Printed from BusinessInsurance.com

That's not my department

Posted On: Nov. 5, 2006 12:00 AM CST

Time for risk managers to step up to the climate-change-plate

Climate change exploded back onto the front pages of European newspapers in the past couple of weeks.

There are a number of reasons for this.

Firstly, this is a topic that is becoming increasingly difficult to ignore on both a personal and professional level.

Scientists may not agree on the impact of climate change and therefore its seriousness, but they do now all seem to agree that it is happening.

As such, individuals are being pressured to change the way they act to help save the planet through simple things like recycling household rubbish and using less energy at home.

Companies are also under increased pressure from consumers and shareholders to show what responsible corporate citizens they are, even if they do not directly damage the environment through their activities.

Secondly, more and more people are talking about it at the highest level and more significantly actually coming up with real solutions and regulations to try and do something about it.

The European Commission is seemingly committed to tackling the climate change problem head on when it meets in Nairobi shortly with the United Nations to talk about what needs to be done after the Kyoto carbon emissions agreement runs out in 2012.

The British government appears to be ahead of the European pack on this one, with a good record so far on carbon emission reductions to date and a commitment to taking it even further. This week it published the "Stern Review", carried out by Sir Nicholas Stern, head of the government economic service and former World Bank chief economist.

His report, described by the government as the most comprehensive review ever carried out on the economics of climate change, said that there is still time to save the world, but not that much.

"Delaying action, even by a decade or two, will take us into dangerous territory. We must not let this window of opportunity close," reported Sir Nicholas.

Climate change presents a host of risks to all kinds of companies and so there is a natural assumption that corporate risk managers should somehow be at the forefront of the effort to combat its impacts and address its causes.

Because the causes and effects of climate change are so broad and often difficult to pin down, however, it is also very difficult for most corporations—particularly those not as directly involved as say energy companies—to work out what to do and how to allocate responsibility for action.

The easy thing for risk managers would be to simply say "not my department" and focus on more tangible and insurable risks instead.

That would, however, be a missed opportunity and arguably a professional failure for the risk management community.

If ever the concept of enterprise-wide risk management—whereby the risk manager can use their company-wide brief to coordinate and drive corporate policy on a very important issue that is sadly still too easy to leave until next year—could be used to good effect, then surely this is it.