A BROADER VIEW. MANAGING RISK, BUILDING TRUST An introduction to six themes for the future SAFER, SMARTER, GREENER

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1 A BROADER VIEW MANAGING RISK, BUILDING TRUST An introduction to six themes for the future SAFER, SMARTER, GREENER

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3 Foreword from Henrik O. Madsen... 4 A broader view... 6 TRANSITIONS, TRUST AND TECHNOLOGY...8 A safe and sustainable future From technology to transformation SAFER, SMARTER, GREENER...14 The future of shipping Electrifying the future Arctic: the next risk frontier Adaptation to a changing climate LOOKING AHEAD...24

4 4 MANAGING RISK, BUILDING TRUST MANAGING RISK, BUILDING TRUST DNV GL S PAST, PRESENT AND FUTURE One hundred and ifty years ago, the world was in the midst of a profound transition. New technologies such as steam power, electricity and the telegraph led to an explosion in productivity and connectivity, reshaping the global economy in just a few short decades. Yet these shifts also introduced new risks to life, property and the environment and transformed the relationship between technology, business and society.

5 5 It was this context into which Det Norske Veritas and Germanischer Lloyd were born. These companies, which have now merged into DNV GL, took on the role of verifying that vessels were seaworthy during a time when the convergence of new technology and business models caused an unacceptable number of ship accidents. By managing the increasingly complex risks associated with the rapidly evolving maritime sector, classiication societies built trust among shipping stakeholders, contributing to the birth of a new era in international trade. Today, as DNV GL celebrates our 150th anniversary and our irst year as a united company, the world is at another inlection point. The technologies, systems and institutions that have driven the most prolonged period of growth in our civilisation s history are being tested by the new demands of the 21st century. And once again, our ability to manage risk and build trust will help us enable the changes the world needs. In order to rise to this challenge, we have been exploring six themes of strategic relevance to our new organisation. Some of the themes, such as climate change adaptation, have taken us into newer territory; others, such as the future of shipping, have seen us re-evaluate more familiar ground. I believe that all of them, however, are absolutely central to our efforts to empower our customers and society to become safer, smarter and greener. I hope that we can use the themes indings, as well as the momentum of 2014, to engage a wide range of stakeholders in a forward-leaning discussion about how to achieve our vision global impact for a safe and sustainable future. I look forward to the journey ahead. Henrik O. Madsen President and CEO, DNV GL Group

6 6 MANAGING RISK, BUILDING TRUST A BROADER VIEW THEMES FOR THE FUTURE As DNV GL turns 150, we are exploring six themes for the future areas where we can leverage our history and expertise to translate our vision into impact. We selected these themes as part of our efforts to take a broader view of the relationship between technology, business and society. On these pages you will ind short introductions to each theme. To ind out more, join us at: dnvgl.com/vision-to-impact A SAFE AND SUSTAINABLE FUTURE FROM TECHNOLOGY TO TRANSFORMATION The future is not what it used to be. Rising global temperatures, diminishing natural resources and deepening inequality threaten everyone s prospects, including those yet to be born. Yet alongside these new global challenges are new innovations, solutions and opportunities that make a safe and sustainable future possible: a world where nine billion people can thrive while living within the environmental limits of the planet. In this theme, we set a vision towards this future. We analyse the barriers to change and detail the concrete actions that governments, business and civil society must take together if the obstacles are to be overcome and the opportunities for safer, smarter and greener growth are to be seized. Technology has always been an enabler of societal change and we can expect that it will play a pivotal role in our transition to a safe and sustainable future. Indeed, existing technology is already unlocking safer, smarter, greener solutions for powering our economy, transporting our goods, caring for our sick and feeding our growing population. But history shows that transformative technologies from the automobile to the internet can take decades to reach scale. And time is one resource we do not have. How can we accelerate the deployment and commercialisation of sustainable technologies while ensuring that they are introduced safely into society? In this theme, we investigate this question, analysing the barriers to technological uptake and providing insights from past and present technologies.

