Mountain Equipment Co-op: Adapting to Climate Change

To prepare for climate change impacts on their sales and supply change, Mountain Equipment Co-operative (MEC) embeds adaptation at an organizational level, in the risk matrix and in its operational and investment decisions. MEC, or Mountain Equipment Co-operative, dates back more than four decades. While the company’s product line has evolved over that time (from climbing and mountaineering supplies to a complete range of outdoor gear and equipment), MEC has always been a member-owned co-operative. A changing climate influences MEC in two main ways: through sales and through supply chain. The unpredictability in weather patterns has implications for what customers want to buy (sales), while extreme events can impact the supply chain through by disrupting transits, destroying stock in place, and by impacting resources require for product creation. MEC embeds climate change adaptation at an organizational level rather than pursuing a separate climate change adaptation initiative. Adaptation is part of the business’s risk matrix and its operational and investment decisions. Tracking weather enables the company to understand how shifts (like shorter seasons) may impact inventory demands, and it also considers climate risks related to infrastructure and material sourcing. Currently, accountants at MEC contribute to adaptation decisions through participation in planning, resource allocation and rigorous analyses. In the future, MEC aims to have their accountants trained in climate change adaptation and sustainability, and to enable “soft” skills, such as communications, in order to facilitate better collaboration with colleagues throughout the organization. Climate change requires a universal response. While government policy and international agreements can create momentum, MEC believes it must advocate for action and prepare for organizational impacts: e.g. by building robust systems and collecting transparent and rigorous data.

Understanding and Assessing Impacts

MEC examines the impacts of climate change from a business perspective. Using climate change information and data released by the Government of Canada, MEC has learned that probable impacts are warmer temperatures, more frequent heat events, less frequent cold events, more frequent and intense hot days/nights, less frequent and less intense cold days/nights, more frequent downpours, fewer days with snow cover, and more wildfires. These impacts, as well as seasonal variations, may affect how consumers buy products. Climate change will also result in more extreme weather, which could impact retail stock and source materials. For example, as stock moves from MEC’s Canadian distribution centre to its stores, it is vulnerable to road closures as a result of flooding, landslides and snowstorms. Stock at the distribution centre or on store floors is vulnerable to flooding. Extreme weather also affects resource availability and even commodity prices.

For additional climate information, look at the Resources section of this example (below).

Identifying Actions

While sustainability thinking has always been a part of MEC’s ethos, as the organization became more sophisticated, it became better able to quantify its climate-related vulnerabilities, and to consider them more comprehensively. As such, MEC embeds climate change at an organizational level rather than pursuing a separate climate change adaptation initiative. Adaptation is part of the business’s risk matrix and its operational and investment decisions. These responsibilities are shared across the organization and maintained by the finance team through planning, reporting and investment activities. In supporting adaptation to climate change, accountants are performing many traditional roles: analyzing cost data, collaborating to develop key performance drivers and related reports, performing financial modelling, applying auditing skills to assist with evaluation of process effectiveness, and facilitating the integration of various plans and strategies. For example, the finance team is closely involved in decisions around new infrastructure, as MEC seeks to site facilities in areas less threatened by a changing climate.

Implementation

A core effort, related to sales and supply chain, involves an increased ability to understand weather patterns. MEC has identified system capability to track weather as a requirement for the new inventory management system. Weather forecasting will allow MEC to better address the changing climate’s impact on sales. They can track the weather and mirror this against sales to make medium- to long-term decisions about how to manage inventory and the supply chain. This information also allows MEC to address the changing climate’s impact on stock in transit. Better supply chain information enables faster movement of goods, reducing exposure to extreme weather.

Additional adaptation efforts related to supply chain address stock in place and source materials:

  • Stock in place: MEC considers climate change risks, particularly around flooding, when making decisions about its infrastructure, including locating a new store or distribution centre, building resilience into existing stores and choosing third-party storage facilities for excess stock. In existing buildings, MEC addresses adaptation issues as they come up. MEC’s store in Winnipeg, for instance, sometimes experiences flooding. The store has installed pumps as one measure and is looking at other ways to reinforce the building structure — essentially, to weatherize it.
  • Source materials: Recognizing that climate change impacts can vary globally, MEC seeks producers in many areas. They consider, for example, whether they can avoid being dependent on one region of the world for supplies or supporting suppliers that are encouraging a change in practices that adapt to changing weather patterns.

Outcomes and Monitoring Progress

For MEC, building climate change adaptation into the organization’s operations and day-to-day activities was an ongoing and collaborative learning process. Through this, MEC identified that training accountants in climate change and sustainability, as well as in “soft” skills and collaboration are key to address climate change. MEC accountants play a core role in climate change adaptation, providing the analysis that underpins decisions, such as measuring variables, trading bench marks and weighing options.

Next Steps

MEC staff recommend two types of training to enhance accountants’ ability to work on climate change adaptation:

  1. Training in climate change and sustainability: Accountants will increasingly work in collaborative, cross-functional organizations. As companies embed sustainability and climate change thinking across functional areas, accountants will “need to broaden our knowledge base about business and the environment. Accountant training should include real-world case studies and practitioner-led lectures on accountants’ role in climate change and sustainability. Such training positions accountants to provide potential employers with benefit beyond the typical financial format.
  2. Training in enabling or “soft” skills and collaboration: Accountants need to be able to communicate and work with others across a broad range of disciplines and functions. Many disciplines have faced challenges in conveying their perspective in ways that promote understanding. At MEC, cooperation across functions is part of the culture. Accountants “want to speak about the numbers all the time. How can accountants develop a better understanding of different out looks? One suggestion is having accounting students work on cases with others, such as marketing students. If more opportunities can be provided for students in different business faculties to collaborate on projects, work on case studies, etc., they will be better prepared to face challenges and work harmoniously with colleagues in our connected world.

Resources

Link to Full Case Study

Additional Resources:

Reprinted with permission from Mountain Equipment Co-op: Adapting to Climate Change, ©2015, by Chartered Professional Accountants of Canada. All rights reserved by copyright owner.

Additional Climate Information:

Using climate change projections enables better adaptation decisions. To learn how to choose, access, and understand climate data, visit ClimateData.ca’s Learning Zone.

Visit ClimateData.ca and click “Explore by Variable” for future climate projections related to temperature and precipitation, which can be used to inform adaptation planning.