Covid-19 News

The Pandemic, Sustainability and Other Disasters…

Could it be that something good can yet come out of the Covid crisis?

To say that risk management currently faces challenges would perhaps be an understatement!

Quite apart from the original Covid outbreak, we now face the real threat of a second spike and national lockdown.

Wales and Northern Ireland have introduced sweeping measures to impose a “fire break”, in an attempt to stem the recent increase of Covid cases.

And we now have the introduction of a three tier system of restrictions in England, with the highest level Tier 3 being imposed upon Manchester, with Liverpool City Region, Lancashire and South Yorkshire agreeing to be subject to Tier 3 restrictions by the time you read this. West Yorkshire, North East, Teeside and Nottinghamshire are also rumoured to be having discussions about moving up from Tier 2 to Tier 3 and the rest of the country remains in Tier 1 or 2 measures.

Ironically, where measures are strictest risk managers may well be able to dust off many of the processes that they developed rapidly at the outbreak of the pandemic, which were latterly modified or discarded as government advice changed. And from that point of view it will be business as usual, although the various complexities created by different rules for different part of the UK will, of course, create additional challenges.

The day before Manchester was put into Tier 3 restrictions, another highly significant event took place – one that will effect businesses every bit as severely as Covid, but with consequences that will unquestionably last for decades to come.

The event was a call by the Investment Association, an institutional investor controlling funds of around £8.5 Trillion, to make it mandatory for all of the 1,140 companies on the Stock Exchange to release climate disclosures or explain why they have failed to do so; in other words, to comply with the Task Force on Climate Related Financial Disclosures (TCFD).

The call for compulsory environmental disclosures comes amid concerns that listed companies are not being transparent about how climate risks are influencing the way they invest and spend. The UK has signalled its willingness to make the reporting guidelines mandatory, with amendments to legislation in the House of Lords that would give central government powers to force pension funds to use them.

According to the pensions minister Guy Opperman, speaking at a conference run by the campaign group Principles for Responsible Investment, the prime minister wants to see the UK lead the way on TCFD implementation.

Opperman told an audience of asset managers and owners that it was an “imperative” that in a post-Brexit world, the UK should break ground on ESG, green finance and green technology.

Sustainability is not an option. Do nothing today and then one day nothing can be done.

Many organisations have been sluggish to embrace the need for change. And perhaps that is understandable when some of those changes will require root and branch reassessments of how retail is conducted, which is a massive undertaking. Add to that the concomitant need for additional resources and inevitable costs and it is clear to see why sustainability has hitherto been a hard sell. However, times they are a changin’.

According to the Global Risk Report 2020 produced by the World Economic Forum, which takes place at Davos each year and involves 1,000 top business leaders from around the world, the greatest threats to businesses in the year ahead are as follows. Climate Action Failure, Biodiversity Loss, Extreme Weather, Natural Disasters, Human Made Disasters and Cyberattack.

Six out of the top seven economic risks are climate change related. The only one to sneak in there that is not climate related is cyberattacks. And given that top business leaders see those as being the clearest risks to the global economy, everyone has to look at their own business in microcosm. So what does this have to do with the pandemic?Everything!

The point is that the documentation, processes and plans that we have put in place for Covid, could be a starting point for contingency planning around the likely implications of climate change over the coming years. For example…

We know that the world is heating up and that this is widely accepted as leading to more severe weather events. That means your stores are going to be flooded, they are going to be hit by high winds and power cuts. They may be subjected to very high summer temperatures and extraordinarily low winter ones. These events are entirely foreseeable. And that in itself has retailers running to check their insurance policies, which usually cover unforeseeable events.

I propose that risk managers everywhere need to consider what implications these more frequent and expected severe weather events have for their businesses. There needs to be contingency planning for securing supply chains, getting staff in to work, keeping premises secure and stock available. And of course there are the issues we have seen with customers panic buying or getting frustrated with having to queue and so forth.

Loss of bio diversity means that things we currently take for granted will no longer be so easily available. A simple example would be the lack of a pollination service from wildlife leading to crop failures and decreased availability of resources, especially in the line of food. Again this is supply chain robustness that we have looked at in Covid.

Climate action failure means that the landscape is going to change. Do you have stores or facilities near water and are the rising water levels going to render those unviable. Similarly will transport links to and from facilities in all likelihood be affected and how will you get materials to and from a store that is going to be surrounded by water.

If ever this was seen as a nice to do item, action on sustainability can no longer be put on the back burner. Climate change not only presents a physical threat to businesses but also a reputational one that will inevitably start to impact through reduced access to investment from as early as 2022 when the first TCFD reports will be due, if not already. Thereafter consumers will become ever more sustainability focussed and that too will become a major driving force for change.

The one good thing that may yet come from this pandemic could be this. In the same way that it has “brutally accelerated” the rate of change in retail and made main stream trends that at the beginning of the year were only first gaining traction, so it has turbo charged the need for contingency planning along many of the very lines that the new reporting requirements, if legislated for, will require too. And risk managers will also have empirical evidence of how those contingencies worked during the pandemic, leading them to make faster, better decisions in the coming decades.

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