7 7 THE FUTURE OF SHIPPING Shipping is the lifeblood of our economy and the lowest-carbon mode of transport available to a world with ever-rising consumption. It therefore has a crucial part to play in a safe and sustainable future. But the industry faces a challenging climate: more intense public scrutiny of safety and security, tightening restrictions on environmental impacts and a revolution in digital technology. To meet these challenges, we have analysed six technology pathways that can help us achieve three ambitions for 2050: reduce the sector s fatality rates 90 per cent and reduce leet-wide CO 2 emissions 60 per cent, all without increasing the costs of shipping. ELECTRIFYING THE FUTURE Electricity is already revolutionising the way we power our operations, fuel our vehicles, and light and heat our buildings and it will have an even bigger role to play in the decades to come. Many emerging technologies can provide cleaner, smarter, affordable and reliable energy. Floating offshore wind can provide emissions-free power at scale by And a suite of smart grid technologies will enable households and communities to participate in leaner, more local power systems. In this theme, we take a closer look at these technologies, and examine the contributions they can make to providing low-carbon power to future generations. ARCTIC: THE NEXT RISK FRONTIER The Arctic offers a preview of a new paradigm for business: harsher environments, higher public scrutiny and a greater need to engage with stakeholders. As industries enter the Arctic, understanding, communicating and managing risks will be essential both to earning social licence to operate and minimising the impacts of their activities. With such high stakes, the Arctic will be a deining frontier not just of operations, but of safer, smarter, greener technologies and standards. The Arctic is rich with resources and dilemmas. And while there are no easy answers to these dilemmas, we must tackle questions about its development step by step, based on a common understanding of the risks. In this theme, we examine the complex Arctic risk picture and explore its implications for shipping, oil and gas, and oil spill response. ADAPTATION TO A CHANGING CLIMATE Climate change mitigation remains essential for our work to build a safe and sustainable future. But the greenhouse gases that have accumulated in the atmosphere over the past century and a half have already set changes in motion. Infrastructure and communities around the world urgently need to adapt to a climate characterised by more frequent and more severe storms, droughts and loods. And given the interdependence between business and society, business has a strong interest and critical role to play in these efforts. In this theme we have been developing tools to help both businesses and communities adapt to this new risk reality: a web-based platform for sharing information and best practices; a risk-based framework to help decision-makers prioritise their adaptation investments; and a new protocol to equip leaders to measure and manage community resilience to climate change.

8 8 MANAGING RISK, BUILDING TRUST TRANSITIONS, TRUST AND TECHNOLOGY

9 TRANSITIONS, TRUST AND TECHNOLOGY 9 Business as usual is not an option; we need to transition to a safe and sustainable future. As always technology will play a key role in the shift. But technology alone is not enough. Building trust among stakeholders is just as essential.

10 10 MANAGING RISK, BUILDING TRUST A SAFE AND SUSTAINABLE FUTURE At DNV GL, our vision is to have global impact for a safe and sustainable future. We believe it is possible to create a thriving economy where growth is decoupled from environmental destruction and material consumption. We believe it is possible for a society of nine billion people to stay within the limits of the planet while still enjoying a safe and fulfilling life. And we believe that shaping this future the most important task of our time is not only possible but essential. The actions we take today will define our opportunities for generations to come. Business as usual is no longer an option The consequences of inaction are steep. On our current trajectory, the global population, already putting our resources under huge strain, is set to hit nine billion by Three billion will enter the middle class by 2030, mostly from the developing world. We have already exceeded our planetary boundaries for biodiversity loss, climate change and nutrient flows. Two-thirds of the world is living in water-stressed regions. And the latest data show that we are on track to see 3-6 C of warming by the end of this century well above the 2 C threshold where scientists predict we will experience dangerous climate change. These trends are defining a new risk reality and the economic, environmental and human cost to business and society, should we fail to manage those risks, will be without precedent. Barriers can be overcome A low-carbon, resource-efficient and socially inclusive economy is within our reach. But progress towards that future is slow. In order to move forward, we must understand and overcome the barriers that are blocking the transition: not only the technological, economic and political barriers we are used to considering, but also societal and behavioural barriers such as a declining trust in institutions as well as reactive, short-term thinking. It is critical that we take action to recalibrate markets and business models, repair governance and institutions, and renew the social contract. Opportunities arise out of the new risk reality For those who act now, the path to a safe and sustainable future is paved with opportunities. Promising solutions lie in the principle of shared value the creation of economic value in a way that simultaneously creates value for society by meeting its needs and challenges. Such opportunities exist in every sector of our economy, including shipping, energy, food and health. To harness them, we will need collaboration and trust among multiple stakeholders. And most of all, we will need innovation and ingenuity our most precious resources.

