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There are many benefits associated with taking a“value chain approach” to climate resilience because
climate change affects companies beyond corporate
fence lines and national borders, and presents important opportunities for lifecycle thinking and creative
collaborations. Within this approach, special focus
is given to local communities and the natural environment because of their essential roles within business value chains. Community risks are business risks
because communities provide key resources to companies, as well as a “social license to operate.” Thoughrarely quantified, ecosystems provide natural goods
and services of considerable economic value to businesses, such as flood protection and water treatment.
This guide introduces the Business ADAPT (analyze, develop, assess, prioritize, and tackle) tool. The
tool follows a step-by-step climate resilience framework inspired by existing good practice risk management models. Many businesses will benefit fromusing the Business ADAPT tool, including businesses
with these characteristics:

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Business ADAPT provides additional questions forthree business sectors with significant climate change
challenges: Food, Beverage, and Agriculture; Water
and Energy Utilities; and General Manufacturing.
Business ADAPT aims to help company executives and senior managers gain a better understandingof climate-related risks throughout their value chains,
identify where emerging market opportunities exist,
take into account community needs, and develop
plans that are integrated throughout the enterpriseand receive the support of communities and civil society. Furthermore, the guide will help the financial services and insurance sectors understand how to engage
with the companies they invest in or insure to manage
risk, maximize returns, and minimize future losses.
Importantly, Business ADAPT is a living tool with thepotential to evolve and incorporate new knowledge,
examples, resources, and methods as they emerge.
Corporate climate resilience is a relatively new
field, yet good examples of multinational and mediumsized companies taking action to manage the implications of a changing climate do exist. Readers will findmany illustrative examples of climate resilience inaction in this report.

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Recent extreme weather hazards have had severe
financial consequences across the world.6 The 2011
flood in Thailand was the insurance industry’s highest
ever recorded flood loss event, and over 14,500 companies reliant on Thai suppliers suffered business disruptions worldwide.7 Overall, 2011 was a costly year
for the insurance industry, with more than $60 billion worth of weather-related insured losses globally.
The same year, Texas suffered a record drought, whichcost the agricultural sector at least $7.6 billion and led
to rising cotton prices, cutting earnings for a number of clothing manufacturers.8 The 2010 heat wave
in Russia, which triggered severe wildfires, shaved off
approximately one percent of the country’s GDP thatyear, representing a total loss of around $15 billion.9Ç_\m[Êh[dejh[WZo"m[Êh[_djhekXb[$È

The rise in record-breaking weather hazards suggests that the world is already experiencing climatechange. While climate variability and extreme weather
events are driven by multiple causes, observations ofincreases in some climate extremes, such as warm days
and nights globally and intense rainfall regionally,
have been linked to climate change.10 Overall, manmade climate change is likely increasing the probability of weather disasters by as much as 80 percent.11
The climate is changing and impacts on businesses, as well as the communities they work in anddepend upon, are already being felt.12 Rising temperatures, changing rainfall patterns, and more severe
weather events are being observed across the world.
Nine out of ten companies have suffered weather-re-

