Departments ‘need more challenge’ on managing climate change risks

Fewer than half of audit and risk assurance committees surveyed say their organisation has a climate or sustainability risk policy
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By Jim Dunton

06 Aug 2021

The National Audit Office has produced new guidance on holding top departmental leadership to account over their management of climate-change risks after a survey found shortcomings in existing checks and balances.

The public spending watchdog said climate change risk is “certain to increase over time” and making continual improvement through learning and experience is “vital”, while the government’s goal of achieving net-zero greenhouse gas emissions by 2050 will require transformative change in the UK economy.

However, a survey of audit and risk assurance committee chairs –  who head up the panels that hold the leadership boards of departments and other government agencies to account – found a lack of prominence given to climate related risks.

While 81% of committee chairs said climate related risks are relevant to their organisation, 55% said their organisation has neither a climate nor a sustainability risk policy.

Fifty-three percent of respondents said their organisation does not have a dedicated person responsible for sustainability and climate change. Meanwhile, 70% said that climate change risks have never been discussed at one of their committee meetings, or that the risks have been discussed “less often than annually”.

The NAO said the risks associated with climate change and achieving net zero by 2050 are multi-faceted for departments and agencies and that the “breadth and far-reaching strategic implications” means accountability must sit with the most senior individual in the organisation: its permanent secretary or accounting officer.

It said the boards of government organisations and their audit and risk assurance committees should expect management to provide an “integrated view” of how climate-related risk is being approached – and how opportunities could evolve.

As part of the guide, the NAO provides more than 60 thematically grouped questions to help committees support accounting officers and their boards in their work by challenging them on their approach to climate change risk management.

It said the risks faced by organisations will involve adapting current operations to meet the challenges of physical risks, such as extreme weather events and rising temperatures in the longer term. Further risks come from mitigation measures required to meet the net-zero target, which could include the need to adopt new technologies or comply with tighter regulation measures or tax rules.

The potential consequences of failing to adapt quickly enough to climate change include reduced workforce productivity and greater disruption to infrastructure, which departments will have to plan for in the same way as other parts of the public sector and the private sector.

But the NAO said government organisations will also have to deal with climate change-related risks that are “particular” to their day-to-day work, such as effectively meeting ministers’ long-term policy objectives for net zero and doing so in a way that provides value for money.

The watchdog said departments and other agencies will also need to balance the long-term costs of not making net-zero related decisions quickly enough with the potential for “expensive corrective action” that decisions made without enough consideration could entail.

“It is crucial that risks associated with climate change are integrated within organisations, enabling decision-makers to understand their organisation’s appetite for risk and balance value for money considerations against the need to make progress quickly,” the guide said.

It added there is also an “accountability risk” connected to the government’s failure to “clearly set out” the roles of public bodies other than central departments in achieving net zero, and a “coordination and delivery risk” if organisations do not collaborate effectively enough to address system-wide challenges.

“All organisations have a responsibility to understand how climate change risk manifests beyond their own organisation in order to ensure that effective public service delivery is not compromised,” the guide said.

The NAO said it is critical for departmental management to identify appropriate activities that will capture the extent of climate change risks, and that all organisations should also have a view on how those risks fit into a wider public-sector picture.

“Management needs to look beyond its respective organisation to see how risks can emerge from key stakeholders and third parties – for instance, how their supply chain could be at risk from the impact of climate change,” it said.

“One of the lessons learned from the government’s response to Covid-19 was the importance of effective coordination and communication between government departments, central and local government, and private and public sector bodies.”

Although the NAO presented a vast array of risks for departments to consider, it acknowledged that the independent Climate Change Committee has flagged a number of opportunities for the UK, despite the overall outlook being negative.

Opportunities include trade related to adaptation services and the growth of low–carbon industries and technologies, such as electric cars, it said.

But the NAO noted that the potential opportunities are more likely to arise if appropriate adaptation action is taken in time to minimise the risks and to put in place any necessary support to take advantage of benefits from warmer temperatures.

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