11 RANSITIONS, TRUST AND TECHNOLOGY Vision Barriers Pathways Enablers Elements of DNV GL's vision for transitioning to a safe and sustainable future From vision to impact For the past 150 years, our purpose has been to safeguard life, property and the environment. As we go forward, fulfilling this role takes on new urgency. That is why we have seized this opportunity to set our vision for a safe and sustainable future. Drawing upon the latest research, our own experts and interactions with leading sustainability practitioners from around the world, we provide a clear picture of the future we must avoid and the concrete actions that governments, business and civil society must take together to do so. We have identified 36 barriers we must overcome, along with three pathways and 20 enablers that can help us achieve our vision. Our own steps towards a safe and sustainable future have already started. As part of our work this year, we bring new services to market, including sustainable sourcing assurance and water footprinting. We have also developed a project assessment tool for evaluating the sustainability performance of the projects we run with our customers. Environmental, social and governance impacts need to be managed on an operational level and this tool will enable our customers to achieve safer, smarter and greener solutions. For more on DNV GL s work on A Safe and Sustainable Future, go to:

12 12 MANAGING RISK, BUILDING TRUST FROM TECHNOLOGY TO TRANSFORMATION From the Stone Age to the Digital Age, technology has defined and redefined civilisation. It has extended human life expectancy and expanded human expectations of life. It has taken us to the extremes of our planet, nourished billions, eradicated diseases, increased our productivity and transformed the world into a global, connected economy and society. Yet the same technologies that made possible the achievements of the past century have also had a host of unintended consequences. The fossil fuels that generate two-thirds of our electricity and power almost all of our transportation have polluted our soil, water and air, causing respiratory diseases, damaging ecosystems and changing the climate. Large-scale agriculture has made it possible to feed ever more people, but this gain has come at the expense of biodiversity, and given rise to crops that are more vulnerable to disease. And though more digitisation has increased efficiency in everything from healthcare to traffic control, it is has also exposed us to violations of privacy and security. As we strive to move to a new and better paradigm one in which the needs of today are balanced against the needs of tomorrow we look once again to technology to drive our transformation. Yet it is clear that a business as usual approach to technology will not get us to a safe and sustainable future fast enough. Given the pace of global warming, resource degradation and demographic change, time is rapidly becoming the most finite resource of all. The future is here it s just not evenly distributed History shows that the technologies that have transformed our shipping, energy, food and health sectors have taken decades to move from invention to scale. For example, the first modern computer was invented in the 1930s, but early growth was slow. In 1943 the president of IBM is famously reported to have said, I think there is a world market for maybe five computers. Yet today, there is one personal computer in use for every five people on the planet. And the next generation of computing is here: personal computers are already being displaced by tablets and smartphones, which have the processing power of desktop computers ten years ago. In part, this slowness can be explained by technology s natural life-cycle. Before new technologies enter the market, they must be developed, tested and qualified. Investors must gain enough confidence to finance research and development and consumers must gain enough confidence to use them. It takes time to build trust in the quality and safety of new technologies. But a number of barriers can slow this process further barriers that seem to be particularly formidable for sustainable technologies. Incumbent infrastructure whether physical, regulatory, economic or societal is one of the biggest impediments to change. For

