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Hello everyone and welcome to today's webinar which is on employment risks and opportunities and is being presented by our professional affiliate members, Rambal.
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First of all, thank you to everyone for coming today. We hope that you find the content useful.
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There will be a Q &A at the end of the webinar so please put any questions that you have into the question box and we'll do our best to go through as many as we can at the end of the session.
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We'll also be doing a few polls today so please do respond to those when they pop up on the and following the webinar, we'll be sending you an aftercare email in the next couple of working days.
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This will contain a recording of the webinar, a copy of the slides, and the contact details of today's presenters.
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So without any further ado, I'll pass you over to today's presenters, Grace and Dale.
0:48
Thanks, Luke. So we're just going to start with a topical image to begin with.
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Broccoli, at the moment, in the UK, they're expecting smaller crops this year.
0:57
So it was quite timely that we're having this presentation today.
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So Grace, I'll let you introduce yourself first.
1:04
Sure, yeah.
1:05
Grace Cook, thanks for joining us today.
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I spent 10 years in consumer packaged goods.
1:11
So working with companies trying to get new products to market and since joining Ramble have really been focusing on both circular strategies as well as climate risks and kind of the intersection between those and ultimately thinking about how businesses can change the way they work and approach their own workflow processes to have more resilient businesses in the face of climate change.
1:33
So really happy to be presenting to you today and I'll be focusing most of my presentation on the climate transition risks side of things.
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Dale, over to you.
1:42
Thanks Grace.
1:43
So hi everyone, I'm Dr. Dale Tromans.
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My background was very academic, holding a PhD in paleoclimatology or past climate change.
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And then over the last three years, working with Rambole based up here in the Northwest in Chester, been supporting clients on physical climate risk and climate adaptation and what it means for their businesses and how to enhance their resilience, worked with clients in food and beverage, both visiting sites and also helping them with their climate risk reporting.
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And my role now typically revolves around supporting clients and identifying those physical climate risks and remediating them.
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In terms of what we'll cover today, we'll give you a brief introduction as to Ramble and ourselves so that you can learn a little bit more about us and then we will take you through why you should care about climate risks and opportunities followed up by what they are and then finally what you should tell your board and leadership. Grace.
2:45
Yeah so just as a brief introduction about Ramble in case any of you are not familiar our company is a Danish firm so it's based in Copenhagen obviously Dale sits in UK, if you haven't noticed, I'm American.
2:57
And so, you know, but our organization is foundation owned and led.
3:02
And what that means is that we are really here for the purpose of making a profit, but also for the benefit of societies to be more resilient and more sustainable.
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And so we do that through engaging a number of sectors and disciplines.
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And we have groups that are fully focused on buildings and how to improve the Sustainability and reduce the embodied carbon around buildings and building design.
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So that goes everything from manufacturing sites to real estate water and energy We've been a leader in renewable energy and have had a hand in designing the majority of offshore wind globally So we have lots of expertise there.
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We have our own architecture firm in-house called Henning Larson and then we also have a breadth of expertise across environment and health disciplines management consulting, which is where Dale and I both sit, as well as our transport colleagues.
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So that is a little bit of an overview about Ramble.
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And we do this really through a focus on sustainability services, which we'll go through on the next slide.
4:04
So we focus on technical and design expertise, and we really pride ourselves on our ability to go from strategy kind of through implementation, with having kind of a plethora of, and a host of PhDs on staff, we really can go deep with clients and understand both their sector and their challenges.
4:24
We focus a lot on climate and climate resilience, mitigation and adaptation, all of the above to help folks change the way they're operating today so that they are better suited for this future that we're already living in.
4:39
Environment is key to Rainbow Services and we do a lot of restoration and conservation as well as mapping and improvement of you know sites that have been kind of brown fields in the past and figuring out how do you remediate that to make that usable in the future.
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So there's a host of biodiversity and nature-based solutions that we that we offer and deliver to our clients as well as policy and legal insights.
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You all are probably know strangers to the plethora of compliance and regulations that have been rolling out both in the UK and the EU and even in the US And so trying to help our clients make sense of all of that and understand kind of where those pain points are, we use our experts globally, which are in 35 different countries around the world to kind of make sense of how these different policy impacts are driving decisions for their business.
5:28
And then lastly, economics and finance, because ultimately if it doesn't make business sense and if we can't articulate the value to business leaders for why these sustainability initiatives are required, then we often don't get much traction, right?
5:42
and it's not going to be sustainable in the sense of financial stability.
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So lastly, we have lots of experts around economics to make sure that it actually makes dollars and cents.
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So why should you care?
6:00
There's plenty of misconceptions about climate change.
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You probably see it in the media pretty much every day, every week that's out there, but these are the top five that we commonly come across when we're working with our clients.
6:11
So it could be that only physical climate risks are flooding, storms, heat waves, whereas we're now starting to see a plethora of new hazards such as wildfires occurring more commonly across Europe.
6:23
It could be that transition risks are just about regulations and carbon taxes without considering the fact that there might be changing markets, might be the need for you adapting your energy source away from fossil fuels to greener energy sources.
6:37
It could be that your risk management system adequately covers all climate risks already, but when you get under the hood, you might realize that there's more going on than meets the eye.
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Opportunities perhaps are sparse when actually, and particularly when it comes to food and drink, they're greater than ever in term, and that's what we will go through later on.
