How to prepare for the disruption of climate change

Bruce Colwill expands on the role of CPAs in detecting the signs of climate change and mitigating its impact.

Bruce Colwill, CPA, is the Chief Financial Officer of General Fusion Inc. in Burnaby, B.C.

What are the implications of climate change?

With hurricane season in full swing, we can certainly witness the impact in the strength and impact of Hurricanes Jose, Irma and Maria. We’ve also seen devastating wildfires in Portugal and British Columbia, where we’ve had the worst wildfire season on record. In the long term, we face a range of issues from increased water scarcity to rising sea levels, and changes to vegetation due to rising temperatures, not to mention more potential extreme weather events.

How might that have an impact on my organization?

The bottom line is that environmental impact creates change. The challenge is to plan for and adapt to those changes, from the impact on the flow of people and goods, to the possibility that enterprises may be shut down due to extreme weather events or may have to meet changing environmental regulations, just to name a few.

How can I prepare for the disruption climate change may cause?

Environmentalists and scientists have been struggling to create a predictive model for climate change for years without much luck. And because the impact of climate change is difficult to predict, it often doesn’t get the same quantitative analysis or time around the board table that other issues do. That said, when you’re operating a business, you have two main goals. First, you look at trying to manage your risk by looking at the known unknowns. In other words, if this event happens, what is it going to cost the business? And how can we mitigate that risk? The second factor to consider is your organization’s ability to adapt to climate change by finding new markets or supply chains, or by revising operations to meet new regulatory requirements, for example.

What is a Chartered Professional Accountant’s role in risk mitigation?

Chartered Professional Accountants are well trained in risk mitigation; it has always been a big part of their role. They tend to have a broad overview of the organizations they work in. And as a consequence of seeing all those different aspects of the organization – whether they’re geographically or process dispersed – CPAs frequently have the ability to recognize potential risks. Although planning for a 1-in-100-year event is difficult because you can’t predict when it might occur or the size or nature of the event, CPAs are well positioned to focus on high-level risks. While they cannot predict the nature and magnitude of extreme or longterm climate changes, they can help their organizations think about the potential implications to operations – impacts such as power outages, road closures or interruptions of key suppliers. Likewise, CPAs can run scenarios using assumptions about the impact of extreme weather on, say, commodity prices and other business inputs. This can result in suggesting changes such as seeking alternative supply sources or increased insurance coverage.

How can my company adapt to climate change?

Along with change comes opportunity. Companies are coming up with innovations because of climate change and the regulatory environment surrounding it. That may mean creating new and better products, for example, or finding cleaner sources of energy that reduce the company’s carbon footprint, enabling it to comply with more stringent regulations. And more and more sustainability is becoming a selling point for a company. Not only are governments stepping up and publicly talking about their commitment to reduce greenhouse gases, you’ve got consumers and shareholders looking at the sustainability of the companies they’re investing in and the products they’re buying. Companies everywhere are waking up to that reality and CPAs are providing the analysis that underpins their decisions and helps their companies weigh options and find solutions.