13 TRANSITIONS, TRUST AND TECHNOLOGY 13 example, the centralised grids that form the backbone of our electricity system are ill-equipped to handle variable renewable sources such as wind and solar power. Most power markets do not incentivise cleaner, more distributed generation. And most consumers have limited visibility and agency over their energy use, making it hard for them to make greener choices even if they could save money. Technology and trust Today, the requirements for earning social acceptance of technology are changing just as the need for technological transformation is most urgent. Governments, investors and industry groups are no longer the only constituents that must be confident in a new technology. Perceptions and trust are becoming crowd-sourced, with consumers turning to new, decentralised sources of information to determine whether a new technology fits with their vision for the future. We must understand not only technologies themselves, but the broader risks they both pose and face. Countless technologies have been invented that enable us to generate power, fuel vehicles, grow food and provide healthcare in a better way, and many are entering the market. A safe and sustainable future is technically possible. Whether we reach it or not depends not just on technologies themselves, but how effectively we are able to introduce them at scale, manage their risks and build trust all in a way that generates economic, social and environmental value. From vision to impact Unlocking the transformative potential of technology requires a systemic understanding of the context in which it operates. To build this understanding, we examine technology in five key sectors: maritime, oil and gas, electricity, food and health. We assess the barriers to scaling sustainable technology, building upon insights gained from a roundtable conversation with thought leaders from business and beyond. And we use selected case studies to analyse both the technical and non-technical barriers to technology adoption and identify solutions for hastening progress. For more on DNV GL s work on From Technology to Transformation, go to: technology-to-transformation

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15 The challenges we face from climate change and resource scarcity to inequality and instability are steep. But there is much we can do to address these risks. By empowering businesses with safer, smarter and greener solutions, we can help society move now towards a safe and sustainable future. SAFER, SMARTER, GREENER 15

16 16 MANAGING RISK, BUILDING TRUST THE FUTURE OF SHIPPING The global maritime sector is responsible for transporting some 80 per cent of goods traded around the world. Although it is one of the most fuel-efficient modes of transport and is responsible for only 2 to 3 per cent of anthropogenic global greenhouse gas emissions today, most ships run on heavy fuel oil one of the dirtiest and most carbonintensive fuels and contribute substantially to air pollution in ports. Global demand for commodities and manufactured goods is projected to rise over the next four decades, adding to global demand for transport by air, land and sea but that demand will come with new expectations for ships to operate in a safer, smarter and greener way. Meanwhile, the potential for game-changers such as a technological revolution in manufacturing and distribution, a high-profile hijacking incident or a major change in public attitudes towards nuclearpowered ships add greater uncertainty. Yet while these trends will drive change through tougher regulations, competitive pressure and advances in technology, it will also reward early movers with a competitive edge. Opportunities to achieve a safe and sustainable shipping industry by 2050 are ripe in three key areas: reducing ship and occupational fatalities; reducing emissions of carbon dioxide; and exploiting efficiencies made possible by new technologies. A whole new safety mindset A number of recent, high-profile ship accidents have increased public scrutiny of shipping safety. The shipping industry s fatality rate is ten times higher than that of onshore industries in OECD countries. To reach parity, the shipping sector needs to reduce its fatality rate by 90 per cent. This is a demanding ambition, but within reach if the industry adopts a new safety mindset. A holistic safety perspective is needed, taking into account humans, technology and procedures. In turn, measures must be put in place to prevent and reduce the consequences of accidents big and small. Towards carbon-neutral shipping The convergence of air quality concerns, growing pressures for fuel efficiency, and intensifying urgency around climate change is pushing CO 2 emissions to the top of the shipping sector s agenda. Scientific consensus concludes that we must avoid warming of more than 2 C above pre-industrial levels or risk catastrophic consequences. This limit implies an economy-wide reduction in CO 2 emissions of 60 per cent by For the shipping sector to achieve this level of reduction while accommodating the expected growth in transport demand, shipping must cut emissions per transported unit by 80 per cent by 2050.