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And then finally, we see and hear quite often that a lot of businesses see this as something that's happening in 2050, 2060, 2070.
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Whereas the reality is, is that both the physical, the transition and ultimately the financial impacts happening today and they're here to stay over the longer term.
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We then have this sort of life cycle or sphere in terms of regardless of your position you should definitely be thinking about climate risks and we understand that there's a plethora of people here today from different backgrounds within their organization but we want to reassure you that no matter what grade or level or where you are in your company you can think about this you can have a voice to have confidence and raise that there are both risks and opportunities to your business.
7:53
When we think about climate risk assessments we try and think of what's known as the value chain. So this encompasses the upstream, downstream and your own operations.
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What we'll do to begin with is we'll take you through what physical climate risks can look like in your value chain, then some transition risks and then some climate related opportunities that might be relevant.
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Now, some of these you may already be familiar with, you may have quite in-depth and granular climate risk assessments internally, but for those of you that are perhaps less confident or looking to adapt and improve your reporting, this might be really relevant to you.
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But even for those of you with great depth and experience, this might give you food for thought or a different angle than what you'd previously considered before.
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Now, there's a slight UK focus here, but ultimately we need to think but with the upstream, it can be getting your raw materials, your supplies, the key ingredients for your food and beverage products to site and the costs associated with that.
8:54
So the example on screen is around cocoa and how that led to a 300% increase global cocoa prices less than a year ago.
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We then have three years ago, some of you may remember when the UK hit 40 degrees C for the first time and you may be experiencing the three or four heat waves that we've had so far this year and how that's impacted our own agricultural industries.
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This may affect your businesses currently.
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In this case, it was poultry and dairy farm losses.
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And then for the downstream, a couple of years ago, we had the very, very wet year, along with 2024, which led to affecting the distribution networks, which again affects supermarkets getting food on their shelves, and ultimately your customers or consumers from buying those products.
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So as you can see, the impacts may be quite far away or quite far up your supply chain and value chain, but they will also affect you right the way down to the individuals buying your goods and your own operations.
9:55
Right.
9:56
As far as transition risks go, when we think about what could be affecting the food and drink sector upstream, some regulations that have recently been brought into force as far as the EUDR could be affecting suppliers on pretty short order here as we see the traceability requirements increase and it's really going to ultimately define who can and cannot have access to this EU market and who can kind of supply the credentials to back that up.
10:28
So that's what we're seeing from as a regulatory example upstream of your supply chains and then within your own operations, EU ETS is also applying to large food manufacturing regarding high-energy uses, and so there's a real focus here around how efficient your operations are and what are the effects of that going to be as far as the pricing that you're facing.
10:55
Pressures from consumers we see as more of a downstream transition risk as people's tastes change and their priorities where they feel like they are essentially you know voting with their with their dollar or with their pound you know that allows them to kind of make choices that align with their lifestyle and align with their beliefs and they're going to ultimately align with brands that they see as more credible and sharing those same values with them and I think this is you know since we've done a little bit of an intro of both transition risk and and physical risk might be a good time to launch out those first polls and maybe even the second one as well.
11:34
So we can get a sense of which parts of your organization you sit within.
12:17
This is great.
12:18
We're seeing a lot of sustainability professionals in the room, which is excellent.
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We're in good company there, but also some compliance and legal as well as finance and operations.
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So this topic we see as pertinent to really cross-functionals And it's like, so despite where you may sit, it's really, it's going to be interesting for you to kind of think through these topics with us today and figure out how these various topics may end up on your desk and in what capacity.
12:46
And that is kind of a nice lead in into these global climate disclosure mandates.
12:52
We are seeing this trend globally, as you can see.
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All of the blue areas on this map are countries that have proposed climate disclosures and what we mean when we say that it means that those regulations are in the process of being passed or finalized or put into force but really this encompasses often greenhouse gas emissions and also climate risks predominantly financial risks and how those are being governed by your organizations the strategies that you are using to both kind of reduce that risk, but also how climate risks are informing your strategy and changing the way that you're approaching your operations day to day.
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It also encompasses disclosing your risk management practices, which is how do you go about identifying, assessing, and then managing these risks and determining whether or not they are material for your business?
13:47
Because inevitably, there will be some physical and transition risks that may be material, as well as climate-related opportunities that could be financially material for your organization, but it doesn't mean that you have to worry about everything all the time, right?
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So that's why that materiality assessment is really key.
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And then lastly, around metrics and targets.
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So understanding and sharing with your stakeholders publicly how you are tracking against these monitoring or mitigating activities to kind of reduce your exposure or your sensitivity to these risks over the long-term.
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And so all of these blue areas means this is in the works.
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All of the green areas means it's already here and here to stay.
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So as you know, for the last few years, the UK has had its own rule requiring climate related financial disclosures to be a part of financial statements.
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And so also the EU has been working through their own finalization of CSRD, which would require something very similar.
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And we're also seeing this in the US, our sole green state over there on the left is California, but Australia as well, already bringing this into force, Brazil, India, Nigeria, there's this rolling timeline of more and more countries adopting these practices.
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And it's because the countries themselves are very interested in what operations exist within their borders and how resilient those operations are going to be to the effects of climate change, both from transition and physical.
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So that is a widespread trend.
