Reflecting the importance global regulators are placing upon climate change, the Executive Yuan formally made its final decision on the revised Greenhouse Gas Reduction and Management Law last April, renaming it the Climate Change Response Act, and also setting a target to achieve net-zero emissions by 2050. Moreover, in order to push alignment in capital markets towards international sustainability trends, the FSC will also actively promote actions like the Corporate Governance 3.0-Sustainability Roadmap, the Green Finance Action Plan 3.0, and the Sustainability Road Map. These plans will support firms in their low-carbon transformation and help them to incorporate the core features of sustainable operations into their climate resilience, all while pursuing a positive feedback loop of green and sustainable development.

With both a legal foundation and policy support, these plans will undoubtedly hasten carbon reduction, as well as management of climate change risks and opportunities. However, domestic firms currently face two major challenges: a lack of green talent reserves and insufficient climate data knowledge. These challenges have caused these plans to remain wholly ineffective in practice, reducing them to mere buzzwords.

Faced with the net-zero transformation, firms should prioritize understanding their own strengths and weaknesses. PWC offers perspectives and recommendations on both talent and data, and assists firms with both advance preparation and adaptation to climate change.

Climate change deeply impacts decision-making

Over the last year, climate change has brought on disasters the world over. The frequency and severity of these disasters are both increasing, which is closely related to global warming. Climate science has also shown that greenhouse gasses produced by human economic activity are the direct cause of global temperature increases. In order to slow this trend of warming, international organizations and all governments must agree to net-zero targets and reduce their demand for carbon. As low-carbon awareness gains ground among consumers and investors, this will deeply influence firms’ actions, and even affect their profitability, compelling them to undergo a transformation. In other words, the dangers of climate change will constantly affect their decision-making and operations.

Apart from this, climate change is a long-term process with complex interactions with the environment and society, which has caused firms’ estimates on the risks of climate change to be highly uncertain.

According to PWC’s observations, although Taiwan’s climate change regulations are at the forefront of the international community, the majority of firms perceive climate change to still be in the energy conservation and carbon reduction stage. A large gap still exists between responses to regulatory requirements and disclosures, which is because their internal knowledge of climate adaptation and capacity building are still in the early stages. They have yet to completely incorporate talent development plans. Moreover, the use of more reliable information to assess climate change risks and opportunities would have great significance for future strategic development in response to the inherent uncertainty of climate change. However, the majority of companies are still developing their climate data collection and management mechanisms, making it impossible for them to use this data in their analyses and decision-making. They face both defined risks and uncertainty at the same time. Training and data can help them figure out how to maintain both resilience and growth.

Inter-disciplinary capabilities and climate professionals

Preventing and adapting to climate change have become unavoidable in every sector. Regarding prevention, which may include greenhouse gas inventories, emissions evaluations, energy management, and renewable energy procurement, every company needs to mobilize its administration, business, R&D, and purchasing departments. However, according to the staff that have participated in this, these projects all constitute new territory. Only after the relevant concepts and knowledge are integrated into everyday business via cross-disciplinary training can companies truly implement carbon reduction. Assessments of production facilities must be completed by experts who must be able to use measurement, documentation, and analysis to determine current climatic sensitivity and ability to withstand disasters. If they discover climate risks, they should take the next step in investigating them and plan adaptation measures and recommendations for consideration by management. However, this type of expert is always in short supply.

In order to ensure the appropriate management of climate risks and opportunities, firms should deploy ample labor resources and conduct appropriate training. PWC has three suggestions to help every level and every department grasp the necessary climate knowledge and establish comprehensive climate management capabilities.

1.     Broad-based training: In order to implement climate risk and opportunity management during the course of daily operations, companies should communicate with every level of their staff, and ensure that the relevant personnel earnestly participate in training. Moreover, in order to implement a culture of top-to-bottom climate governance, they should invite also their board members and senior management to attend climate-related training for each level of the company when appropriate.

2.   Tailored training: The educational needs for each level and unit are different, so the design of climate-related training programs should include foundational information corresponding with simple and easy-to-understand courses, helping the relevant staff grasp how climate change impacts operations, duties and client needs, and allowing them to apply what they have learned to further growth. Moreover, companies should also regularly assess whether their training programs have achieved their expected results and conform to the relevant units’ educational needs, adjusting the training material when appropriate.

3.   Recruiting and training climate professionals: When it comes to professional solutions to climate-related problems, apart from recruiting experienced professional staff, companies can also establishing longer-term cooperation plans with universities and research institutions, with reference to international methods. They can also subsidize specialized training classes, allowing them to absorb and train talent with basic capabilities and relevant goals. Moreover, suitable selection and appointment mechanisms when promoting projects and plans will help to ensure that the administration and staff possess sufficient expertise.

Understanding data sources and applications

In this digital economy, firms already deeply understand the value of data, and use it when making business policy decisions, managing staff, and expanding their operations. However, climate data is still unfamiliar to most. Faced with increasingly harsh climate supervision, client demands and international convention standards, the lack of relevant information is one of the largest challenges. However, when it comes to early adaptation, establishment of data collection and application mechanisms may become an opportunity.

For example, one of the expectations of the Task Force on Climate-Related Financial Disclosures (TCFD) is that corporations work to understand their current climate resilience by analyzing increases in global temperature of 2°C or less. They could also look to include even more severe scenarios. When they run these analyses, they must utilize large datasets to formulate their hypotheses and assessments, and can only move onto the next step of assessing resilience and adjusting strategy after receiving reasonable and interpretable results. Physical risk assessments could make use of data that includes the location, timing, hazard level, frequency, and probability of natural disasters predicted under particular scenarios, as well as the geographic location of factories and historical losses due to disasters.

PWC recommends that companies apply data to climate change management. In addition, they should adopt and carry out the following workflow, which will allow them to gradually grasp data sources, build application mechanisms, and ensure data reliability.

·        Assess their current, and potential future, climate data needs

·        Make use of government information sources and climate data services

·        Formulate internal data collection mechanisms and workflows, which could be managed via a digital system

·        Collect and integrate objective information

·        Verify the reliability of data and its subsequent use in analysis, using a third-party when necessary

·        Continuously manage and improve related mechanisms and systems

If corporations can use the above workflow to collect, apply, and manage climate data, then they will be able to increase their resilience, turning this crisis into an opportunity.

PWC is a pioneer in climate change solutions, and has helped Taiwanese companies establish comprehensive carbon management strategies and guide them in adapting to international trends. Moreover, they look forward to helping clients break out from their core business and display their uniqueness by implementing sustainable development.

The author is Leader of Sustainability at PWC