lated impacts in the past three years, and most haveseen an intensification of such impacts.13
A changing climate will lead to a changing businessenvironment. Recognizing the problem, identifying therisks, and responding with adaptation measures canhelp businesses minimize their risks and build resilience.
The time to act is now. In the words of the CEO of Cinergy Corporation, “If we’re not ready, we’re in trouble.”:bZg\^c\7jh^cZhhDeedgijc^i^Zh
Addressing the uncertainties created by a changing climate requires robust risk management strategies. Adaptation need not be laborious or expensive,
and there will be “low-hanging fruit,” opportunities
to increase resilience through low-risk and low-costmeasures. Responding to the effects of a changing
climate will also provide opportunities for climateresilient products and services and new markets. There
are already many examples of businesses embracingsuch opportunities. Financial leaders are developing
innovative climate-insurance products for communities at increased risk of weather-related natural disasters (see Swiss Re case study on page 20), engineers areworking on more-resilient construction materials anddesign standards (see EBA Engineering example on
page 4), ICT (information, communications, and technology) companies are starting to offer equipment andsmart networks to monitor and manage climate-related
impacts (see Earth Networks case study on page 4), andnew technologies are being developed and deployed toaddress increased water stress (see Levi Strauss & Co.
case study on page 18). Companies that have engaged
early on with government on climate change impacts
are positively influencing policy and developing newservices. The economic possibilities for innovative, forward-looking companies are extensive.
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Studies signal that there will be increasing investment opportunities for climate resilience in the next
two decades. In 2007, the UN Framework Convention on Climate Change estimated that $11 billion and$14 billion worth of additional investments will be
required by 2030 to cope with climate impacts in the
agriculture and water supply sectors respectively, withdemand for infrastructural investments as high as $130
billion annually.14 More recent economic estimatessuggest that these sums underestimate the high andgrowing needs for climate resilience investments.15,16
The role of the private sector in adaptation is a
topic of debate at international climate change negotiations and within national governments. The 2009
Copenhagen Accord sets the goal of developed countries mobilizing $100 billion a year by 2020 to financemitigation and adaptation investments in developing
countries, with the private sector targeted to make asignificant contribution. The Green Climate Fund,launched at Conference of the Parties 17 in Durban inlate 2011, includes a built-in facility to finance private-sector climate resilience activities.

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Businesses face increasing pressure from stakeholders
to address climate risks. These pressures come fromseveral fronts.
>chjgZgh# Studies by Swiss Re and other reinsurers
show that weather-related loss claims are increasing.
Worldwide insured losses alone, which averaged $5.1
billion between 1970 and 1989, have risen in the lasttwo decades to an average of $27 billion annually.18
In 2009, the US National Association of InsuranceCommissioners asked state regulators to administeran Insurer Climate Risk Disclosure Survey to assess

how climate risk enters into their risk management
practices and investment plans. Insurance commissioners in California, New York, and Washington
State have made this survey compulsory.19 In the first
voluntary reporting period, over 75 percent of insurers said they anticipate increased natural hazards.20
Insurers report that with continued losses and growing regulatory pressures, the affordability and availability of insurance for businesses are likely to decline
in the next few years.
>ckZhidgh# Investor interest in climate risk management has sharply risen in recent years, as seen in
high-profile initiatives calling for improved disclosure (see Calvert Investments example on page 5). The
Carbon Disclosure Project (CDP), Investor Network
on Climate Risk, and Institutional Investors Group on
Climate Change, together with their global counterparts, act on behalf of investors, with trillions of dollars of investments to engage directly with companies
on climate risk. Similarly, the number of shareholder
resolutions filed with public companies in the US on:mVbeaZ:76:c\^cZZg^c\8VcVYV
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EG:EqKVajZ8]V^c8a^bViZGZh^a^ZcXZ)climate resilience grew considerably between 2009 and2011.21 More investors are starting to consider climate
resilience as part of their strategic asset allocation.22
7Vc`h# Barclays, Standard Chartered, the European
Bank for Reconstruction and Development, the International Financial Corporation (IFC), and other banks
have begun mandating that climate risk and resilience
be included in the feasibility and environmental andsocial impact studies they require before making investment decisions (see Barclays example below).23 Discussions are also underway to bring climate resilience into
international good practice standards for banking.24
GZ\jaVidgh# Public companies in the US andCanada must disclose the material risks associated with a changing climate, according to Securities Exchange Commission and Canadian
Securities Administrators guidance. The UK government requires statutory undertakers, such as utilities, to report on their plans to address climate risks.
Beyond such requirements, company directors could
be in breach of their duty to act in the interests of
their shareholders if they fail to address the reasonably foreseeable impacts of climate change.
GZ\^hiZgZY egd[Zhh^dcVah# All professionals,
including, for example, accountants, engineers, andlawyers, have a duty of care to their clients and are
required to meet codes of professional conduct. Many
professional institutions around the world are providing guidance to their members on the impacts ofa changing climate. Professionally qualified advisors
must act with due diligence in their work and ensure
they have the knowledge and expertise to act in the$ 7VgXaVnhJ@:mVbeaZ

