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Companies have been caught off guard by campaigns to divest from fossil fuels. Kamyar Adl/Flickr, CC BY

Climate change poses a major threat to the future of humanity. Extreme weather, rising seas, ocean acidification and biodiversity collapse will undermine many of the systems on which we depend. We’ve even seen a recent example of this, with South Australia’s storm and blackout illustrating the vulnerability of our society to extreme weather.

Risk has become a central construct for how businesses should respond to climate change. As Hank Paulson, former Secretary of the US Treasury has argued, “climate change is not only a risk to the environment but it is the single biggest risk that exists to the economy today”.

The G20 is currently investigating how companies are exposed to climate risk, and how they disclose that risk to consumers.

However, instead of dealing with the larger problem of rapid and systemic decarbonisation, most businesses construct climate risk solely through the lens of profitability and market opportunity.

As part of a broader study into corporations and the climate crisis, we recently published an article in the journal Organization exploring how corporations have responded to climate risks.

What is risk?

Risk management has become a central feature of corporate language. Risk was translated into management in the 1990s after catastrophes and scandals such as the collapse of Barings Bank and the Brent Spar controversy at Shell.

The core assumption here is that risk is somewhere outside the company: it just has to be found and captured. The perception is that corporations are exposed to a variety of objective risks that can be managed through rational decision-making. This might include cost–benefit analysis based on probabilities and consequences. The aim is to make uncertainty manageable.

How companies construct risk involves a number of processes. In relation to climate change, companies seek to break up a complex concept into smaller parts that can be addressed by specific corporate practices and policies. These include:

• physical risks such as the potential for extreme weather events such as storms, droughts and fires to impact upon business operations (most evident amongst resource, energy and manufacturing companies with vulnerable infrastructure and supply chains)

• regulatory risk, including the potential for governments to regulate greenhouse gas emissions and implement carbon taxes and cap and trade mechanisms

• market risks, such as new disruptive, low-carbon technologies that challenge established business models (such Tesla’s reinvention of electric vehicles and mass production of battery storage)

• reputational risks, such as the threat of negative customer or community perceptions of companies’ environmental impacts (such as growing consumer awareness of environmentally harmful products such as palm oil or fossil-fuel based energy).

To address these risks, companies seek to minimise the threats and maximise the opportunities. These include practices such as scenario planning and retrofitting infrastructure for extreme weather events, engaging politically and lobbying for better regulation, scanning the market for competitive threats, investing in R&D for new “green” products, and actively marketing and branding themselves as “green” businesses.

However, for corporations to prosper from climate change, the risks associated with it have to be meaningful in a business sense. They have to be able to be valued in monetary terms. For instance, putting a price on carbon means emissions can be factored into business strategies, which then stimulate investments in “green” energy and technologies.

As one manager in a financial services organisation confided to us: “The easiest thing to do, is to go carbon trading. There’s a way to make money!”

These risk framings are then institutionalised through corporate roles and practices (such as pricing carbon internally, restructuring activities to identify new products and markets, and actively managing customer and employee perceptions of corporate activities).

As another sustainability manager outlined: “My job is to keep their risk as low as possible … from regulatory right through to perception and reputation.”

But risk is more complex than that

However, these risk constructions often fail to fully account for the physical and political complexities of climate change.

In insurance for example, the reliance on historical climate models often fails to account for new and extreme weather events. As one senior manager explained:

I mean most people didn’t think it hailed in Melbourne until last year (2010). There was another one in Perth, you know it was classic. It was known in the industry as “unmodelled risk”, which means there isn’t a detailed model of the risk that you can use to price it. Perth – hail in Perth was unknown. I mean completely unknown.

Moreover, consumers, employees and communities often surprise companies and wrong-foot corporate risk modelling.

For instance, despite the claims by financial institutions that they are “sustainability” leaders by reducing their carbon emissions and encouraging corporate clients to adopt more climate friendly practices, NGOs and critics have emphasised how these statements conflict with continued investments in fossil-fuel based energy projects.

