Bending, not Breaking, with Climate Change
Accountants are more than bean counters. At Horizon Utilities, they are leaders on climate change adaptation.
How CPAs at Horizon Utilities Shifted Corporate Culture
Horizon Utilities is one of the first utilities in Canada to evaluate its performance based on triple bottom-line reporting — focusing on overall social, environmental, and economic performance. It is also one of the largest municipally-owned electricity distribution companies within the province of Ontario, Canada. Jointly owned by the cities of Hamilton and St. Catharines, it provides electricity and related utility services to 242,000 residential, commercial, and industrial customers.
For Horizon Utilities Corporation, the motivation for climate change adaptation — and sustainability more generally — was a shift in corporate culture. It was a shift in understanding that “sustainable development was good for our customers and for our business,” explained Brian Lennie, then a Policy Advisor at Horizon Utilities.
How Climate Change Will Affect Horizon Utilities
In July 2013, nearly 20,000 Horizon Utilities customers lost power after a summer storm. Completely restoring power took several days. “We were in emergency mode for a significant period of time,” said Lennie. In December of the same year, an ice storm left more than 30,000 customers without power.
Climate change is expected to bring more frequent storms to Horizon Utilities’ operating region, as well as more rain and erratic temperature shifts.
All these changes require adjustment. Storms, for example, require investment in additional labour for maintenance and repair to damaged poles, overhead lines, transformers, and other distribution assets.
A changing climate also affects organizational planning and accounting staff. With more funds allocated to addressing weather, “There is a significant ripple effect to the organization as certain projects and related capital spending may be deferred to future years,” explained Peter Vallieres, CPA, CA, and Director of Financial Reporting and Accounting.
Horizon's Climate Change Adaptation Strategy
Horizon Utilities has an Enterprise Risk Management (ERM) system through which risks are identified and prioritized. Within that system, “‘Major disruptions due to weather’ is categorized as hazard risk,” says Vallieres. Horizon Utilities has also developed a climate change vulnerability assessment and initial adaptation strategy and a long-term climate change adaptation plan.
Joseph Almeida, Director of Supply Chain Management, explained the rationale for these actions on climate change: “As a company, we felt that we needed to understand the climate trends, identify our gaps, measure those trends, and put a long term plan together to reduce our risk going forward.”
Part 1: Developing the Vulnerability Assessment & Initial Adaptation Strategy
Horizon Utilities engaged a consulting firm to analyze the significance of climate change for its service territory. The consultant used historic weather data and recent studies of climate change to identify:
alternative climate change scenarios for the next 20 years
the impact of recent climate changes around Horizon Utilities’ service territory
how these changes could affect the company’s design, planning, emergency preparedness, procurement, and related functions over the next 20 years
an action plan designed to meet the company’s climate change objectives
In response, Horizon Utilities addressed climate change through these actions:
Infrastructure planning. Horizon Utilities considers climate change adaptation as the utility locates substations and poles, for example. Flood avoidance is a particular focus. Horizon Utilities assesses whether an area is likely to experience flooding; if so, it builds infrastructure to minimize flood risk.
New technologies. Horizon Utilities is exploring technologies that will allow poles to flex in high winds, reducing the risk of downed lines.
Outage management. Horizon Utilities has improved its geographic information and outage management systems to locate and respond to outages more efficiently. “We are now able to pinpoint down to the specific pole where the outage has occurred in real time and without necessarily waiting for a customer’s call,” explained Lennie.
Part 2: Implementing the Long-Term Adaptation Plan
In 2014, Horizon Utilities developed a 20-year climate change adaptation plan and policy. The first five years of the effort will focus on data collection and monitoring, supporting required actions through the remainder of the plan. Collected data should also enable Horizon Utilities to develop specific key performance indicators around climate change.
“We want to reduce power outages and see some reduction in costs,” explained Almeida.
The Role of Charted Professional Accountants
Chartered Professional Accountants (CPAs) assume a leadership role in helping Horizon adapt to climate change. “Their perspective on numbers is critically helpful with risk avoidance and risk management,” explained Vallieres. CPAs’ contributions are enhanced by their objectivity and broad business background.
Looking forward, Horizon Utilities sees its CPAs closely involved in data control and analysis. Data are key to the development of the long-term adaptation plan. Almeida explained: “Accountants will be involved in ensuring the accuracy and quality of the data collected. They will analyze it to determine the required actions, as well as monitoring the financial impact of the potential risks and benefits.”
How CPAs Can Become Better Suited to Work with Climate Change Adaptation
More education on climate change and adaptation is necessary for CPAs, staff at Horizon Utilities said. That education can be academic, professional, or a combination.
In parallel, the broader business community needs to understand how CPAs can contribute to climate change adaptation. “There is this infamous belief that accountants just deal with numbers,” said Vallieres, “[and] that climate change adaptation is not an accounting problem.”
Almeida suggests that organizations connect CPAs with employees who are working on climate change initiatives. Greater training on enabling skills around collaboration and communication would facilitate this connection.
This resource is part of the Chartered Professional Accountants of Canada's climate change adaptation initiative, which is partly funded by Natural Resources Canada and managed by NBS. Download the full case study (PDF) here.