17 SAFER, SMARTER, GREENER 17 emissions Freight cost Lives lost at sea 60% below present levels Maintain present levels 90% below present levels DNV GL`s 2050 ambitions for a safe and sustainable shipping industry "Global demand for commodities and manufactured goods is expected to rise over the next four decades, adding to global demand for transport by air, land and sea." Digital technology: a catalyst for smarter shipping A sustainable world will also be a digital world. The steady advance of communications technology and access to ever increasing amounts of data will continue to drive human connectivity. For the shipping industry, the Digital Age will open up a new landscape of opportunities for the industry to get smarter from ultra-efficient supply chain coordination to virtual design laboratories capable of producing next-generation vessels with radically reduced operating costs and energy consumption. These digital solutions can enable the shipping industry to maintain or reduce its costs relative to today, even while dramatically improving safety and CO 2 emissions levels. information and communication technology, energy and climate change and the environment. Based on these trends, we set out a vision for the future of shipping that sees the industry become dramatically safer, smarter and greener over the coming decades. And we identify six pathways that can enable the shipping sector to achieve these ambitions: safe operations, advanced ship design, the connected ship, future materials, efficient shipping and lowcarbon energy. From vision to impact Looking ahead to 2050, we are confident that the impact of technological advances, increasing public engagement and changing industry mindsets will create new opportunities for the industry to become safer, smarter and greener. We examine trends in the global population and economy, For more on DNV GL s work on The Future of Shipping, go to:

18 18 MANAGING RISK, BUILDING TRUST ELECTRIFYING THE FUTURE Since the first light bulbs began to replace oilburning lamps, electricity has revolutionised society s relationship with energy. Electrification has brought heat and light to billions around the world and transformed the way we power our businesses and fuel our vehicles. But we will need to reach an additional 1.3 billion people if we are to achieve the goal of providing universal energy access for our growing population. Meeting the world s rising energy demands while dramatically reducing the cost to the environment is one of the biggest challenges we face in achieving a safe and sustainable future. Electrification holds the key to unlocking this challenge. New technologies can provide cleaner, smarter, affordable and reliable energy. Innovations in infrastructure, markets and regulations are making our grids smarter, allowing us to generate more of our power where we use it and to find and fix faults in real-time. And as electricity becomes the fuel of choice for an ever-growing number of cars, buildings and industries, these benefits will be amplified. A safe and sustainable future is electric Recognising electricity s potential, many governments have made the power sector a central pillar of plans to curb carbon emissions. For example, the European Union has set a target of reducing its greenhouse gas emissions by 80 per cent by 2050 a goal which will require an almost complete decarbonisation of its power sector. Europe s wealth and diversity of renewable resources and its extensive grid give it many options for achieving this ambitious target. Few countries have the same luxury. In 2010, Japan announced that it would target an 80 per cent reduction, in line with Europe s goal. But Japan has dramatically down-scaled this ambition since the Fukushima nuclear disaster of Without nuclear power, Japan has been forced to import record amounts of liquefied natural gas and coal to keep the lights on, at heavy cost to its economy and population. Meanwhile, the country's high population density means that onshore wind and solar farms have limited potential. Today, Japan is facing a profound energy trilemma: how to provide power to future generations that is affordable, reliable and clean. The clean generation An array of emerging technologies offers solutions to countries such as Japan, supporting the affordable, reliable, low-carbon grids of the future. Floating offshore wind is one such example. Offshore wind turbines can access higher wind speeds with fewer environmental and land constraints than onshore turbines. For these reasons, offshore wind has started to take off in areas such

19 SAFER, SMARTER, GREENER 19 95% 40 60% Share of ocean coastlines that is too deep for bottom-fixed wind turbines Regular households living in a smart grid laboratory in The Netherlands According to our findings, the highest emissions reductions that Japan can achieve by 2050 without nuclear or CCS as the North Sea, where turbines can be fixed to the shallow seabed. But with 95 per cent of the world s coastlines too deep for bottom-fixed turbines, floating wind power could help dramatically increase the amount of clean energy generated offshore. By harnessing synergies with other offshore industries, demonstrating feasibility at increasing scales and equipping decision-makers with better information about costs and benefits, we can enable this third generation of wind to become a cost-competitive, commercial energy source over the coming decades. The smart generation A generation of new digital technologies, including smart electricity meters that receive and transmit information about electricity price and usage, and appliances set to run when power prices are low, are paving the way to a smarter grid. Smart grids take advantage of new, distributed generation technologies to meet electricity demand more efficiently than a centralised system. The rise of the smart grid allows consumers to contribute to the power system through electric vehicles, rooftop PVs and other appliances. Smart grid technologies will smooth renewables passage into the grid and make electricity cleaner, more reliable and more affordable. But their deployment depends on acceptance and support from policymakers, investors and the public. By demonstrating technical and economic feasibility, we can build support and enthusiasm. From vision to impact We have developed a number of tools to assess the potential contribution that new technology options can make to a clean, electrified economy. In a new analysis, we model different electrification scenarios for Europe and Japan, exploring how technologies including offshore renewables and smart grids could affect the power system s affordability, reliability and sustainability. We conclude that both Europe and Japan have several options for reaching 80 per cent or greater CO 2 reductions depending on the technologies they employ and the amount of flexibility they are able to provide. Our vision for the third generation of offshore power gives decision-makers a template for making floating offshore wind a viable, large-scale solution by And our interactive smart grid learning tool enables stakeholders anywhere in the world to experience the realities of smart energy systems in real-time from PowerMatching City, an actual smart gridenabled community in The Netherlands. For more on DNV GL s work on Electrifying the Future, go to: electrifying-the-future

