This week’s blogs make it clear – companies need to take a hard look at their climate programs and the bases for them. Or, as Advisory Board Member Mark Trexler has said, “audit your climate assumptions.” Mark wrote a pair of guest blogs for PracticalESG back in 2021 (here and here) offering guidance on how to do just that. Mark wrote:
“… many business decision-makers are locked into questionable or out-of-date assumptions regarding climate change, climate risks, and climate risk management. It’s not at all surprising given how rapidly the business climate risk conversation has evolved, but it does pose a problem for robust business decision-making.
What are some commonly held assumptions that are informing corporate and investor climate policies and responses, and why might they be worth revisiting?”
He addressed seven common assumptions and why companies should revaluate their existing thinking/position underlying them. The seven assumptions are:
- Assumption 1: The most important thing companies can do to advance climate change mitigation goals, and to mitigate their own climate risk, is to shrink their carbon footprints (whether Scopes 1, 2, or 3).
- Assumption 2: The work of the Intergovernmental Panel on Climate Change (IPCC) is the best source of information for business decision-making related to climate risk.
- Assumption 3: Resilience to physical risks of climate change should be the primary focus of business risk assessment and management, since as former Exxon CEO Rex Tillerson once argued, “we’ve always adapted, we’ll adapt.”
- Assumption 4: Business planning and decision-making should focus on the same 2 degrees C and 1.5 degrees C scenarios that are the topic of most international policy discussions.
- Assumption 5: Market mechanisms such as carbon offsets will always be available to significantly moderate the cost of business compliance with climate policy.
- Assumption 6: Systemic climate risks are largely outside the ability of companies to influence or manage.
- Assumption 7: Disclosing climate risk, e.g. through the TCFD scenario planning process, will provide investors and others with objective information needed to help decarbonize the economy.
It is interesting that Mark’s articles are four years old (geologic time in the ESG/sustainability space), but are more on-point today than ever.
Members can read more about carbon risk here. In addition, members have access to our checklist Identifying & Updating Climate Risks and Uncertainties.
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