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and I think the main takeaway that I try to get folks to understand from this slide is you can run but you can't hide from climate risk, right, because increasingly this disclosure point is really key and people want to have the public awareness and public scrutiny so that we have the needed transparency to have honest conversations about what we're doing and how we're changing the way that we operate.
15:49
So you're probably asking and wondering what climate-related risks and opportunities.
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You're probably familiar with more often than not physical climate risks.
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You may also be aware of transition climate risks and you probably have a good idea as to some of the opportunities that are out there but what we'll do is we'll take you through in a little bit more detail here what they are and ultimately what they mean for your organisation and we'll also provide you with some unique case studies and examples particularly relevant to food drink as well.
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So first off I'll cover the physical climate risks, Grace will cover the transition climate risks, and then finally we will wrap up with the opportunities.
16:30
Now physical climate risks you as already mentioned probably aware of things like flooding, heat waves, storms, then there's wildfires, drought, these are some of the acute hazards, so hazards that occur over short time periods, think days, weeks, months, and then we have the chronic or the longer term climate hazards, so things like rising sea levels, the changing in global temperature, it could be changes in precipitation.
16:58
So like in the UK, we've had an incredibly dry year this year, yet last year was one of the wettest on record.
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The other thing to bear in mind when we talk about physical climate hazards is the nature impacts as well, and this is something that we'll cover in a future Food and Drink Federation webinar, is how climate is systemically linked to nature and how that will affect both your upstream supply chain and your own operations.
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But for the purposes of this webinar, we're just capturing those physical climate risks.
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We've then got an example here of some of those hazards that you've seen on the previous slide and what the effect is and are.
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So from heat waves, for example, that can affect the growing season of crops.
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it could lead to increased crop failure, reduced yields, increased health risks of your workers and staff and the greater need for cooling infrastructure or passive ventilation, things like that.
17:56
Drought, self-explanatory but reduced water and as mentioned at the start could lead to smaller crops for things like broccoli and carrots, it could reduce your yields as well but also increase your cost to get water brought to site or to think about changing your entire crop yields and switching from one crop to another that's perhaps less water intensive.
18:17
You then have the chronic hazards where average temperature will change growing seasons, it will change the types of crops that you can grow.
18:25
We've already seen over the last 20 years in the UK, the increase in UK grown wines and citrus fruits that is starting to occur.
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The fact that you can now grow tea down in Cornwall, that was something that wasn't possible about 10, 15 years ago now.
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then you have sea level rise.
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So this is particularly relevant to the eastern part of the country but also other areas where there's particularly low-lying lands.
18:51
This can affect not only losing that land but also can increase salinity of the land and make that soil less nutrient-rich for growing and make it poorer for animals as well to feed off of.
19:07
We then have this wonderful diagram from Carbon Brief. I implore you to go and read this article.
19:13
If you get chance in the slide deck that we'll send across afterwards there is a link to this article.
19:19
This was some scientific research done to sort of show the link between the physical climate risks and what it led to both from an economic side but also a social development side.
19:29
Starting with the UK we had obviously the heavy rainfall last year and the year prior leading to a lower potato yield which then impacts quite a lot of other products and crops that use extracts from potato to as some of their key ingredients.
19:46
We then have China and India where you had in contrast to the UK's very wet weather last year, record heat waves where we saw temperatures reaching 50 degrees and for the most part staying around 40 degrees for extended periods of time.
20:02
This led to sudden crop failure, there were export bans on goods, then there was a very very food price inflation on goods such as rice.
20:12
Mexico and Spain in 2023 both regions opposite sides of the world but they experienced severe droughts leading to a large reduction in olive oil production.
20:23
That then led to irrigation issues and there were also upstream supply shortages for those businesses that really dependent on that crop to produce the oil and take it and turn it another product. Then we have Brazil.
20:40
Brazil obviously notorious for the Amazon rainforest but also a huge grower of cocoa and coffee and with the changing climate there what we're seeing is as there's more deforestation there is a greater increase in drought occurring in key crop areas and this is leading to large crop failure, productivity decline, lower soil fertility and greater increased insurance costs and adaptation costs for the people that live there as a result of secondary effects such as landslides and flooding as a result of soil instability.
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And then finally we have Indonesia.
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This is one of the parts of the world which is actually sinking as a result of climate change and this is leading to a decrease in available land for growing.
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So things such as arable land are decreasing and leading to greater food security risks for the people that live there but also for the companies that are dependent for the exports that come from there as well.
21:40
On the transition risk side, so we usually talk about these in four categories.
21:45
So we have policy and legal, and so that's a lot of this regulatory pressure that I've been alluding to.
21:51
The fact that we will likely have stricter environmental laws as time goes on and climate related litigation, you know, are both as well as carbon pricing and emissions regulations.
22:02
these are all different types of policy and legal risks within the realm of climate transition risks.
22:08
And so that is separate kind of, but all of these are interrelated.
22:13
If you think about market risks, this is how changes from your customer preferences or your supplier availability, as well as kind of new competitors or consolidation, access to retailers, you know, all of those kind of classic supply and demand shifts are what falls into the markets and how is that being driven by climate change and the transition to hopefully a greener and cleaner economy in a future state.
22:42
Technology risks tend to be, you know, potentially unsuccessful investment in R &D or that technology switching costs.