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best interests of their clients and employers on climate
risk management.29
CVi^dcVa VcY adXVa \dkZgcbZcih# National,
regional, and municipal strategies and action planson climate resilience are being developed worldwide.
There are great opportunities for companies who workwith government organizations to manage their own
risks, align their climate resilience plans, and identify
opportunities for businesses to develop adaptation
solutions for governments. Working with governments provides an important mechanism for businesses to build relationships with communities.
8^k^a hdX^Zin dg\Vc^oVi^dch 8HDh# Appeals by
CSOs encouraging companies to strengthen community and environmental adaptive capacity reveal theneeds of communities and ecosystems.30 They also
include useful information and examples of sociallyand environmentally responsible climate resilience
practices. Companies will find they will be underincreasing pressure from CSOs to take into accountthe changing climate and how it affects their businessand their relationships with communities (see BarrickGold Corp. example on page 6).
7jh^cZhh XjhidbZgh# Many companies receive
questions from investors, regulators, or CSOs on cliEG:EqKVajZ8]V^c8a^bViZGZh^a^ZcXZ*mate risks and management strategies across their value
chain. In turn, they often direct these questions towards
their suppliers or distributors. The CDP Supply Chain
initiative provides an example of such business-to-business transfer of climate resilience considerations.

7d[mXki_d[ii_cf[hWj_l[_i[c[h]_d]$68Vaa[dg6Xi^dc
A new business imperative is emerging. Reducing
greenhouse gas (GHG) emissions continues to be critical to avoid unmanageable climate change, but businesses must also build their resilience to unavoidable
and ongoing climate change by managing climate-related impacts that threaten their value chains, whileplanning for nascent market opportunities. Mostof the changes expected over the next 30 to 40 years
are already unavoidable due to past emissions.31 This
report asks companies to plan for the now unavoidable
impacts, in addition to taking action to reduce GHG
emissions. By bringing climate change into their risk
:mVbeaZ

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i]Vib^cZZmead^iVi^dcldjaYheZZYje\aVX^VabZai^c\WZXVjhZd[WaVX`YjhiYZedh^i^dc!Y^kZgi
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dgYZgZYVcVi^dcVa^ckZcidgnd[i]ZXdjcignÉh\aV"
X^ZghVcY^hhV^Yid]VkZi]ZediZci^Vaidi]gZViZc
i]ZEVhXjV"AVbVegd_ZXi#()7Vgg^X`<daY]Vh
hdj\]iY^Vad\jZl^i]\dkZgcbZciVcYXdbbjc^i^Zhdci]ZhZ^hhjZh!Wjihigdc\XdcXZgchgZbV^c#calculations, companies can reduce costs, strengthen
contingency plans, and capitalize on business opportunities, building resilience in business and communities alike.
“Value Chain Climate Resilience: A Guide toManaging Climate Impacts in Companies and Communities” includes a business primer on good practiceclimate resilience and the practical guide to action,
Business ADAPT, both of which help company executives and senior managers build their knowledge about
how to manage business risks and opportunities associated with climate change.
:mVbeaZ

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8a^bViZGZh^a^ZcXZ
@Zn7jh^cZhhG^h`hVcYDeedgijc^i^Zh
Most businesses recognize the threats of a changing climate and extreme weather events, yet few have started
building climate resilience. In a recent survey, 90 percent of companies worldwide agree that they faced climate-related impacts in the past three years, but only
30 percent are actively responding to those threats.36
In the financial services industry, 80 percent of firms
agree that direct risks, such as credit losses, will grow in
the future, but many do not feel “sufficiently informed”
to take action.37 Corporate climate resilience remains avery new area with much work to be done.

