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How can organisations ride out and master the storms of a climate ‘permacrisis’?

“The pessimist complains about the wind; the optimist expects it to change; the realist adjusts the sails.”

William Arthur Ward

It’s official – the Collins Dictionary announced ‘permacrisis’ to be 2022 word of the year, defined as ‘an extended period of instability and insecurity’ by the publisher. Oh yeah, I use that word all the time (said no one ever) – but it’s true that the zeitgeist of this period has been one of turbulence; fiscally, politically, economically, pandemically (sorry lexicographers, I make my own word rules). Adding in sustainability to the mix may very well sink the ship of some organisations who are not capable of responding to these waves. 

However, this can no longer be a ‘should have’ in the strategic backlog for a company, because climate change is happening, as confirmed in the IPCC’s 5th report confirmed and with 95% certainty as resulting from human activity (Bullock, Haddow & Haddow, 2016). For business this change will manifest in several ways: regulations, customer needs and, of course, the climate conditions themselves for end to end operations. However, organisations need not see this all as a big red risk, but as an opportunity space. Opportunities are posed by each historic economic revolution that has come before, from railway mania to dot com boom, and now a green revolution; they can ‘turn…environmental problems into economic solutions’ (Perez C., 2017).

Some housekeeping definitions

It’s useful to frame this discussion in two ways: vulnerability and resilience. They may well be two sides of the same coin, but nonetheless they are helpful in categorising an organisation’s change ability:

  • Vulnerability – The generally well accepted definition from the IPCC is a function of exposure, sensitivity, and adaptability. Exposure is how frequent and intense the hazard is, sensitivity is the characteristics that make something more susceptible to that hazard, and adaptability is how capable that thing is to recover and change itself.
  • Resilience – the capacity of individuals, communities, organizations and systems to…adapt and grow in the face of shocks and stresses, and even transform when conditions require it’ (Rodin, 2014)

Now I appreciate these do sound kind of similar, but to remove the jargon, the key differences are vulnerability is focused on a more negative here-and-now timeframe, and resilience on longer term transformation to anticipated change. In essence, surviving now and thriving tomorrow.

So, if we think of the organisation as the ship, how can it quickly repair vulnerabilities to maintain business continuity in a storm whilst also looking to achieve the positive transformation of resilience, to both respond in the ‘now’ and anticipate the future, to stay afloat and also build itself bigger and better for the storms to come? I draw on both general change theories as well as some analogous climate change actions of communities in my top 5 musings below.

Photo by Ahmed Zayan on Unsplash

1. Highlight the climate crisis, use economic arguments

  • Governance and process red tape slow us down. Evidence for crises being the biggest accelerator of change is substantial, and is the first step from Kotter’s 8 steps for leading change. This involves both outlining what the burning platform is, as well as the opportunities at hand. Therefore, you could interpret this as focusing moreso on vulnerability at this stage (i.e. what are our high risk unstable areas of the business, why, and what do we need to do to change it)
  • Removing emotions and opinions on climate change is a real catalyst. Given the topic is still highly political and divisive in certain markets you may weaken your argument if you use this as the sole primary driver.    
  • Use economic rationale as motivation. The collective cost of climate change disasters is an estimated $200 billion every year (Bullock, Hadow & Hadow, 2016), both in terms of infrastructure and industry. This annual damage and loss figure is (you guessed it) on an upwards trajectory, so costs now will be cheaper than losses & damages incurred later.

2. Diversify – the proverbial ‘eggs in multiple baskets’

  • Increased globalisation means even impacts that seem detached from your business ecosystem will have a high probability of making themselves felt. 
  • Diversifying your investments, including your R&D focuses, will increase your odds when it comes to innovating a brilliant solution that is taken further. Given there is still much uncertainty, this is always a good strategy.  
  • Diversify your products and services portfolio on offer to your consumer. Should one product or service suffer supply chain issues or consumer demands shift dramatically due to a climate change event, the remaining portfolio may keep you afloat whilst you decide what to do.

3. Ground long-term plans with near-term co-benefits, starting with an existing initiative 

  • Some stakeholders are less inclined to think long term. Integrating with existing projects is an easy way to hit the ground running and can still deliver value early.
    • Examples from city community projects has involved updating and creating new transport methods, leveraging new green technologies along the course of the programme. The increased transport diversity will, in the long term, build resilience against environmental hazards, and in the short term create jobs, boost commuting efficiency and reduce emissions.  
  • Linking this to a business example, migrating from plastic to alternative plastic packaging is likely to reduce manufacturing costs in the near term and both protect against government regulations and conscious consumer demands in future.
Photo by Marcus Woodbridge on Unsplash. Industrial ship in Antarctica.

4. Re-think the supply chain; smaller is better

  • Globalised supply chains equals a higher chance of impacts from climate change in different geographies (an example here is of agricultural hardships from disasters or more pests causing food price inflation. Or, for energy, the potential impact of permafrost melting in Russia driving oil and gas price.) And we haven’t even touched yet on transport disruption of the stuff! 
  • Small can be interpreted in two ways, with a bit of magic lean thinking needed here:
    1. Localise chains to each market. Therefore the impact zone is localised too (one market may suffer, but not all). A clear move being made by the UK now is investing heavily in nationally own renewable sources (albeit yes, right now this may be more motivated by the war than the permafrost) 
    2. Reduce the steps in the chain. As Wall Street technology journalist Chris Mims says when describing a supply chain as a system: ‘each node is a point of vulnerability whose breakdown could send damaging ripples up and down the chain’ (Mims, C., 2022). Therefore thinking creatively, how can this be achieved for a company? Fashion retailer recycle schemes are a good example here.

Enable green innovation through flexibility and partnerships

  • Empower people closest to the work to innovate on a green solution. This will be intrinsically linked to how they can access funds, so design your investment process with as easy as possible access in mind. Also, look to create strong feedback loops to share learning. These mechanisms are at the core of a resilient organisation. 
  • Partnership investments will share risks from high investment R&D. The emergence of Sustainability Linked Bonds (SLBs) enables some truly eye watering investment numbers for sustainable ventures but split across an equally high number of investors. Companies can partner with governments or other beneficiaries of the solutions so their money and sustainability initiatives go further and with lower risk. 
  • And finally, accept higher failure rates in the pursuit of green innovations for the organisation. The costs of NOT doing this will likely be far larger. A clear parallel can be made with the pandemic. The UK government backed several vaccine ventures accepting large cost, high failure because, ultimately, alternative null or delay solution scenarios would be far, far worse.

Wrapping up…

So, those travellers in the ship have got some big storms ahead when it comes to their vulnerability and resilience in relation to climate change. They need to balance short and long term changes, and ultimately adopt what I’ll dub to be a new ‘green mindset’ when it comes to decision making. The above can help drive and implement strategic change whilst mitigating risk when the inevitable earthquakes of climate change are felt, either directly or indirectly. It’s too easy to end with saying businesses need to get comfy with the hyperchanging warming world, so I’ll add to that by saying they should get better at acting in uncertainty. The green mindset can spot both the risk and the opportunity posed, not only of financial gain but societal too. 

Photo by Aneta Foubíková on Unsplash. Shipwreck in Motueka, New Zealand

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