ERM, the world’s largest pure play sustainability consultancy, has unveiled its enhanced approach to assessing climate-related risks and opportunities. The six-step approach, titled “A Better Blueprint for Corporate Climate Analysis,” explores ways to understand and implement innovative climate scenario analysis and is designed to engage stakeholders at the most senior levels within companies.
Scenario analysis has quickly become a widely accepted tool for businesses to envision and disclose potential long-term impacts of climate change, and to identify ways to shape strategies in response. The recent trend for companies to undertake climate scenario analysis has been reinforced by guidance from the Task Force on Climate-related Financial Disclosures (TCFD), who recommend that climate scenarios should engage senior stakeholders and generate business-relevant outputs that can inform strategy and financial planning.
ERM’s new blueprint aims to overcome the current challenges with climate scenario analysis that are limiting its impact and influence on corporate strategy. These include outputs that are too complex for decision-makers to digest; assumptions of linear or predictable rates of change that are not representative of the real world; and above all a tendency for the process to be led by mid-level management operating in silos, resulting in insufficient financial and practical investment in the strategic response required.
The six-step approach developed by ERM is underpinned by deeper stakeholder engagement that encourages C-suite ownership of scenario analysis outputs, alongside the use of narrative-based analysis. It also enables an enhanced articulation of ‘real-world’ business impacts that incorporates tipping points, step-changes, macro trends and non-linear outcomes across all relevant timeframes.
Charles Allison, Partner at ERM Group said: “Climate change is bringing immense complexity and uncertainty to the business landscape, while stakeholder expectations and regulations relating to climate performance and disclosure are on the rise.
“Climate now plays a defining role in corporate strategies, yet companies lack the right tools to incorporate it effectively. This blueprint represents our vision for a new era of climate scenario analysis, one that helps our clients to effectively manage the risks and harness the opportunities offered by the transition towards a sustainable, net zero emissions future.”
ERM’s approach is informed by its extensive experience of climate scenario design, interviews with subject matter experts and engagement with participants in a range of climate scenario exercises.
ERM is the business of sustainability. As the largest global pure play sustainability consultancy, ERM partners with the world’s leading organizations, creating innovative solutions to sustainability challenges and unlocking commercial opportunities that meet the needs of today while preserving opportunities for future generations.
ERM’s diverse team of 7,500+ world-class experts in over 170 offices across 39 countries supports clients across the breadth of their organizations to operationalize sustainability. Through ERM’s deep technical expertise, clients are well-positioned to address their environmental, health, safety, risk, and social issues. ERM calls this capability its “boots to boardroom” approach - a comprehensive service model that allows ERM to develop strategic and technical solutions that advance objectives on the ground or at the executive level.