This has culminated in a global movement of fossil-fuel divestment which undermines the social legitimacy of these investments.

Corporate risk constructions also exclude non-market understandings which underpin personal and social identity. For example, energy companies which promote coal-seam gas as a cleaner energy source have been caught off guard by vehement political battles with agricultural landholders and communities objecting to fracking as a harmful activity. Here, community and environmental concerns collide with corporate risk calculations, which focus on profitability and the opportunity of increasing commodity prices.

By ignoring these factors, and constructing risk in a way that maximises opportunities and profit, corporations emphasise a vision of human mastery over nature. Like latter-day wizardry, corporate risk calculations suggest that markets and capital can, not only control the natural world, but somehow anticipate it.

These risk calculations downplay the need for radical change and emphasise “business as usual”. Ironically, the devastating environmental change that is supposedly being anticipated and managed by corporate risk management is locked in to an ever more terrifying degree.

Christopher Wright has received funding from the Australian Research Council.

Daniel Nyberg has received funding from the Australian Research Council.

It is easy sometimes to wonder whether our governments care about anything except money; yet they refuse to put a monetary value on those aspects of life that lend enchantment (Mary Dejevsky, Quality of life has a price. The frackers should pay it, 17 October). A beautiful view is one of these; so is peace and quiet. So is the ability to keep one’s windows open at night.

These blessings are disappearing at great speed, as the skies fill up, and as lorries, cars and machines are added to our beloved landscapes. We are told that “those affected by fracking” might be compensated, but I do not believe that many people would rather have £10,000 than the peace and quiet, and the grassy view that will vanish, with their clean drinking water, as the frackers appear. It is generally noise that provides the majority of council complaints. For example, between January and September 2014, councils in the UK received 200,220 noise complaints, almost half the total number (Report, 18 March 2014).

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Some of the giants of the dinosaur family may have arisen in South America and crossed over Antarctica to Australia about 100 million years ago, new fossil evidence suggests.

The European Union’s push away from fossil fuels toward renewables, along with falling costs, has seen offshore wind thrive with turbines being installed from the Irish to the Baltic Seas, reports Environment 360

On a sunny October morning, our boat passes the run-down relicts of Liverpool’s maritime past and heads down the river Mersey and into the Irish Sea. As we steam offshore, I see in the distance a cluster of tall structures that soon reveal themselves to be towers of a wind turbine array. Arriving at the windfarm, six miles offshore, the turbines rise as high as 650ft, taller than the tallest church in the world. Each of the turbines’ three shiny metallic rotor blades is nearly 300ft long.

“A single rotation of an eight-megawatt turbine will cover the daily electricity consumption of an average British household,” says Benj Sykes, vice president of Dong Energy Wind Power, the company that is constructing and co-owns this wind project, as the boat rocks in five-foot swells.

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The Ogoni leader and son of renowned Niger delta environmental activist Ken Saro-Wiwa has died from a stroke in London, aged 47

The president of Nigeria has joined politicians, environmental activists and others to pay tribute to Ken Wiwa, the Ogoni leader and critic of Shell and other western oil companies in the Niger delta, who has died from a stroke in London.

Wiwa, the eldest son of Nigerian author Ken Saro-Wiwa, who was executed in 1995 after leading a peaceful uprising by the Ogoni people to stop Shell from polluting their oil-rich area of the delta, was a journalist with the Guardian who later became an adviser to three Nigerian presidents.

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Munganga Nzonga Jacques died in a region of Kahuzi Biega national park previously believed to be safe for the gorillas, Mongabay reports

On October 4, a park ranger was killed in the Democratic Republic of Congo’s Kahuzi Biega national park while trying to protect the park’s rare Grauer’s gorillas.

The ranger, Munganga Nzonga Jacques, died at the age of 26. He was killed in the Tshivanga region of the park — an area that was previously believed to be safe for the gorillas, according to a statement by the Wildlife Conservation Society (WCS).

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Scores of spectacular and rare undersea species have been found on expeditions to some of the deepest trenches in the Pacific Ocean.

