Why directors can’t ignore climate risk

We have seen the catastrophic consequences of climate change this summer. We can’t ignore scientists who tell us the unprecedented bushfire severity is due to the effects of global warming.

Australians have been shocked by the extent and ferocity of bushfires over past months. We all share a sense of loss and grief for the families and communities that have been devastated.

There is an immediate task for us as a nation to assist those families and communities. Beyond recovering from tragedy and disruption, and rebuilding the physical damage caused by the fires, the economic consequences for regions that rely on tourism and agriculture will be severe.

Leaders of local organisations will be doing the essential work in getting these communities back on their feet and the AICD will assist our members involved in that effort.

Beyond that immediate task, we must take stock across every sector and ask whether we were prepared, what we could have done to mitigate the effects of the fires on our organisations and staff, and what we should do now to prepare as scientists tell us future summers will be longer, hotter and drier.

In his 2008 climate change report, economist Ross Garnaut AC wrote that “fire seasons will start earlier, end slightly later, and generally be more intense. This effect increases over time, but should be directly observable by 2020.”

We have seen the catastrophic consequences of climate change this summer. While it may not be the only cause of these bushfires, we cannot ignore scientists who tell us their unprecedented severity is due to the effects of global warming.

In the 12 years since the Garnaut report, climate change and energy policy have been mired in party politics. For years, the AICD’s members — through the Director Sentiment Index — have nominated climate change and energy policy as their top priorities for the federal government. The scale of these fires, their wide-ranging effects and impact on critical infrastructure show that the risks from climate change cannot be isolated and contained.

Australia needs a consistent and enduring bipartisan policy framework in the same way we approach defence and infrastructure — national challenges that extend beyond the term of any one government.

But we cannot think of the challenge through the prism of energy policy alone. We will need to transition the economy as we shift to less carbon-intensive forms of energy production and assist regional economies and communities through that transition. We must foster innovation across the economy to build our competitiveness. We must build and acquire the skills and capabilities the workforce and our economy will need, and adapt our education system. This is a "joined-up" policy challenge we must meet, aligning and focusing our national and state policy settings to prevent gaps and optimise our capabilities.

It is also clear from this crisis that Australians will not accept politics in federal-state responsibilities when lives are at stake. We need a pragmatic federalism with forums for cooperation between governments that can be convened rapidly at hours of need. Our preparedness at the national level will come under scrutiny in coming months. The AICD will be part of the conversation on whether we have the right national and state governance structures to address urgent challenges that cross state borders and whether the Council of Australian Governments needs greater prominence.

We also need to listen to our emergency response leaders when they call for extra resources to confront the increasing threats they face. We owe it to those who have selflessly put themselves in harm’s way to learn the lessons and prepare for the next emergency, in a world in which they will be more common.

Many Australians have friends, family or colleagues who have been directly affected. We will soon learn how many businesses and organisations have been devastated by the fires and their aftermath.

This bushfire season should prompt directors to reassess how extensively their organisations’ risk management frameworks have dealt with the risks — immediate and secondary — from natural disasters and extreme weather.

Ensuring organisational resilience and the safety of staff is core to directors’ duties. In its September 2018 report on climate risk disclosure by Australia’s listed companies, the Australian Securities and Investments Commission said: “directors and officers of listed companies need to understand and continually reassess existing and emerging risks (including climate risk) that may affect the company’s business”.

Organisations also need to consider if their policies are adequate in supporting staff who are assisting in relief efforts. The volunteer spirit and generosity of the Australian community has been inspiring during this crisis. It is our responsibility to support staff with clear and certain policies when they make personal sacrifices to help their communities.

News coverage of the fires has turned global attention to Australia with pictures that conflict with our traditional image as a natural paradise of fauna and flora, and a safe and secure place for visitors and students. Globally there is a message of support and concern for Australians who have been impacted.

I recall the images in Dorothea Mackellar’s My Country — “I love a sunburnt country... her beauty and her terror...” Australia remains a natural wonder despite the devastation of these fires, and as “...grey clouds gather and we can bless again, the drumming of an army, the steady soaking rain”, we will recover.

To me, these are comforting images of endurance and resilience, and perhaps that’s a stronger image to present to the world.

Bushfire victims affected by hardship

If you have been directly impacted by the fires and are experiencing financial hardship in relation to your membership, please contact us at information@aicd.com.au.