20 20 MANAGING RISK, BUILDING TRUST ARCTIC: THE NEXT RISK FRONTIER In September 2012, Arctic sea ice dropped to the lowest levels ever recorded. Some scientists are now predicting that the Arctic could have ice-free summers by The decline of sea ice means that the Arctic is more accessible than ever before just as growing population and consumption are pushing many industries into remoter places in search of resources. From its considerable oil and gas resources and shorter shipping routes, to its rich fisheries and the ecosystems and communities it supports, the Arctic is a prize valued far beyond its own borders. But with the Arctic s wealth comes dilemmas. Should preserving the Arctic s wilderness be prioritised above securing resources to meet the world s growing demands? Should providing economic opportunities for local communities be promoted over indigenous livelihoods? While society struggles to answer these fundamental questions, development is continuing, and regulators and industry are faced with the challenge of managing the risks that the Arctic presents. Decisions are being made about investments, regulations and operations in the Arctic and a transparent, robust decision basis is crucial. Operating in a sensitive environment Although the Arctic is often seen as a monolithic region, its risk picture is complex. Few generalisations can be made about the enormous region, which spans 33.4 million square kilometres, or nearly 13 per cent of the earth s surface. It is home to some of the harshest, most sensitive and most remote environments in the world, as well as some environments that resemble the North Sea more than the North Pole. The Arctic is already under pressure from a changing climate, and temperatures there are rising much faster than the global average. Some stakeholders are raising concerns about the threats that industrial activities, including shipping and oil and gas development, could pose, including the disruption of habitats, the emission of air pollutants and the potential for major oil spills. Many parts of the Arctic present greater operational risks than industries face elsewhere. Ice limits accessibility and can strain and damage equipment. Severe seas and high wind as well as reduced visibility during the long polar night present additional challenges. And the remoteness and lack of local infrastructure constrain supply chains and emergency response in the event of shipping accidents and oil spills. Response gaps and conditions which impede response measures amplify risk to human life, property and the environment. These challenges require careful risk management and add to operational costs.

21 SAFER, SMARTER, GREENER 21 DNV GL has developed a dynamic Arctic Risk Map Public opinion adds yet another dimension to the Arctic debate. In our increasingly global and networked society, local accidents can quickly become global reputational crises, not just for the operators directly involved, but for the entire industry. The frontier of risk management In the Arctic, thanks to these consequence multipliers, there is no margin for error. Development must be undertaken step by step, demonstrating acceptable levels of safety in areas with no sea ice before moving on to progressively more challenging areas. On the frontier of industrial activity we need to employ the frontier of technological innovation, standards and best practice. Equipment design, operational procedures, personnel training, vessel routing, response protocols and risk management must be adapted to the location and season in which the work will occur. As in any geography, local values and opinions will always play a role in decision-making about the Arctic. An activity that presents the same risks and offers the same benefits may be enthusiastically welcomed in one community and rejected in another. Stakeholders perceptions of different industrial activities and trust levels of regulators and industry differ from region to region. But for sound decisions to be made, all stakeholders must have a common understanding of the risks and how they are being managed. Objective information, transparency and dialogue among stakeholders are paramount for Arctic development to earn social licence to operate. From vision to impact Business and society need a better decision basis one that takes into account the full risk picture to provide the best protection for life, property and the environment in the Arctic. To support these decisions, we have created a dynamic Arctic Risk Map as well as indices that measure environmental vulnerability and safety and operability in different seasons and locations. We have conducted public surveys and stakeholder interviews to gain a better understanding of risk perception in the region. We have also assessed shipping risk in the Arctic, taking two case studies cruise ships and bulk carriers and working with Aker Arctic to develop concept ships for safer, smarter, greener Arctic operations. And finally, in collaboration with SINTEF we have evaluated the current status of oil spill response around the Arctic and offered recommendations for improving this essential service. For more on DNV GL s work on the Arctic: The Next Risk Frontier, go to:

