging. This is where we can achieve the greatest reduction in our environmental footprint while ensuring the long-term availability of ingredients."18 (General Mills)
Example 2: "We recognize that upstream agriculture emissions and our manufacturing are the largest sources of emissions in our value chain and will focus on efforts on achieving emissions reductions in these two areas."19 (Kellogg's)
Example 3: "Mars' full value chain GHG emissions in 2015 were estimated at 26.2 million tonnes of carbon dioxide equivalent (MtCO2e) - approximately equivalent to the emissions of Panama (WRI, 2017). While energy use is a significant driver of our operational emissions, agriculture and land use change emissions make up the lion's share - approximately 75% - of our full value chain emissions."20 (Mars)