3-8. The Fusion of Climate Change Risk and Business Continuity Planning (BCP)

Climate change poses a serious risk to corporate management. The intensification of natural disasters like torrential rains, typhoons, heatwaves, and floods, along with the instability of energy supply and constraints on water resources, directly impacts business activities. Therefore, it is becoming crucial to integrate climate change risks into traditional Business Continuity Plans (BCPs) to achieve sustainable management. This article explains the concept of BCPs that account for climate change risks and practical points for implementation.

1. The Intersection of Climate Change Risk and BCPs

Traditional BCPs were formulated to prepare for sudden risks such as earthquakes, fires, and cyber-attacks. However, risks stemming from climate change are characterized by their frequency, longevity, and widespread nature, which traditional BCPs may not be able to address sufficiently. For example, risks such as the disruption of logistics networks due to floods, the deterioration of working environments from heatwaves, and production halts caused by power supply shortages are now becoming a reality.

2. Steps for Integrating Climate Change Risks

The following steps are effective for formulating a BCP that accounts for climate change:

• Risk Identification: Use climate projection data from sources like IPCC reports and national/local government bodies to identify climate risks to your company's locations and supply chains.

• Impact Analysis: Pinpoint specific impacts, such as factory flooding from heavy rainfall, work stoppages due to heatwaves, and manufacturing interruptions from power outages.

• Prioritization: Evaluate risks based on their frequency and impact to determine which areas require priority action.

• Countermeasure Formulation: Consider effective measures such as relocating facilities, making equipment water-resistant, introducing renewable energy, and establishing a remote work system.

• Monitoring and Review: Since climate change risks are constantly evolving, regular reviews and improvements are essential.

3. The Supply Chain Perspective

Climate change risks affect not only your own company but also your business partners and logistics networks. If a key supplier's operations are halted by heavy rains or droughts, your own production will immediately stagnate. Therefore, it's crucial to evaluate the climate risks of your suppliers and secure alternative sources or diversify your bases. Collaborating with business partners to formulate a joint BCP is also effective.

4. Demands from Investors and Customers

With recommendations from the Task Force on Climate-related Financial Disclosures (TCFD), the disclosure of climate change risks has become a key evaluation criterion for investors. By incorporating climate change risks into your BCP, you can enhance trust in financial markets, leading to reduced procurement costs and expanded business opportunities. Furthermore, there is a growing number of cases where a response to climate risk is a mandatory procurement requirement from customers.

5. Future Outlook

BCPs are expected to become more sophisticated with advancements in climate risk prediction technologies that use AI and big data. In the future, "resilience management," which is predicated on climate change, will become standard and will be integrated into the business strategy itself, going beyond mere disaster preparedness.

The integration of climate change risks with BCPs is a prerequisite for companies to achieve sustainable growth in an uncertain environment. Companies are now required to incorporate risk management into their business strategies and build a resilient corporate structure.