Kumbuka, an endangered lowland gorilla, escaped from his enclosure in London zoo on 13 October. It was later discovered he drank five litres of undiluted blackcurrant squash before being returned to his space. The zoo says Kumbuka was never a threat to visitors

• London Zoo gorilla drank five litres of blackcurrant juice after escaping enclosure
  

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Bacchus Wilson Panyonnoh, a 35-year-old palm oil worker, and Lee Sworh, a community activist, live in the remote forests of south-east Liberia. Both have been affected by the arrival of Golden Veroleum Liberia to build one of the country’s largest palm oil plantations. For Panyonnoh, it offers the chance of a better life but Sworh wants it off the land

• Liberia: the growth of a new palm oil frontier

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Europe's Schiaparelli lander did not behave as expected as it headed down to the surface of Mars on Wednesday, data shows.

Scientists in Italy have discovered how our brains can be tricked into feeling disembodied from our own limbs.

Japanese fleets have killed more than 300 minke whales in the Southern Ocean despite a court ruling and three-decade-old ban

Japan is likely to face international criticism at a whaling summit this week for killing whales in the Southern Ocean in defiance of a court ruling and a three-decade-old ban.

Japanese fleets killed more than 300 minke whales, many of them pregnant, when they resumed so-called scientific whaling in 2015-16 after a hiatus the year before because the international court of justice decided the hunts were not scientific and should cease.

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In a letter seen by the Guardian, European parliament president, Martin Schulz, warns EU chief, Jean Claude-Juncker, that inaction over a stalled review of the EU’s nature directives is jeopardising EU biodiversity targets

An impasse in Brussels over changes to the EU’s pioneering nature laws has pitted the president of the European parliament, Martin Schulz, against the bloc’s chief, Jean Claude-Juncker, in private correspondence seen by the Guardian.

More than a thousand animal and plant species – and 500 types of wild bird – are protected by the EU’s nature laws.

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Some 73% of the British public polled by ComRes support onshore windfarms in contrast with government decisions to block them

Public support for onshore windfarms is far higher than widely believed, according to a new opinion poll, even in rural areas.

Wind turbines are also far more popular than fracking or nuclear power, contrasting with the UK government’s decision to block onshore windfarms but back shale gas exploration and new nuclear power plants.

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ROUGH LANDING: Although fears grow for the ExoMars lander, scientists say the mission has been a success. Here's what we know so far.

Results of annual report card based on data collected before bleaching killed a fifth of the reef’s coral, suggesting next year’s results will be even worse

The Great Barrier Reef has been given a D on a report card for its overall health by the federal and Queensland governments for the fifth year in a row.

The results of the annual report card were based on data collected before this year’s climate change-induced bleaching event that killed about a fifth of the reef’s coral, suggesting next year’s results will be even worse.

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The market operator seems happy to let the blame for the South Australia blackout fall on wind energy, but questions about its own role are warranted, particularly because it seems to have totally ignored a report prepared a decade ago that envisaged a similar scenario.

Frosterley, Weardale The footpaths were silent and deserted, but, at every turn, there were signs of the days when they echoed with the sounds of human labour

On a windless morning, when the sun had barely reached sufficient elevation to skim the dew on the grass, the footpaths around the old quarries were silent and deserted. And yet, at every turn, there were signs of days when this valley echoed with the sound of human voices and people’s labour.

I stood among the ruins of Harehope Gill lead mine, where only a single wall still stands, and tried to imagine it two centuries ago, when it was at its productive peak: the clop of hooves as ponies dragged squeaky-wheeled wagons laden with lead ore from the mine level tunnel; the thud of picks on rock; clanging shovels; rattle of broken stone tipped on to spoil heaps; and the shouts and curses of labouring miners. Now, just silence, except for the trickling of water.

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Queensland's 50% renewable target is a great idea and achievable, but its current plans will need radical change.

NSW says it has accepted an unsolicited offer from Australian Super and IFM investors to buy 50.4% of utility Ausgrid for just over $16bn.