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And so a lot of times we see this kind of related to competitive advantage as well.
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if you are too close or too early to invest in something, or if you fall behind and you're a laggard in that space.
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The technology piece can be really critical to making sure that you get that right and you stay in step with both what the market needs and also what you need to make your operations as efficient as possible.
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Then lastly, there's the bucket of reputation.
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There can be sector stigmatization.
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If consumers and customers feel like a sector isn't doing enough in particular space or taking responsibility.
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There can be some negligence associated with that, as well as unmet targets when companies go out and they make these bold claims and they set these strong sustainability commitments, and then those fall short, then there's a lack of trust among stakeholders, both, you know, upstream and downstream.
23:48
So those are kind of the four broad buckets, but we'll get into kind of increasing, you know, granularity and specificity of of how this can come to life.
23:56
So for starters on policy and legal, as governments introduce emission standards or carbon pricing in food and agriculture production, this can lead directly to cost increases for producers and a need to kind of shift in sourcing.
24:11
As well as with market risks, you can have buyers and consumers shifting demand to lower emissions foods.
24:17
So think your plant-based alternatives as well as more regenerative ag.
24:23
So, really focusing on those methods and those products that are lower emissions and going to be likely more resilient and have more longevity.
24:34
This can kind of have an effect of reduced market share.
24:37
If you have had kind of a historic product line and you're not looking into how you might need to be shifting that, if you're continuing with the status quo, that can result in reduced market share for things like red meat and model monocultures that are going to be more susceptible to these impacted risks.
24:58
With technology, the adoption of low carbon ag tech like methane reduction or precision ag is kind of can be uneven or capital intensive.
25:09
So again, it's kind of tricky to make sure that you get this technology piece right and you're investing at the right things at the right time.
25:15
And the effect of that can be competitive disadvantage for laggards, operational disruptions during this transition.
25:23
And lastly, with reputation, there is, I think we see it in the news often, you know, a certain company here or there being made an example of essentially, where scrutiny of corporate climate or nutrition strategies really intensify, and there's more focus on this, that investor or consumer backlash could be, you know, pretty strong from perceived inaction.
25:46
So those are some kind of, you know, broad examples and then we'll go through a kind of place by place example here too.
25:55
So we've just highlighted some examples that we thought would help paint a picture and make this real for folks.
26:02
So with Tesco and Sandsbury's having committed to net zero emissions by 2050, what this means is that ultimately they're looking for their suppliers to help them reduce their own scope three emissions.
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And so, you know, as you are likely aware, scope three emissions are really your value chain emissions.
26:20
And so this aspect of looking upstream and downstream of your operations is really key to being able to meet your own greenhouse gas emissions reductions targets.
26:31
And so you need suppliers who are on board and have similar strategies likely, because if they're not reducing the emissions intensity of their operation, you're going to be unable to affect your scope three.
26:42
So, this pressure on suppliers and on supply chain is something that we see increasingly and this is really truly like a market risk.
26:51
Are you going to be able to sell into these retailers?
26:54
Are your products going to be low enough as far as an emissions intensity goes to be able to still have access or are you risking being delisted because you cannot keep up with your competitors in that sense?
27:07
For the next one here, we have both India and Indonesia.
27:12
So this is more of a policy and legal example, where in 2022, India actually banned wheat exports and Indonesia briefly banned palm oil exports because of a price surge.
27:25
You know, these examples show when governments feel like they need to get involved to help kind of control these market dynamics because of the effects of shortages or of increased prices, and so what that means on the other side is that UK and EU buyers of these materials and ingredients are really facing both supply shortages and cost volatility, and this is for things that are really essential and go into loads of different products, food and beverage, so it's really something that we are seeing increasingly, but this aspect of policy and legal intervention is really something to keep an eye on.
28:07
And then next we'll go to kind of a combined risk because, you know, especially when it comes to actually affecting the community where a company is operating, having their resources being cut off too, that's always going to hit closer to home.
28:25
And so here we have an example of both policy risk as well as this kind of mixed reputational risk.
28:32
So there have been instances where breweries in Mexico City have actually faced government imposed water use restrictions due to local drought and overuse.
28:42
And so when your general population doesn't have access to water like they need, it's really a difficult situation to be in as a really water intensive, you know, product maker that you are going to have to be trying to in a situation where people are under basically rations and it can have a lot of community backlash, but that local operations facing that water rationing as well as the reputational pressure, it can really create kind of potential relocation pressures or just, you know, shut down costs if you have to leave that place altogether.
29:23
And then lastly, for a technology example, at the Ivory Coast, there is tech being invested in to allow traceability to cocoa farms and agroforestry and ultimately really being able to like map their own regenerative practices and kind of prove out that they're reducing emissions.
29:43
And the effect of this is that, without these credentials, this risks exclusion from preferred sourcing lists and also potentially from whole markets, you know, with regulations like EUDR starting to come into the foray.
30:00
And so I think with that, you know, before we get into the opportunities, maybe we can have one more poll question up.
30:07
And since we talked through both physical and transition risk, we're curious if your organization has actually been affected by any of these, as you understand it.
30:17
So, you know, physical risk, both acute and chronic, and all the different transition risk types that we just walked through to.
30:24
Curious to see if you feel that this is already a reality for a lot of your organizations that you're being faced with.
