Why it's okay to mix up climate mitigation, adaptation

In the face of continuing non-action on climate change policy at the national and international levels, we’ve seen a growing fatigue develop around the topic of corporate climate change mitigation. But regardless of the lack of government action, companies can’t be seen to be ignoring climate change. Additionally, there is a growing recognition that a lack of mitigation will mean increased climate impacts. As a result we’re seeing a rapid increase in corporate discussion of climate change adaptation.

Climate change adaptation historically has been seen as quite distinct from climate change mitigation. Indeed, distinguishing between climate change “mitigation” and climate change “adaptation” is not conceptually difficult if one looks at the typical formula for risk:

Risk = H x E x V

Where H = Hazard (e.g. sea level rise), E = Exposure (e.g. exposure to sea level rise), and V = Vulnerability (e.g. damage from sea level rise).

In this formulation, climate change mitigation reduces risk by addressing the level of the hazard (e.g. GHG concentrations in the atmosphere). Climate change adaptation, on the other hand, moderates risk by reducing either exposure to or vulnerability to the hazards of climate change. For example, reducing one’s exposure to sea level rise could mean building farther away from an exposed coastline; reducing one’s vulnerability to sea level rise could mean building high enough to avoid storm surges.

In this context, the distinction between mitigation and adaptation seems clear. And it makes sense to distinguish between mitigation and adaptation efforts at a societal level. The policy objectives are different, the policy measures you would use are different, and the distributions of policy costs and benefits are likely to be very different.

The same logic is filtering down into, for example, commitments by multilateral development banks (MDBs) to dedicate distinct percentages of their lending portfolios to mitigation and adaptation efforts. MDBs are now trying to figure out a metric by which to measure where their portfolio dollars are going. This is not as simple as it sounds when you get into possible multiple impacts of a given loan, but as representatives of societal policy one can see why the MDBs want to be able to differentiate between mitigation and adaptation.

But does the same logic apply in the context of private sector decision making? Is it important for companies to record and report climate change mitigation vs. adaptation initiatives separately? This question can be approached from two perspectives: 1) is there a significant societal value in such a distinction? And 2) is such a distinction practical to implement?

I would argue that there is no obvious societal value in being able to separately sum up private sector mitigation and adaptation activities. Such summations simply cannot answer the question of whether a societal climate change mitigation goal is being met; the only way to assess that outcome is to measure GHG emissions at the societal level. The same argument applies to tabulating private-sector adaptation activities. In neither case can corporate actions be summed to yield insights into societal outcomes, not to mention the fact that many activities will be listed in both categories, leading to inflated numbers.

The practical impediments to implementing such a differentiation through corporate reporting are even more convincing. Companies are not actually driven by societal climate change mitigation and adaptation objectives; rather, they are driven by their need to reduce their own business risks by adapting to changing policy, market, and climate forces, and to enhance their competitive advantage through new products and services.

No clear standards

How these forces play out will vary from company to company, leading to the prioritization of different sets of activities when it comes to climate change and climate risk. Some focus on saving money (e.g. through energy efficiency), or implementing best practices (e.g. through reporting to the Carbon Disclosure Project), or positioning themselves for future policy (e.g. by internalizing a price of carbon into their decision-making, or going with new gas as opposed to new coal), or responding to consumer and investor expectations (e.g. by tracking and reducing their GHG footprint), or are beginning to anticipate impacts of a changing climate (e.g. by diversifying their supply chains). At the end of the day, whether responding to societal efforts to mitigate climate change or adapt to climate change, companies are adapting to a changing business risk environment and changing business opportunities.

The idea that we shouldn’t bother trying to distinguish between corporate mitigation and adaptation efforts may seem counter-intuitive; some practical examples may help:

• If a company is implementing energy-efficiency measures, is it mitigation (because it reduces emissions) or is it adaptation (because it reduces their future financial liability in a low-carbon world)?
• If a company builds a gas-fired power plant instead of a coal-fired power plant, is it mitigation (because it reduces emissions) or is it adaptation (because it recognizes the rising policy and financial risks of new coal plants in the move to a lower-carbon economy)?
• If a company internalizes a carbon price in its decision making, is it mitigation (because it might reduce emissions) or is it adaptation (because it responds standard business practice in the sector)?
• If a company upgrades a hydroelectric dam, is it mitigation (because it produces more low-carbon electricity) or is it adaptation (because it’s designed to manage expected seasonal changes in precipitation under climate change)?

These are just a few of numerous potential examples. This is not to say that there aren’t measures that unequivocally fall under only one category or the other. But in practice, most corporate activities will have characteristics of both. With no clear standards by which companies can consistently allocate initiatives between the two, any effort to report this way will lead to very different decisions division to division, company to company, sector to sector. Even in the absence of gaming, the resulting reports would almost certainly not be comparable. And if you can’t objectively compare such reports, they lose most of their meaning.

So let’s nip this potential headache in the bud. Let’s clarify that what companies should be reporting is whether they’re adequately managing their climate risks, not how much money they’re spending on mitigation vs. adaptation. Such a distinction will ultimately prove a corporate reporting dead-end.