22 22 MANAGING RISK, BUILDING TRUST ADAPTATION TO A CHANGING CLIMATE New technologies, policies and regulations, business models and behaviours hold tremendous potential to reduce the impact that we have on the climate. The decisions and investments we make today will determine our course by the end of the 21st century, either locking us into serious and irreversible change or saving us from the worst effects of global warming. But the greenhouse gases that have accumulated in our atmosphere over the past century and a half have already set changes in motion. From heat waves, floods and droughts to severe storms and sea level rise, the science is clear: mitigation is necessary but no longer sufficient for a safe and sustainable future. Businesses and society must adapt, and fast. Adaptation is particularly critical for high-risk sectors such as the power, maritime and oil and gas industries. These sectors supply chains and physical assets power plants, electricity transmission and distribution infrastructure, offshore platforms and ships are highly exposed to climate risks. At the same time these sectors will be expected to provide society with better, more sustainable services more safely and reliably. A harsher, more unpredictable climate may be the new norm, but power outages that last for days or offshore accidents due to stronger storms and waves cannot be part of a safe and sustainable future. Some companies and communities are taking action, investing in measures to reduce their vulnerability and increase their resilience to climate change. In June 2013, Mayor Michael Bloomberg announced a USD 20 billion adaptation plan for New York City, vowing that the city would be prepared for the next Superstorm Sandy. But many more leaders hesitate. We believe businesses and other decision-makers must make adaptation a core part of their strategy, taking a broader view of climate risks, estimating risks and characterising uncertainty, managing vulnerability and resilience and collaborating for greater impact. Making decisions under uncertainty In many cases, infrastructure built today needs to last for decades in a climate that is difficult to imagine now. Severe storms, droughts, floods and other extremes are becoming more frequent and severe as the earth warms. As the baseline changes, businesses and society need a better way to make investment decisions one that is transparent, objective and robust across the range of futures we could face. From factory owners to mayors, adaptation planners must start from the same basic principles. First we must assess climate and other risks, evaluating our vulnerability to particular climate hazards, estimating the direct and indirect losses they may cause, and modelling the cost-effectiveness of different

23 SAFER, SMARTER, GREENER 23 Current climate Hazard analysis Vulnerability analysis Risk analysis Future climate DNV GL's climate adaptation risk assessment framework "Decision-makers need information to build the confidence they need to act on adaptation." adaptation measures. Our assessment must take into account uncertainty related to climate change and it must capture interconnections among the complex elements in the systems it addresses. Our risk assessment should form the cornerstone of a comprehensive risk management strategy one which also encompasses leadership, flexibility, innovation, response, recovery and learning. In this way, we can identify cost-effective ways to reduce our vulnerability and increase our resilience. Taking a broader view of climate risks Many businesses are already investing in increasing the resilience of their own assets and operations to extreme weather. But when it comes to adaptation, understanding the full range of risks, the solutions available and the potential consequences of our investments require thinking beyond our own walls. Moreover, a systems approach reveals the importance of community resilience to the private sector. Whether we do business in Nepal or New York City, our companies are as vulnerable as the communities we work in. By supporting community resilience, businesses can decrease their own vulnerability and build social licence to operate. From vision to impact Decision-makers need information to build the confidence they need to act on adaptation. We have developed a climate risk assessment framework to help businesses assess their vulnerability to climate hazards and make risk-based investment decisions for their operations, assets, supply chains and communities. We are designing a tool to help decision-makers measure community resilience and identify solutions beyond their fence line. And we have created a web-based adaptation knowledge platform to raise awareness about adaptation and help decision-makers understand and communicate with each other about how they are managing climate risks in their respective sectors and geographies. For more on DNV GL s work on Adaptation to a Changing Climate, go to: climate-adaptation