30:38
Pretty good mix here that we're seeing come through.
30:43
About half are saying transition risks and about half are saying physical risks as well.
30:50
So, very good.
30:57
Great, so we then come to the opportunities which is arguably the most important bit once you've understood your risks and addressed them, and there are five categories for these.
31:08
You'll see some similarities between the transition risks and the climate-related opportunities, particularly when we think about markets and resilience and resource efficiency.
31:17
Starting from left to right, resource efficiency is thinking about energy efficiency or process efficiency.
31:23
This could be finding a lower carbon-intensive way of producing your goods or harvesting goods, so on and so forth.
31:32
Products and services, this could be switching from quite processed methods to lower processed methods or coming up with new recipes or mixes or products that provide you with a competitive advantage and also have lower embodied carbon.
31:51
Then we move to resilience, maybe your supply chain.
31:55
So one of the clients that we've worked with recently, they only had one supplier for a lot of their fruit and veg.
32:02
Whereas if you were to have three or four suppliers, that might improve your resilience.
32:06
It could also be that you say have solar panels on the roof of your buildings, or you use wind power to supply your facilities, divesting or moving away from fossil fuel sources.
32:18
Then there's markets.
32:20
It could be that you're solely in one market at the moment, but perhaps looking to expand out into another market in the near future.
32:27
We're seeing at the moment, for example, the matcha boom, where matcha latte, matcha tea is the big thing, yet last year it was bubble tea, next year, who knows what it will be.
32:37
It could also be strengthened relationships, both with your upstream, so your suppliers, but it could also be your own operations and your downstream.
32:45
And then finally, the energy source, perhaps linked to resilience as well is, do you have a diversified energy source?
32:51
Do you have a mixture of renewables such as solar and wind?
32:57
Do you maybe have some biomass in there as well, where you try and use some of the waste products to fuel your facilities?
33:03
Or are you looking at some of the newer technologies, synthetic fuels or hydrogen to power your facilities?
33:09
So these are some of the opportunities that you might unpick or find out when you do your risk assessment.
33:16
And what we've done is we've broken some of these down by each of those categories to help give you real-world example of how competitors and peers are currently identifying these opportunities at the moment.
33:28
So for example, we have Nestle here who have retrofitted their facilities to help produce their operational expenditure or OPEX and improve their margins and they've done this at their UK facility through reduced water consumption. We then have products and services.
33:45
So Unilever, one of the bigger brands, they've done this through low carbon products such as plant-based alternatives, and particularly through two of their brands, Knorr and Hellmans, with plant-based meats and dairy alternatives.
33:57
So that's their vegan mayo, as well as their plant-based meats.
34:04
In terms of resilience, we have Bardsley England, who are apple producers.
34:09
We're certainly coming up to apple picking season at the moment and over the next month or so.
34:13
And they've managed to invest in climate-smart agriculture to improve their yields and to improve the quality of crop that they're producing.
34:22
This is through a mixture of AI and data analytics to reduce those weather-related losses.
34:29
For markets, we have Oatly, the popular UK-based oat milk brand.
34:33
They have managed to tap into this new market of milk alternatives that's there.
34:39
You've perhaps heard of other alternatives like Alpro, or you might see it in your local coffee shop.
34:45
This is quite a booming market at the moment as people are trying to perhaps either shift away from dairy, given that it's a high carbon and high methane producing product, and look to these more sustainable alternatives that have lower embodied carbon and are considered to be better for the planet.
35:04
And then finally, energy sources.
35:06
So the Heineken Brewery up in Manchester, that is supplied 100% by renewable electricity, but you may also see competitors and peers buying renewable electricity to power their facilities, much like you can do for your own home.
35:20
So, there's plenty of opportunities available there across the five categories.
35:25
Going through the assessment, you can unpick these.
35:29
It's interesting.
35:31
Go on.
35:31
Sorry, Neil.
35:32
I just wanted to see, maybe we can have another poll jump in here, too, because with these various climate-related opportunities, we're curious, after stepping through those, which ones you think might be most relevant to your organization.
35:50
Will it be product innovation or reformulation, you know, cost savings from energy or emissions reductions, supply chain resilience and transparency, or maybe market differentiation and brand trust, or to be determined?
36:10
Cost savings is winning at the moment.
36:24
Back to you, Grace, with what should you tell your board and leadership?
36:28
Great.
36:29
Thanks, Dale.
36:30
And so as we think through this, you know, a question that often comes up, especially, you know, thinking about the audience that we have in this room.
36:38
You may understand the importance of, you know, your climate related risks and the considerations that go along with that, but it might be a bit more difficult to translate that to your board and leadership.
36:48
And so if you are trying to progress or just getting started in trying to get funding for a climate change risk assessment to be conducted, or maybe it's trying to get that better integrated into your organization's enterprise risk management process, if you want to be taking this more seriously, some key points to bring up to your board or leadership is really the fact that this is going to help you improve your decision-making and help you update your governance as an organization as a whole.
37:20
You are already making business decisions all of the time.
37:23
The question is, are you making business decisions in the context of our reality that we're living in, which is in the face and the wake of climate change?
37:32
So with that, we would have all done things differently if we had known that a global pandemic was coming, right?
37:38
If we had been able to prepare or see through a crystal ball that COVID was going to happen 2019, 2020, but we didn't, right?