Though each business will be affected by a changing climate differently, there are a number of common
concerns for businesses with long and complex supply
and distribution networks or long-lived fixed assets,or those businesses under high scrutiny by regulators,
finance, CSOs, and the media. These are summarized
in Figure 1.

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jej^ei[j^h[Wji$All businesses, irrespective of size, location, products,
and services, depend on weather and climate. Changing
weather and climatic conditions can affect the supply of
raw materials, interrupt transport and logistics, damage infrastructure and physical assets, reduce revenues,
and create other direct and indirect impacts (see Muelles
El Bosque example on page 6 and Earth Networks casestudy on page 14). A changing climate will also provide
new and enhanced market opportunities by influencing
demand for products and services. Already, some of theserisks and opportunities are being felt worldwide, particularly in sectors such as Food, Beverage, and Agriculture;
Water and Energy Utilities; and General Manufacturing.
This report offers real examples of such considerations inthese sectors throughout the text.

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Businesses are not islands – their success depends on
the prosperity of local communities and ecosystems
and other vital components of their value chains. Local
communities provide key resources to companies: customer base, workforce, essential supplies, and social:mVbeaZ

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EG:EqKVajZ8]V^c8a^bViZGZh^a^ZcXZ-license to operate. Similarly, ecosystems provide natural
goods and services of considerable economic worth tobusinesses, such as flood protection or water treatment,
which are rarely quantified.39 Actions aimed at improving community or ecosystem resilience to climate
impacts can trigger an additional set of business benefits in the form of increased business stability, improved
reputation, or new markets (see Entergy case study on
page 5 and The Body Shop example below).

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The corporate world is beginning to understandthe importance of managing each pillar of the triple
bottom line (planet, people, profit).40 Failing to manage climate impacts while taking account of communities and ecosystems can have implications for the
triple bottom line. For instance:t Climate change could affect companies” environmental and social performance. Action isrequired to improve a company’s social andenvironmental performance (see Starbucks case$:mVbeaZI]Z7dYnH]deJ@

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study on page 19 and EDF example below);t Poorly planned adaptation by companies could
have negative consequences on local communities and the environment;t The adaptation plans of communities could
hold material considerations for businesses;42t Communities often also hold local data andinformation that is critical to help companies
undertake climate risk assessments (see Green
Mountain Coffee Roasters case study on page16);43 andt In a changing climate, obtaining and maintaining a social license to operate or a positive
corporate reputation is increasingly difficult;companies that do not factor climate resilience
considerations into their corporate social
responsibility strategies (CSR) could suffer
setbacks (see Barrick Gold Corp. example on
page 6).
The Business ADAPT guide included in thisreport questions prompting company executives andsenior managers to consider whether the key community stakeholders or ecosystems they rely upon are
vulnerable to the impacts of a changing climate, andwhether there are “win-win” solutions for managing
climate risks while creating benefits for the company
as well as for communities and the environment (seeAnglian Water example on page 7 and Tolko example
on page 10).
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The “climate challenge” for businesses is complex:
impacts will vary by sector and location and dependon the underlying sensitivity of a company to extreme
weather and climate trends. What’s more, today’s businesses are connected to global value chains, which are
increasingly vertically integrated and intertwined.46
These value chains often encompass multiple countries,
a large number of individual organizations, an extensive
transport network, and a large workforce.47 This makes it
difficult for a business to assess the materiality of climatechange impacts as they will be felt directly and indirectly
throughout its value chain, as shown in Figure 1.
Companies spend approximately $1 trillion a year
managing risks across their value chain.48 Value chain
management can be useful to manage climate risks,since the approach goes beyond corporate fencelines,
country boundaries, and across traditional divisions
between public and private goods and services.49 For
example, by considering how suppliers, communities,
and governments add value to a company, a value chain
approach to climate resilience provides a favorable
framework with which to understand business risks
from climate change to a company’s product supply,
community engagement, and government relations.
The specific strengths of the value chain
approach are that it enables companies to performthe following:t Analyze vulnerability to climate for eachlink and identify hotspots for risk across thewhole value chain (see National Grid example on the right).
t Assess risk for each link individually, taking
into account how different impacts can havea compounded effect (see Hydro-Québec casestudy on page 17).
t Identify opportunities for new markets to help
communities adapt (see Swiss Re case study
on page 20).
t Identify opportunities to build climate resilience across the whole value chain and appraise
the full lifecycle economic benefit-to-cost ratio.
t Implement climate resilience actions in partnership with those who can mutually benefit
from them.

