In the aftermath of major global weather events such as Superstorm Sandy and Typhoon Haiyan, companies have increasingly focused on resilient infrastructure, business continuity, and secure supply chains. But are business continuity and rapid recovery the hallmarks of resilience, or has there been a disconnect between the scientific understanding of resilience and its implementation by business?
1. Why do it?
It’s clearly in the interests of the private sector to invest in resilience-building activities. More and more corporations are embracing resilience as a framework to maintain core operations, fulfil corporate responsibilities, and develop new business opportunities as global economic, social and environmental conditions shift ever more rapidly. By resilience we mean social-ecological resilience, which integrates systems of people and the natural environment, as opposed to engineering or psychological resilience.
IBM, for example, has focused on developing resilience-based infrastructure management solutions that help both cities and companies prepare for major disruption from natural and man-made hazards. Their insurance sector scorecards support ways to vary insurance premiums according to reductions in hazard exposure and vulnerability, thus creating a financial incentive to invest in resilience.
Swiss Re is part of the Resilience Action Initiative, a multi-stakeholder partnership to support multinationals build their own resilience and that of the surrounding communities. PWC increasingly supports private and public-sector organisations in building disaster risk resilience.
Meanwhile Zurich Insurance wants to transform community flood resilience through its alliance with the International Federation of the Red Cross, International Institute of Applied Systems Analysis, and the Wharton School. It is building partnerships that support community innovation for preparedness rather than post-disaster responses.
2. Convergence or critical mismatch?
These are encouraging examples, but for anyone familiar with the central tenets of social-ecological resilience, some troubling blind spots emerge in the way corporations implement resilience thinking. Businesses tend to focus on shorter-term issues that directly challenge their own specific and immediate operations, developing systems robust to isolated shocks. This pits local versus global resilience and individual supply chain resilience versus a broader perspective of resilience.
Although businesses often talk about addressing chronic, long-term stresses, in reality they focus far more on critical, immediate stresses, failing to recognise broader ‘systems’ issues, which track across sectors, economies and regions. To avoid these traps, business leaders should reflect on a few key questions:
- Is resilience a short-term objective or a longer-term approach to help shape sustainable practice?
- Is resilience being used to reduce vulnerability to specific risks or to optimise the system in which they do business?
- And does the over-riding focus on short-term fixes still allow for taking longer-term, systemic issues into account?
Businesses would do well for themselves and the communities in which they operate by addressing some of the core complexities at the heart of resilience thinking.
The Capital Institute is one such example. Its Evergreen Direct Investing concept calls for the end of quarterly financial reporting, which incentivises short-term thinking at the expense of long-term stability and growth. As another example, the R!SE initiative brings together the public and private sectors with civil society to scale up isolated best practice on disaster risk resilience for a more systemic response.
Business must also be better supported to understand how this kind of cross-scale complexity can become directly or indirectly relevant to them.
At the international scale, recent work has led to the translation of a set of ‘Planetary Boundaries’ (i.e. carbon emissions, biodiversity loss, ocean acidification and global freshwater use) from global levels of resource consumption and pollution into more specific societal and business relevant targets. At a national level, Earth Security Group has developed a risk dashboard to simplify the complexities of interdependent resource risks across trade partners and commodity supply chains.
As aggregate levels of risk collide with the growing interdependence of our global economy, it will become increasingly vital to take a longer-term and wider perspective to avoid unintended consequences.
3. Persistent challenges remain.
Firstly, resilience, as a concept, lacks clarity. Academics need to critically address whether current research and its communication is suitable for supporting the resolution of urgent real-world problems.
Secondly, while companies may often think in the longer-term, our economic structures and financial practices remain captivated by quarterly timeframes and the pursuit of efficiency to the detriment of long-term systemic resilience. We need a more diverse and flexible financial system that is capable of factoring ‘general resilience’ into risk-adjusted returns on investment.
About the authors: Dr Margot Hill Clarvis of the University of Geneva and Earth Security Group, and Professor Michael Schoon of the School of Sustainability, Arizona State University. The authors would like to thanks participants of the Resilience of Business Event at the Resilience Conference 2014 for their insights that informed this post.