37:47
And so we all just had to kind of react.
37:49
But with climate change, we're very well aware of a lot of these impacts that are coming or that are brewing.
37:55
And so with that, you can start to improve your decision-making today by taking those considerations into account and baking them into your decision-making strategies, your incentive structures, as well as informing your overall production plans and your growth plans, right?
38:13
So, this is really key, and it allows you, if you do this right, it allows it to be kind of a self-perpetuating cycle where your governance, you know, improves your decision-making and your better decisions kind of, again, feed back into that structured and strengthened governance because people have more confidence that you all are facing this with eyes wide open.
38:35
There's cost savings and operational resilience.
38:38
So, we understand that, you know, to diversify your number of suppliers that you're sourcing from, that costs money.
38:45
That's organizational complexity. That's verifying more suppliers. There's a lot of effort that goes into that.
38:51
The quality assurance that comes inside with that, there's a lot of effort there.
38:56
But equally, it costs you a lot of money if you are just supply shorted and you all of a sudden have a supply that completely dries up.
39:05
And so if you are not able to kind of think about these profiles of where you're getting the sources, both from a geographic standpoint, but also from kind of a policy environment as well.
39:19
You need to be able to think about all of the various risks from where you're getting your ingredients and your raw materials, so that you can have improved operational resilience.
39:27
And when you need to switch gears or turn a supplier down and turn another one up, that you have the readiness baked into that.
39:35
So there's a lot of cost savings and operational resilience that can be brought in from that.
39:39
There's also kind of more practical things around, you know, your insurance premiums because you are more clearly aware of where your buildings are situated and you can put in kind of physical measures to reduce your risk to some of these physical risks as well.
39:53
With competitive and financial advantages, you know, customers are often screening for emissions intensity.
40:02
Governments are now doing that too.
40:03
So what kind of fees and penalties are you going to be incurring or what kind of delisting risks are you carrying by not thinking about these things and taking them into account with your financial planning.
40:15
And then, you know, lastly, the regulatory and reputational benefits.
40:19
So this is really setting you up to be a good steward of your organization today and make sure that your organization continues to serve the customers, communities, and, you know, consumers that you all have been serving, you know, for now a few days, maybe for a few generations for some of your organizations.
40:37
And so you really want to make sure that you can continue to have that strength in your reputational benefits, because you know, if and when something does happen, you all already most of you already said that you've already been impacted either by physical risks or transition risks in one way or another.
40:52
And that's going to continue.
40:54
And every time that that happens, if you are able to say that you were aware of this, here are the five things that you're doing to try to reduce your exposure to exactly that risk.
41:05
You are building trust with your stakeholders and you're improving your reputational resilience against that as opposed to just acting like you were completely caught off guard and caught by surprise.
41:17
So we'll talk about that a bit more, but here are some kind of just key aspects to bring to your board and leadership about why we really recommend not only conducting a climate change risk assessment, but really kind of baking these considerations into your daily operations.
41:36
And then we have the outcomes from it in terms of how to integrate them into your organization.
41:41
And again, this comes back to the earlier slide where we outlined that regardless of your position, you have a place in this cycle and process.
41:50
Whether that be raising the risks that you're seeing on the shop floor, right the way up to if you're the chief sustainability officer or chief financial officer, in terms of reporting and recording these risks.
42:03
Now, of course, there's lots of reporting frameworks out there that can help you align with how to structure the outcomes of your CCRA and embedding them in your organisation.
42:14
And our approach is so where we want you to minimise the risks by identifying them, thinking about them rigorously through firstly, a traditional lens of is it impacting your physical assets?
42:30
is it affecting your supply chain, so on and so forth, but also then putting in that financial materiality.
42:37
This is something that will then help you to put a number to that risk and help you to then therefore identify any mitigation or adaptation measures that you need to embed to help influence your strategic planning, whether that be over five years, ten years or longer, and therefore that will help feed up to your governance to ensure that they have full oversight of those risks and can manage them properly.
43:01
But equally on the other side, we have the capitalising on those opportunities.
43:06
So again, if you can quantify what the value of those opportunities might be to your organisation, whether it be a particular figure or a broad range, this can again feed up in strategic planning so that you can think about next year, in three years, five years, 10 years, how you can realise that opportunity.
43:25
And this is what will ultimately come from the climate change risk assessment and be your to-do list for this year, next year, and so on.
43:35
And from that, we will now provide you with the roadmap or outline for where you should go from here and what you could do to get started.
43:47
So hopefully now you're a bit more informed about both transition and physical risks as well as these opportunities.
43:55
and you have ultimately kind of your organization has a decision to make about whether you act and you further conduct a climate change risk assessment or you refresh one that's already been done that maybe just looked at physical risks and just looked at the short-term risks and didn't do a full scenario analysis or really consider transition risks and opportunities.
44:17
So you could move this ball forward and kind of strengthen these efforts And, or you could kind of delay, and your organization could, you know, hope that you can kind of kick this can down the road because maybe you're underneath some of these regulatory thresholds, that you're not quite in scope or you're not quite required yet, you could delay.
44:37
And that delay is going to mean that you're gonna continue to be unaware of what you're exposed to.
44:43
And you can kind of just hope to not need a climate change risk assessment.