There are many published resources available thatwhich explain the threats of climate change and theirimplications for business.50 However, few follow a systematic value chain approach and associated guidance,
informed by existing examples of companies working
on climate resilience. Few companies have begun toassess and respond to climate impacts, but there arenonetheless noteworthy examples of climate resiliencein action, from which much can be learned. This reportbuilds upon those examples to help guide corporate
leaders in building their firms’ climate resilience.
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The impetus to assess climate change risks, recognize
opportunities, and increase resilience is clear. But corporate climate adaptation is a new field. Companies
taking the road towards climate resilience are likely toface some common difficulties, some of which are discussed in this section. Those businesses that spot andaddress these challenges early on are the best poisedfor success. This section proposes ways forward.

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Operational decision making requires high-resolution
data at appropriate spatial and temporal scales. Available climate model outputs and derived data may notprovide the level of data that would ideally be required(e.g., the spatial resolution may be too coarse). Obtaining higher resolution data requires additional processing (through statistical downscaling), which can betime consuming and costly and may not provide a
firm basis on which to make a decision. Furthermore,in many cases businesses need derived climate-related
information, such as heating degree days or 100-year
return periods, which are not directly available fromclimate models but can be derived from statisticalanalysis. This perceived lack of access to useable data
can lead to a “wait-and-see” attitude.

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WdZWZZh[iij^[i[Y^Wbb[d][i[WhboedWh[j^[X[ijfe_i[Z\ehikYY[ii$However, there are good examples of businesses
overcoming climate data challenges.53 For example,
some companies make the best possible use of available
data. While global climate model projections are limitedby their low resolution, they do characterize the envelope of future climate-related changes and, coupled withan analysis of past climate variability, can inform climate
resilience actions. When this is not enough, businesses
can work with climate research centers to develop highresolution climate change projections (see the Hydro
Quebec case study on page 17).
Imperfect data is not an excuse for inaction. Stakeholders expect businesses to anticipate future impacts
on their value chains, and relying on historic data only
for decision making is no longer enough.

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jcXZgiV^cid_jhi^[nZmeZcY^ijgZ#
It is difficult to justify making adjustments or investments today to increase resilience to future that may or
may not materialize, especially in cases where climate
science and associated risks are not well understood.
However, climate change is not just a future risk: recent
climate observations include warmer temperatures, sea-level rise, and more extreme weather, and reports ofimpacts on businesses from these changes are alreadynumerous. Improvements in climate-change science arealso increasing the level of confidence attached to predictions, including increases in temperature.
Risk management and entrepreneurship are critical to business success. Despite the complexity of the
EG:EqKVajZ8]V^c8a^bViZGZh^a^ZcXZ&&underlying science, climate change is ultimately like anyother risk or opportunity. Even with imperfect information, risk-based decision making is possible and necessary. Risk management tools are already essential partsof the corporate toolbox and can be build upon to assessclimate risks and improve resilience.54

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Governments have taken the lead in financing climate
adaptation. This is because government traditionallyhas had responsibility for providing or managing public
goods and services that may not be associated with thereturns on investment the private sector often seeks, yet
are essential for economic prosperity and human development. These include many long-lived fixed or natural
assets (e.g., essential infrastructure) and social services(e.g., disaster risk management systems and projects).

