Weathering the Storm: Building Business Resilience to Climate Change

CSR in purchasing , Greening the Supply Chain Jul 30, 2013 1 Comment

Climate changeBusinesses face growing threats from extreme weather and climate change: damage to facilities, loss of water or power supplies, higher costs, and disruption of supply and distribution chains.

In a new report, Weathering the Storm: Building Business Resilience to Climate Change, the center for climate and energy solutions provides a detailed snapshot of the state of resilience planning among a cross-section of global companies and outlines steps companies can take to better assess and manage their growing climate risks.

The report identifies that some leading companies are taking proactive steps to better anticipate extreme weather and climate changes, and to more quickly recover after their effects. They see opportunities to become more efficient, reduce costs, or provide greater value to customers. There is a four-step process that these companies generally follow:

1. Build a common understanding across the company of the risks associated with extreme weather and climate change, based not on the past but on future changes.

E.g. Rio Tinto has brought in external experts to brief senior executives on climate science and the business implications. The company is now starting to consider climate and energy risks in water management and the engineering of new projects.

2. Risk assessment determining how changes in the likelihood or magnitude of extreme weather events could affect a company’s supplies, operations, facilities, employees, customers, and costs.

Following major floods across the United Kingdom in 2010, the energy utility National Grid conducted flood risk assessments of over 130 electricity substations, and found that 13 sites needed to be rebuilt or elevated.

3. Produce adaptive and flexible risk management strategies that can develop over time, and pursue potential opportunities. This may be breaking new ground for many companies.

For example after following Hurricane Sandy, American Water discovered that it needs to build extra redundancies into its fuel supply and, for the first time, also into its telecommunications systems.
Climate change will offer new business opportunities, for example Bayer Material Science is researching crop productivity and resilience, high-performance insulation, and improved mosquito nets; all products that could face greater demand under warmer conditions and more extreme weather.

4. Incorporate climate risks into regular risk management activities and continually review as new information becomes available.

Weyerhaeuser, one of the world’s largest private owners of timberlands, is working to improve its resilience by regularly adjusting its planting and harvest activities to account for actual and potential losses from extreme weather.

In many respects, building resilience is doing what companies and communities have always done; strategic planning, risk assessment, investing in infrastructure, diversifying the supply chain, and safeguarding employees, all using the best information available.

There is no denying that uncertainties exist over the predictions for how exactly weather patterns will alter in response to climate change. However, many leading companies have concluded that, given the already substantial risks associated with the full range of projected climate change impacts, the costs of delaying action may be far greater than the costs of adapting now to become more resilient.

For example, MunichRE identified that over 800 major weather-related disasters last year led to over $130 billion in losses worldwide. Of these, eleven events each resulted in economic losses of $1 billion or more.

As extreme weather events are predicted to increase as the climate changes, it won’t only be the insurance industry that could be counting the cost if companies don’t evaluate their exposure to the risks posed.

Tom Bowers

Tom is an environmental and life cycle analyst and a supply-management advocate. He believes that Purchasers are in a great position to deliver sustainability goals and objectives for all types of organization. He has worked for over 10 years in Policy and Research in government, the 3rd sector and private sector. More importantly, he has a wealth of ideas to share with the supply chain profession.

One Comments

  1. Very interesting article. As a student at the University at Buffalo seeking a degree in Business Admin, with a concentration in Supply Chain Management, as well as a minor in Environmental Studies, I have been thinking mainly about the ways companies can become more green.

    This article has opened up a whole new area for me to look into.

    Kyle Ephraim

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