44:47
But we don't recommend this path, obviously, because ultimately maybe this is a bit of Murphy's law, but I think it's also just life experience that we all see the news, we're all living in this world together and we see lots of complications arise.
45:01
And so sometimes that's an investor calling and saying that they actually want more transparency into how the organization that they are funding and investing in is actually being responsible stewards of that financial investment that they have.
45:15
And they wanna make sure that it's gonna be around for the longterm.
45:18
There could be additional regulations that pass, even though arguably there's already quite a lot in the making, but one might come with a lower threshold that then affects your organization and you get caught by surprise that you all of a sudden have to report by the end of the year.
45:33
That's currently happening in the US with 10 ,000 companies being affected by this California regulation.
45:39
There's also just the reality of climate impacts.
45:41
We're getting impacted by these physical hazards left and right, it feels daily that it's in the news.
45:48
And if it's not at your site, at your operations, it's upstream of you or downstream of you.
45:53
And so having these climate impacts, it means that it's going to be disrupting to your distribution and transportation and your ability to get the goods where they need to be.
46:02
And so the result of that is either you have done these assessments and you've baked this into your organization and you have the ability to respond with all of your risks are documented, they've been publicly disclosed, all of your stakeholders know that you're very aware of it, you have mitigation plans in place, and that trust that you have with stakeholders is really maintained and strengthened because there will always be challenges throughout conducting your business, but knowing that you have the awareness of those and that you're working to navigate those challenges goes a really long way with building trust and also ultimately just keeping your lights on and your doors open and keeping things running and avoiding that downtime that often comes with these complications.
46:48
Or on the delayed path, your risks are unknown.
46:51
So maybe you experienced something and you still don't really know what that means for you.
46:55
You don't know how frequent or how common that's going to be for your organization if it's just a one-off as we kind of like to try to convince ourselves that this will never happen to me or this will never happen again.
47:07
You don't have any mitigation plans in place because you don't know what your risks are.
47:11
So how would you know how to reduce your risks?
47:14
And then there's also loss of stakeholder trust because they are going to see that you are less prepared of an organization than maybe perhaps some of your competitors or new or old competition in this market.
47:30
And so folks are going to continue to align themselves to organizations that have the foresight and the values and the long-term mindset to be able to weather these storms, both metaphorically and literally.
47:45
And so we really encourage you all to kind of act and bring this information into your organizations and to the extent that we can help that we're more than willing.
47:55
And I think with that, we'd love to get a few more polls in here before we close.
48:01
So this next question is around how confident you are about your organization's understanding of its own climate-related risks and opportunities.
48:11
So if we can just take a moment to respond to that next poll question, that would be great. Nice.
48:53
Yes, it's good to see that we've got a mixture of confident and confident.
48:57
For those not confident, we hope that this is helping you to feel a little bit more confident. If not, feel free to contact us afterwards. Grace?
49:10
Yeah, so, you know, just as a quick recap, hopefully you understand a little bit more about Ramble's capabilities, also why you should be caring about climate risks and opportunities, or maybe how you should be thinking about them a little bit more often and in different ways.
49:24
Really, what are these topics that we've discussed today.
49:27
Hopefully we've increased the depth of your understanding there.
49:30
And then lastly, you know, what you should tell your board and leadership, again, to try to move this forward and progress this topic within your organization.
49:43
We've got one more webinar from Ramble coming up next month, all about life cycle assessments from our colleagues, Sam and Emily.
49:51
So please do sign up for that, and Luke will include a link to that after this webinar.
49:56
And then we've got some time, about five minutes, I think, for any questions or queries that you may have.
50:03
And yeah, thank you for coming along.
50:08
Thank you very much, guys. Really interesting stuff. Thanks so much for all of your efforts going into presenting the webinar today.
50:14
We have had a few questions that have come in already.
50:17
So if anyone else has any others, feel free to put them into the questions box.
50:21
We'll try and get through them all.
50:22
the first question that's come in is how do you recommend a company to start their risk analysis without any costs? Very good question.
50:35
I think on the physical climate side there are some free tools out there where you can get quite a high level risk assessment to sort of point you in the right direction of some of the hazards that may be affecting your assets or areas of interest.
50:49
Grace, on the transition side.
50:52
Sure, for organizations that already have enterprise risk management processes, oftentimes you already have an existing risk register.
51:01
These are gonna have things on there like cyber security, right, and the other things that your business is worried about.
51:05
I would suggest going through that risk register because there are likely already some risks such as increased compliance costs that could be driven by climate and maybe are not posed right now as a climate risk.
51:19
And so it might be looking through that current risk register and thinking about are these being motivated or driven or could they be driven by climate change and really broaden the thinking about the risks that your business already has on its radar.
51:31
And then I would say further a great exercise is to really go through some of the materials that we've talked about today because maybe you have a heavy concentration in one of these categories but you might be missing some of these others.
51:43
So maybe overlooking reputational risk as an example.
51:46
And so doing this kind of peer benchmarking is another great way to kind of get started.
51:51
If you can see other folks who have put out PCFD or ISSB IFRS S2 reports, as you look to other peers in your sector, seeing what other similar businesses are worried about is a really great starting point for you to kind of drum up awareness and drum up some engagement within your organization to say, hey, everybody else is already talking about this, and we need to catch up.
52:17
Well, thank you very much.