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Yet businesses also have a fundamental role andinterest in avoiding or reducing the impacts of a changing climate. For instance, many businesses own andmanage critical assets and infrastructure and depend
on local communities or the natural environment foressential goods or services. Businesses, just like individuals, are also subject to the rule of law; in cases where theimpacts of climate change have the potential to harm,
failing to act can be considered negligent. Furthermore,
CSOs and multilateral organizations are promoting abusiness model of climate resilience, whereby the private sector can play a key role in supporting resilient
economies and communities, especially in developing
countries, where government capacities and resources
are often limited.55 Finally, businesses can gain from theprovision of greater public-sector financing towards cli-mate resilience, and a number of companies are alreadyadvocating for such financing.56
Building climate resilience poses great challenges
that demand innovative partnerships. There are many
areas where opportunities for collaboration among governments, businesses (including small and medium-size
enterprises), and local communities exist: coastal protection, promotion of workers’ health and safety, disaster prevention, etc.57 By working hand in hand withpublic authorities on those climate risk issues that havebusiness implications, companies can achieve better
results. What’s more, partnering with the public sector
can be an effective strategy for companies to build resilience in areas of their value chain that they don’t havecontrol over, such as critical transportation networks.

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Wnldg`^c\l^i]Xdbbjc^i^Zh#
Private sector leaders are increasingly recognizing that
community risks are business risks. Companies not
only rely on communities to source employees andaccess essential supplies, but also to sell their products
and services and expand their market shares.
Businesses that do nothing to support communities in coping with climate change are exposed to additional risks. If companies are perceived – rightly or
wrongly – to cause or aggravate some of the impactsof climate change, they could lose their social license
to operate. Another risk comes from local instability,
triggered by extreme weather events or reduced performance of the local economy due to a warmer climate. Including community climate concerns within abusiness climate risk management process helps identify risks and solutions outside of the business fenceline, laying the groundwork for resilient communities
and a favorable business environment.58
Companies are increasingly finding ways to connect
with local communities in areas that are part of businessvalue chains. Local and community-based, national andinternational nongovernmental organizations (NGOs)
can assist in providing those linkages and helping toassess climate impacts in those communities and theimplications for business/community relationships.
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Mainstreaming climate risk management within an
organization is a journey, and not all organizations areat the same stage. Business ADAPT proposes a fivestep climate resilience framework inspired by existing
good practice processes and populated with guiding
questions to help company executives and senior managers move their organizations on a pathway towards
climate resilience (See Figure 3). All corporate leaders
can find relevant questions to inform their decisions,engage others in their company, and assess the robustness of their approach, wherever they are on their own
climate resilience pathway. The questions can also be
useful to functional corporate managers in working
out the implications of climate risk management for
their specific roles.
Some companies are stepping up to the challenge
and offer examples of how to build climate resiliencein practice. In the absence of globally approved standards for managing climate risks, such examples provide a valuable resource to other businesses: theydelineate the contours of emerging practices in theprivate sector and offer important lessons to be built
upon. Selected examples of climate resilience in action,
provided throughout this document as a resource forreaders, illustrate different aspects of business risks
and climate resilience.
The most successful approaches to climate resilience span the value chain, consider the triple bottom
line, and are integrated within core corporate strategy, processes, and projects. In line with good practiceprinciples for climate resilience, Business ADAPT covers climate resilience considerations across businessvalue chains while giving a central role to communityand ecosystem vulnerability and adaptation needs.

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Each step of Business ADAPT cites entry points
where businesses can readily integrate climate resilience considerations into mainstream corporate processes or documents. For users who would like tolearn more about specific questions, Business ADAPT
additionally provides links to examples of climate
resilience in action, existing tools and methods.
Business ADAPT also includes sector-specificquestions for company executives operating inseveral highly vulnerable sectors: Food, Beverage,
and Agriculture; Water and Energy Utilities; andGeneral Manufacturing.
The aim is that Business ADAPT is a living document with the potential to evolve and incorporate
new knowledge, examples, tools, and methods as
they emerge.

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