24 24 MANAGING RISK, BUILDING TRUST LOOKING AHEAD I was truly inspired last year when our CEO and President Henrik O. Madsen asked me to lead the ambitious project highlighted in this booklet an initiative aiming to explore areas of key relevance to our company s future. Together with a global team of great colleagues and our strategic partner Xyntéo, we embarked enthusiastically on this task, focusing our efforts on these six themes: Safe And Sustainable Future, From Technology To Transformation, The Future Of Shipping, Electrifying The Future, Arctic: The Next Risk Frontier, and Adaptation To Climate Change. We started conversations with some of the world s top thought leaders, evaluated global trends, considered how these trends could impact our customers and held a series of challenging roundtable meetings to test and broaden our insights. I believe that our commitment to putting our vision into action as we do by investing 6 per cent of our revenue in research has always been one of our greatest strengths. In these themes for the future we dare to envision the future we hope to help build and take concrete steps towards bringing it to life. Though the themes have wrapped up their reports, this is only the beginning. During 2014 our company will mark both our 150th anniversary and our first year as DNV GL. We will meet all over the world not just to look back at our achievements but also to look forward at the journey ahead. We will use our findings so far as a platform from which to continue the enriching conversation we have started with colleagues, customers, stakeholders and society at large. It is my hope that we will use this conversation to take a broader view,in three directions: First, we should look to the young. For too long have business and government alike ignored the voices of those who have the most at stake in the shift to safe and sustainable future. The young should be seen as a source of insight and wisdom. We should tap into this resource, harnessing the ongoing social media revolution and the power of education.

25 AFER, SMARTER, GREENER 25 "Inspiration unlocks the future technology will catch up" Second, we should look to our leaders. They need to start leading us somewhere, instead of optimising the status quo. This means creating a new tone, a new narrative that speaks of the opportunity of change, rather than a fear of it. Third, we should look to each other. Collaboration is key to solving the systems challenge that a safe and sustainable future represents. We need to form new alliances across all spheres of life from academia and business to government and civil society across nations, industries, communities and cultures. We have an exciting road ahead of us and we have some incredible momentum to drive us forward, thanks in large part to the visionary and committed colleagues who took part in this project. Their work has given me much to think about. It was from one of them that I learned these words: Inspiration unlocks the future technology will catch up. Bjørn Kjærand Haugland Chief Sustainability Officer, DNV GL NEXT Over the past year, we have been privileged to speak with and learn from shapers and thought leaders from around the world about what should come next. We have collected their visions for a safe and sustainable future and their recommendations for how to get there in a special volume, Next. Stay tuned at dnvgl.com

26 26 MANAGING RISK, BUILDING TRUST JOIN US IN TAKING THE BROADER VIEW

27 JOIN US IN TAKING THE BROADER VIEW 27

28 SAFER, SMARTER, GREENER HEADQUARTERS: DNV GL AS NO-1322 Høvik, Norway Tel: DNV GL Driven by its purpose of safeguarding life, property and the environment, DNV GL enables organisations to advance the safety and sustainability of their business. DNV GL provides classification and technical assurance along with software and independent expert advisory services to the maritime, oil & gas and energy industries. It also provides certification services to customers across a wide range of industries. Combining leading technical and operational expertise, risk methodology and in-depth industry knowledge, DNV GL empowers its customers decisions and actions with trust and confidence. The company continuously invests in research and collaborative innovation to provide customers and society with operational and technological foresight. DNV GL, whose origins go back to 1864, operates globally in more than 100 countries with its 16,000 professionals dedicated to helping their customers make the world safer, smarter and greener. The trademarks DNV GL and the Horizon Graphic are the property of DNV GL AS. All rights reserved. DNV GL 03/2014 Design and print production: Erik Tanche Nilssen AS