File Image: IOL
CAPE TOWN - It is evident that businesses are incorporating climate change into their internal decision-making processes by adopting methods which are more energy efficient or seek to reduce greenhouse gas emissions.

These measures are critical in order for South Africa to reduce its overall greenhouse gas emissions. The reduction of greenhouse gas emissions, however, is only half of the story.

The effects of climate change are already having a negative effect on the economy and if businesses are to survive, they need to take reasonable measures to ensure that the effects of climate change and extreme weather events on the business are minimal from an operational as well as an environmental perspective.

Highest risks

The World Economic Forum’s Global Risk Report for 2016 identifies water scarcity and the failure to adapt to climate change as two of the highest risks to the global economy.

Extreme weather events such as droughts and severe storms may impact on the availability of resources or raw materials such as foods, cotton, paper or rubber; or result in damage to key infrastructure such as roads, rail, ports, pipelines, communication networks, roads or electricity supply which may affect the supply of key resources, manufacturing processes or transporting products to customers or for export or have significant impacts on the health and safety of employees and communities.

For example, miners in mines during flooding events or communities living in close proximity to a slimes dams that ruptures.

These impacts will also have an exponential effect as the failure to or delay in providing a resource due to its availability or due to infrastructure damage may have a knock-on effect for a number of businesses.

Businesses need to anticipate these impacts and begin implementing adaptation measures not only to minimise these risks but ultimately to remain competitive.

This requires knowing and understanding the business’s weak points and how weather events, resource supply or damaged infrastructure will impact production or operations.

It also demands examining how climate change may affect other stakeholders in the supply chain and how this will impact on their business.

That is, how extreme weather events may affect resource supply, the labour force or the supply of the product to customers.

This requires that businesses engage and collaborate with stakeholders in the value chain.

With this information in mind, business can better allocate resources towards minimising climate change impacts that are within their individual control as well as collaborating with suppliers, customers and competitors around investment planning to minimise existing and future climate change risks.

The National Business Initiative recently published: A New Climate of Risk: How South African Businesses are Adapting to Climate Change indicated that one of the key barriers to implementing adaption measures is a lack of “buy-in” by senior management as climate change is viewed as an environmental risk rather than a risk to the survival and longevity of the business itself.

If the potential impacts on the operational-side of the business are not enough to spark senior management into implementing adaption measures, then perhaps their potential liability in terms of the National Environmental Management Act (Nema) may trigger a response.

Section 28 of the Nema places a duty of care on “every person” to take reasonable measures to prevent pollution from occurring, continuing or recurring. If they fail to do so, they may personally be held responsible for the costs incurred in remedying the effects of any resultant pollution.

Given the recent effects of extreme weather events experienced in South Africa, it would be considered reasonable for senior management to audit their operations, identify any potential pollution risks that may arise from a failure of infrastructure and to take appropriate measures to strengthen infrastructure against these events.

In light of the above, the expression should perhaps be “adapt or die and/or pay the consequences”.

Another barrier to implementing reasonable adaptation measures is establishing a business case for investing money in future potential risks.

Understandably, businesses may be reluctant to fund activities that will not result in a return on the investment, particularly since these costs may be significant.

It is anticipated, however, that if businesses are unable to fund new projects or expansions of projects off their balance sheet, they will need to ensure that they have adopted an adaption plan as lenders will want comfort that the borrower will be able to service its debt notwithstanding climate change impacts.

To survive and flourish in the future, business leaders need to look beyond the obvious climate change mitigations, and broaden their interventions to include adaptations which will protect and position their businesses appropriately.

It’s worth doing before the heavy stick of regulation descends or a competitor with greater vision takes a leap forward, leaving the slower organisations to play catch-up in the storm.

Matthew Burnell is a director, Environmental Law, at Herbert Smith Freehills.