Introduction
Climate change, a term that has echoed through the halls of science since the 1970s, is no longer a distant threat but an imminent and relentless reality. The world has witnessed a surge in the physical impacts of climate change in the past years, even in the absence of the notorious El Niño effect. These impacts have come at a steep price, with the cost of damage estimated at a staggering $3 billion per event. The economic, social, and environmental consequences of climate change are on the rise and have the potential to unleash major disruptions across the globe. In this article, we will explore the urgent need for decisive action, the importance of risk management, building resilience, and the role of policymakers in navigating the turbulent waters of climate change. We will illustrate these concepts through the lens of the hydropower sector in Switzerland, where the consequences of climate change are already felt.
Part 1: The Decade for Action
As we stand at the edge of a climate crisis, the next decade is crucial for action. Mitigation efforts are paramount to curbing the devastating effects of climate change. The international community is witnessing a surge in commitments to reduce carbon emissions. However, this surge is accompanied by a simultaneous rise in climate skepticism, threatening the momentum of these critical initiatives.
Managing climate risks, building close-knit teams and resilience, and securing policy support are the cornerstones of our journey toward sustainability
In the hydropower sector, a transition to sustainable practices is imperative. Switzerland, a country renowned for its pristine glaciers and abundant water resources, is already grappling with the consequences of climate change. In 2022 alone, the country witnessed a 6% decrease in glacier mass, leading to an exponential loss of water resources. If not anticipated and addressed, this threatens the very business model of the hydropower sector, one of many at risk.
Part 2: Managing Risks
To navigate these turbulent waters, companies must embrace climate risk assessments aligned with the TCFD. These assessments should encompass both the risks associated with transitioning to a low-carbon society and the physical risks posed by climate change. Such assessments must become an integral part of enterprise risk management processes, be disclosed with appropriate levels of detail, influencing decision-making at both investor and State levels. Boards of directors and their committees, along with the C-Suite, must take a proactive stance in addressing climate risks, with a long-term perspective to secure the future of the organization they currently lead, far beyond the Directors & CEO’s tenures. The cost of inaction is staggering, with estimates projecting a mind-boggling $180 trillion in losses by 2070 if we fail to act decisively.
Part 3: Building Resilience
To thrive in a changing climate, organizations must adopt the principles of highly reliable organizations. Scenario planning and modeling are essential tools for preparing for uncertain futures. In the hydropower sector, this might involve developing strategies for managing water scarcity and adapting to highly fluctuating water levels. Strengthening emergency response planning and crisis management is crucial for readiness, adding unusual scenarios to the list, by consulting a wide range of stakeholders to broaden the perspectives. Education plays a pivotal role in building resilience: the whole organization must be well-informed about climate risks and mitigation strategies to make informed decisions. But execution requires teams as the Covid-19 pandemic reminded us that team spirit, trust, and a sense of responsibility are values that can make or break an organization's ability to weather the storm.
Part 4: A Call to Policymakers
While individual companies can and must take proactive measures, the role of policymakers is equally crucial. Policy frameworks that provide a clear, long-term horizon are essential to drive the necessary investments in sustainability. This must be supported by enforcing regulations that limit carbon emissions. Certainty in policy direction encourages businesses to transition their business models. Here too, a well-informed Board will advocate for such policies within its own ecosystem and embed its stakeholders in the journey (industry associations, society, customers and suppliers).
Conclusion
The hydropower sector in Switzerland, with its shrinking glaciers and dwindling water resources, serves as a stark reminder of the urgent need for action and planning.
Managing climate risks, building close-knit teams and resilience, and securing policy support are the cornerstones of our journey toward sustainability. As we embark on this path, let us remember that the cost of inaction far exceeds the investments required for a sustainable future. It is not a choice between business and the environment but a call for a comprehensive understanding of the challenges lying ahead to secure a sustainable future.
