How can your organisation begin adapting to climate change? The first step is understanding what a risk is. Let's go!
Climate risk is the combination of 3 factors: hazards, exposure and vulnerability. First, hazards. A hazard is a one-off climate-related event, such as flooding or a heatwave, or a gradual change, such as rising sea levels.
Imagine, for example, an area near a river. The hazard shown here is a flood. Right.
The second factor is exposure. Are the organisation's activities exposed to certain hazards? It depends on their characteristics, like their location for example.
Let's go back to our example: if a site is located next to this river, on a flood plain, the site is EXPOSED to flooding. The third factor is vulnerability. You may have a site that is exposed to a hazard, but is more or less vulnerable.
. . Here, as we have seen, the site is exposed to a flood hazard.
. . Well, it is also very vulnerable because it is not protected.
The damage can be significant. On the other hand, if the organisation has taken protective measures, the potential damages are much less significant. So, it is much less vulnerable.
Risk is therefore the combination of these 3 variables: hazard. . .
exposure. . .
and vulnerability. . .
The key to identifying risks is therefore to think in terms of geographical zones. That's the next step. Map the areas your organisation DEPENDS on.
You must be thinking of your production, storage and sales sites. But that's not enough. You also need to think about suppliers and customers: remember the keyword : value chain Also identify the essential transport networks and infrastructure for your business.
Don't forget energy supply or telecommunications, for example. The aim is to progressively assess the hazard exposure and vulnerability of these areas. It sounds HUGE.
So, how can you proceed? We have the pleasure of discussing with Bertrand Pigeat, Group Audit Director and Risk Manager at Michelin, the world's leading tyre manufacturer. Hello Bertrand.
Hello! Why did you start working on your climate-related risks? So, Michelin is historically exposed to climate hazards.
Recently, we have had tornadoes at our plants or at our suppliers in the United States, floods in Thailand and water shortages in Brazil. This type of risk is included in our group risk mapping. And beyond these phenomena, we are working more and more with biosourced materials.
For example, we are the world's leading buyer of natural rubber: rubber tree sap. Future climate change will lead to changes in our supplier sourcing and transport flows. How did you identify your priority sites?
Are they the ones that generate the most profit? Some of our priority sites are those that generate the most profit. But it isn’t the only and most significant criteria.
For example, we have identified some suppliers as a priority site because they are our single suppliers for one product. The Group's Audit and Risk teams are constantly working to map our risks. So, we know how sensitive we are to a disruption of any kind in the entire physical chain - our suppliers, our factories or our customers.
And we even include in that mapping the IT chain, i. e. , our data centres or shared service centres.
Thanks to this work, each of these sites is classified according to business continuity management, or BCM. It can be BCM 1, business continuity with a major impact for the group, BCM 2, significant impact or BCM 3, a minor impact for the group. And this basis has been very useful in helping us to know where to start with our adaptation strategy.
What's next for Michelin? With these tools we are using now, we are looking at 2030 and 2050, which we did not do in a precise or methodical way. Until now, our focus has tended to be on the present or the near future.
And in terms of scaling up, we are moving from infrequent one-off studies to a much more systematic and almost instantaneous overview of the topic. Thank you very much Bertrand! Thanks, bye!
Right. Once you've identified what you want to preserve, and prioritised your sites, the next step is to see WHO can handle the subject internally. This question of governance is the third step.
Ideally, rely on a dedicated adaptation team. This team will define the right strategy and coordinate its implementation. In turn, it will be able to rely on local adaptation representatives on the most at-risk sites.
This could be site managers, or those working in health and safety, for example. They have a local vision of the risks and adaptation options, and can infuse an adaptation culture into the organisation. Implementing an adaptation culture also means 'de-siloing' information exchange on these subjects as much as possible.
All departments should connect: CSR, risk and legal, strategy, but also local teams, etc. . .
In other words, governance must also be TRANSVERSE. In fact, climate adaptation needs everyone to be involved in the subject. We'll talk more about this in the next few videos.