52:19
We've got another similar question, which is really well suited to you, Grace, which is, what are transition opportunities where climate action could directly lower costs or open up new revenue streams?
52:31
Yeah, I think this really is dependent on the type of producer that you are, right?
52:37
So this can really vary.
52:38
But I think as we look at product innovation, making sure that you have a good market fit and you're creating a product that has lower emissions intensities.
52:48
And so that might be kind of piloting something off onto one side to make sure that you have, you know, making this product with lower input costs, with a more diverse sourcing of raw materials that you think that you're gonna be able to get at a more or less stable price point and is a bit more guarded and insulated from some of these risks that we've discussed today.
53:10
But there are a lot of different ways.
53:12
We've seen some good examples.
53:14
Dale, I feel like you have some good examples from the greater market that may be top of mind.
53:23
Yeah.
53:24
I think we're seeing clients now starting to think about where they're getting their ingredients from, how they're growing those ingredients as well in terms of coffee's an excellent example at the moment where we're starting to see the range where you can grow coffee shrinking ever so around the equator, similarly with cocoa.
53:48
There was a Swiss chocolatier last year that managed to crack, not just using the beans from inside the cocoa, but the whole shell as well so that you're now using the whole ingredient as part of your chocolate product and that nothing's going to waste.
54:03
So that's opportunities of where a little bit R &D is starting to come into play, and some of those new markets and opportunities will open up as a result.
54:14
Substitutions can be a great way to get that.
54:18
Brilliant, thank you.
54:19
We've got one more question, so if anyone has any others, please do put it into the questions box now before we end.
54:27
But the final question is, what are some immediate steps that mid-size food manufacturing could take to begin integrating climate risk into Do you want to go first, Grace?
54:42
Sure.
54:43
So I think planning is a broad statement.
54:47
So I think that there's lots of different aspects of an organization's operations where it should be included in planning.
54:52
So on the transition risk, we often think about planning of new product lines and new markets.
54:58
We think about planning of also if you're looking to merge or acquire a particular company, you want to be looking at what are the transition risks that you're now kind of bringing on board as a result of that.
55:11
And so when we say planning, we mean a lot of different things, but I also think that it's important to call out capital expenditures and so your financial planning because when you think about transition risk, often we are also talking about energy sourcing and what kind of stranded assets might you be investing in today that you maybe shouldn't be.
55:28
And so thinking about how fossil fuel dependent your investments are to date.
55:32
Are you buying new trucks that are running off of fossil fuels?
55:35
Are you putting in a boiler that's going to last 20, 30 years that is only able to run off of fossil fuels?
55:41
Those types of financial planning about how are you making your decisions to invest in infrastructure and in capex assets that are going to have a long lifespan, that's really key to guard yourself against some of these transition risk exposures.
55:57
So we really encourage that.
55:59
But planning is a broad term, so I'm going to answer that a bit broadly, but the truth is that we need to be looking at it in many different ways.
56:05
And then from the physical side, there's equal amounts of contributions I'll let Dale speak to.
56:10
Yeah, something that we're seeing with clients is particularly around cooling or heating inversely in terms of adapting their systems to ensure that they can cope with both higher temperatures and for winters that are particularly harsh, those lower temperatures as well.
56:25
We mustn't forget that climate change, yes, overall average temperature rises, but we will still experience these cold snaps.
56:33
There's a client that we've worked with that has managed to adapt their mixes so that they have a summer mix of ingredients and a winter mix of ingredients, both to produce the same quality of product out, but to accommodate for the fact that more cooling is needed in summer and more heating in winter.
56:50
And so we're starting to see these subtle changes as a result of the warming climate, but also companies are wanting to make their assets areas more resilient.
57:01
So we're seeing companies do studies into where should they be growing their crops and getting raw ingredients from next, particularly when we're thinking about parts of the Amazon are greatly affected as well as Southeast Asia where we get a lot of palm oil.
57:16
Those areas are getting a lot of dry weather or climate whiplash where one year will be very, very wet, but next it might be very, very dry or inversely.
57:25
And so there's studies being done both from a climate, but also a nature risk perspective to figure out where should I be planting my crops?
57:32
What crops should I be planting?
57:35
And should I be doing anything to breed hardier species?
57:38
So again, coffee is a really great example.
57:40
We're starting to see a lot more arabica and robusta beans, so robusta being sturdier and more resilient to drier weather and hotter weather, with arabica, which is your better flavor and better taste profile of coffee, to ensure that overall you have a great tasting, hardy crop that's resilient to those physical climate hazards.
57:59
So there's plenty of options available and particularly for a medium-sized company I think a lot of them are achievable as well if you go through that assessment process that we've discussed today.
58:12
Thank you very much.
58:13
I don't think we have any other questions so thanks to both of you again for your time and all the work that's gone into this webinar.
58:21
We have been recording so if anyone like to rewatch or go through the slides again, we'll be sending you that email in the next few working days.
58:28
We'll also be sending you Grace and Dale's contact details if you have any follow-up questions at all. So unless there's anything else from you guys before we end things?
58:40
No, we appreciate everyone's time and engagement.
58:44
Thank you everyone.
58:45
Lovely, well thank you very much.
58:47
I hope you have a great rest of the week and we'll see you at another webinar again soon.
58:52
Bye all.
