RiskOperational RiskMultinationals see Extreme Weather, Climate Change as Growing Business Risk

Multinationals see Extreme Weather, Climate Change as Growing Business Risk

Most major companies regard extreme weather and other impacts of climate change as current or near-term business risks, but lack the data and tools needed to effectively assess and manage them, according to a report by the Centre for Climate and Energy Solutions (C2ES).

The report, entitled ‘Weathering the Storm: Building Business Resilience to Climate Change’, details the state of resilience planning among a cross-section of multinational corporations (MNCs).

C2ES found that 90% of companies in the Standard and Poor’s (S&P) Global 100 Index identify extreme weather and climate change as risks, and most have experienced climate impacts or expect to within 10 years. Main concerns include damage to facilities, loss of water or power supplies, higher costs, and disruption of supply and distribution chains. Sixty-two per cent said they are experiencing climate change impacts now, or expect to in the coming decade.

Companies are most concerned about the direct impacts of extreme weather on property, production and supplies, and indirect impacts on operational costs, such as higher prices for commodities or insurance.

Although most companies are well aware of these risks, relatively few are investing in resilience beyond ‘business as usual’ due to a lack of information and tools to help them relate these risks to their specific business operations. Most are managing these risks through existing business continuity and emergency management plans. Only a few have used climate-specific tools to comprehensively assess risks.

“Companies know how to navigate a changing business environment. Now they face a changing physical environment, as climate change leads to more extreme heat, drought and flooding,” said C2ES president, Eileen Claussen.

“Many companies are asking whether they’ve entered a ‘new normal’. They need help assessing and managing these rising risks to the bottom line.”

The report examines how companies perceive their climate-related risks, the steps they are taking or plan to take, emerging best practices in building business resilience, and what is standing in the way.

The report’s co-author, Meg Crawford, said that weather-related disasters and other climate change impacts can affect a company’s supplies, production, distribution, and property. As extreme weather events become more frequent and intense, it’s vital for companies to have the right tools and accurate information so that they can assess and manage their risks.

Based on case studies from six companies: American Water, Bayer, The Hartford Group, National Grid, Rio Tinto and Weyerhaeuser, C2ES developed a four-step framework for managing climate risks and recommended other actions for overcoming obstacles to building broader business resilience.

Among the report’s recommendations are the following measures:

  • Create a clearinghouse for reliable, up-to-date data and analytical tools: Companies need user-friendly, localised projections of climate changes and models that link projections to impacts germane to company operations.
  • Invest in public infrastructure resilience: Companies rely on public resources, including roads, bridges, and ports, to get their goods and services to market and need these resources to withstand extreme weather and climate impacts.
  • Consider resilience needs in regulation: Companies in regulated sectors, such as water, electricity, and insurance, need regulators to be forward-looking and open to companies making the case for more spending on resilience.
  • Set up voluntary, public-private partnerships: Bringing together government and business expertise will improve resilience planning.

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