New report offers retail company directors advice on how to manage climate change risks

A new report from a legal think tank calls on executives and directors of retail companies to be aware of the risks they face due to climate change, noting that investors and consumers are putting increasing pressure on retailers to protect the climate and go net-zero emissions.

The Canadian Climate Law Initiative (CCLI) guide notes that retailers face significant transition risks due to policy changes and emerging technologies, as well as increasing regulatory requirements to reduce carbon footprint, commit to effective waste management, eliminate single-use plastics and develop ethical supply chains. There are also pressures around litigation related to companies failing to mitigate the impacts of climate change, failure to adapt, insufficient disclosure regarding material financial risks and “greenwashing” – misrepresentation of the sustainability of the company, its supply chains and/or the products sold – with substantial fines imposed for misrepresentation at retail.

Report author Janis Sarra, a law professor at the University of British Columbia and co-lead researcher at CCLI, said businesses are also feeling the impact of acute weather events on a physical level, pointing to the ” atmospheric rivers” torrential rains. that hit British Columbia late last year and the resulting impact on railroads and highways.

Janis Sarra, University of British Columbia

“Major value chain disruptions are one of the biggest impacts of climate change, and it’s just going to get worse as the frequency of acute events increases,” she said. “And the physical assets themselves, like retail warehouses and stores, have been flooded, resulting in direct damage to their goods. Floods are now the most significant cost in terms of insurance costs in Canada, and these damages are caused by all these serious events. »

The report offers guidance to the retail sector on how to address the risks it faces, which are broken down into three categories: governance oversight and strategic planning, material risk oversight, and best practices for financial statement reports. Sarra noted that climate change has been accepted by many as an existential threat to the economy and society, and corporate directors have an obligation to consider what those risks will be for the business and what the opportunities are for company as part of a general duty of care.

“Investors are increasingly demanding effective governance when deciding whether or not to invest in retail businesses. And consumers are increasingly asking distribution companies what they are doing to protect the climate and move to net zero emissions,” she said. “Capital typically flows to companies in all industries that address these risks because they understand that failure to do so will actually lead to systemic failure.”

The guide indicates that there are various opportunities for retailers in the transition to a net zero economy, such as energy efficiency measures, shifting to circular economy operations and harnessing the rapid development of digital technologies in store and online. The retail sector is a significant contributor to greenhouse gas emissions, estimated at nearly 11% of Canada’s total emissions when warehousing and distribution are included. And about 95% of those emissions are indirect emissions from energy purchasing and the value chain.

Sarra noted that there is empirical work that indicates that consumers are willing to pay a premium for retail products, knowing that they have produced on an environmentally sound basis and that they are produced by workers who pay fair wages.

“Investor and consumer preferences are changing,” she said. “Millennials and Gen Z are talking with their shopping dollars, expressing serious concerns about climate change. Effective monitoring of climate risks and opportunities is therefore of critical importance to the retail sector.

The CCLI will also host a webinar on the guide on February 9. Click here for more information.

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Anne G. Cash