Climate-related financial disclosure reporting (TCFD)

Impacts

Business logistics, including supply chains, utilities and transport arrangements, can be disrupted by extreme weather events. Those that rely heavily on utilities, the transport network or who have inflexible supply networks will be particularly vulnerable. Businesses in Northern Ireland must consider the additional supply chain logistics of crossing the Irish Sea for supplies and deliveries to Great Britain.

Suggested actions

• What would happen to your business if suppliers cannot get to you because of weather-related disruptions?
• Have you considered what would happen if you cannot get your products/services to your customers or if your customers cannot get to you?
• Have you considered alternative suppliers and/or increasing storage capacity to increase your ability to operate without deliveries? 
• Do you have any processes or products that are sensitive to changing temperature or climate conditions? 
• Have you considered the circumstances under which you might decide to scale back or suspend operations during weather-related disruptions? 
• Have you identified critical activities and the employees and inputs required to maintain them? 

Impacts

Climate change will impact business finances through the cost of damage, supply chain disruption and lost sales. A climate-resilient business is ultimately more insurable, more profitable, and more investable.

Suggested actions

• When did you last check that you have the insurance you need? 
• Are you covered for floods and storm events? 
• What are your insurance limits? Check excess and coverage terms and conditions, watch for small print and under-insuring.
• Does your policy cover the full value of your business?
• Do you keep documents safe from weather impacts (and store copies off-site)? 
• Do you have business continuity cover if your business is interrupted? 
• Do you have a business continuity plan? 
• Have you considered the financial management implications of a severe weather event?

Impacts

Suggested actions

• Is your business product or service weather or climate-sensitive?
• Have you put in place measures to increase your business' resilience?
• Does your business have global markets or suppliers that could be affected by climate change in other countries?
• Have you considered establishing alternative suppliers for critical goods and services?
• How would it impact your customers if you could not provide your product or service?
• Would it change your customers’ requirements?
• To what extent do others depend on your business in the event of a severe weather event?
• Have you considered the possibility of changes to your product, service, or channels of customer interaction during a prolonged severe weather event and plan for any appropriate changes?

Impacts

Suggested actions

• Should your computers be unavailable, what processes would be affected, eg orders, payroll, contacts, and would your business still function?
• Do you have documentation of all key processes/procedures?
• Do you scan important physical documents and store the originals off-site?
• Have you considered backup utilities – energy and water?
• What arrangements are in place to ensure the availability of supplies in the event of a severe weather event?
• Have you considered where you store your products, stock, and raw materials?
• Does your business depend on water? If there was a drought would you be able to reduce your water usage while continue running your business?
• Have you identified which equipment is potentially vulnerable to flooding, and which equipment your business could not operate without?
• Have you considered the possibility of changes to your product, service, or channels of customer interaction during a prolonged severe weather event and planned for any changes?
• Do you have a contact list of current and alternative suppliers?

Impacts

One of the recommended disclosures from TCFD focuses on the resilience of a business’ strategy. This evaluation involves considering different climate-related situations, including a 2°C or lower scenario, which is the target of the UN Paris Agreement. This objective aims to limit the increase in global average temperatures to a maximum of 2°C from pre-industrial levels. However, current projections indicate that temperatures may rise to as much as 3°C or 4°C degrees by the end of the century. Each degree of global warming significantly impacts the global climate system and increases risk for society, the environment and the economy.

Suggested actions

Think about what impacts you are already seeing in your business and what areas are being affected by asking questions such as:

• How might your governance procedures have to change between a 2°C and 4°C world?
• How might your risk management processes have to change between a 2°C and 4°C world?
• How might your supply chain, finance/insurance, products and services, and operations be impacted and what action can you take to reduce these risks?
• How might these changes affect your transition risks?
• What metrics and data, eg weather-related losses and supply disruption, are you already gathering which could help inform these decisions? Are there any priority data gaps?