Why weather around the world can affect your business
July 12, 2016
Companies see extreme weather events as a growing risk to their business.
If you’ve noticed an uptick in in the occurrence and severity of heat waves, droughts, hail storms, heavy rain or flooding in your part of the country, you’re not alone. Many companies are experiencing the impacts from extreme weather events or expect to in the near future, according to the nonprofit Center for Climate and Energy Solutions (C2ES). Nearly all of the companies surveyed experienced a greater intensity and variability of extreme weather than they did in the past.
Climate volatility is posing big problems for big business. Ninety percent of the S&P Global 100 Index companies see extreme weather and climate change (including warmer temperatures, more extreme weather and greater water scarcity) as a current or future risk to their business, C2ES reports.
Climate change costs are rising
Climate volatility is expected to take its toll on communities and businesses across the country. The Department of Homeland Security shared U.S. Global Change Research Program projections that national economic losses due to extreme weather events will cost $1.2 trillion through 2050. On a global level, extreme weather events is projected to cost the global economy $700 billion annually by 2030, according to the Climate Vulnerability Monitor, as reported in Business Insider.
U.S. business impact
The failure of climate change mitigation and adaptation is most impactful risk for the years to come, according to The Global Risks Report 2016, and the impact will be felt in businesses across the globe.
Whether it’s rising sea levels and hurricanes that tear through the coastal states, flooding along the Mississippi River, hail in the plains states or drought and wildfires in other parts of the country, businesses across the U.S. are feeling the effects of weather volatility exacerbated by environmental changes.
And it’s not just climate change effects in the United States that can affect your business in profound and sometimes unexpected ways.
“We no longer have the luxury of assuming that an event in another part of the world will not impact our ability to function at home or elsewhere abroad,” write Dante Disparte and Daniel Wagner in CFO Magazine.
Climate changes globally can affect your business in the shape of rising costs, supply chain vulnerabilities, distribution and transportation infrastructure, business interruption and market volatility.
The internationalization of business can increase exposure to global risks. The Global Risks Report 2016 finds that companies are increasingly vulnerable even if they have no immediate presence in the area where the risk arises. The resilience of a business depends on the resilience of their suppliers and purchasers, whose supply chains can span many countries.
Zurich North America Commercial CEO Mike Foley traveled to the White House in 2014 to take part in discussions around climate resilience and extreme weather.
“Part of our Zurich commitment is to deliver insights that empower our customers and the communities we serve to understand and protect themselves from risk. For climate change, that's helping better understand ways to mitigate risk of catastrophes before they happen and become more resilient for the future, as well as in recovery,” said Foley.
Businesses need to factor potential environmental risks and their contingencies into their business planning, proactively address climate challenges and reduce vulnerabilities to climate and other hazards.
Building greater climate resilience
The UN Environment Programme (UNEP) in its GEO-5 for Business report encourages business leaders to:
- Conduct a deeper, company-specific analysis, taking a lifecycle approach.
- Continue to mitigate the impacts of the business on the environment.
- Think strategically about how the business must change to reflect changes in the global and local environment.
- Report to stakeholders (investors, employees, customers, communities, NGOs, and others) on the company’s impacts on the environment, the risks and opportunities posed by environmental trends and the strategies to address them.
- Work with policymakers to craft public policies that encourage sustainable business practices.
- Collaborate with others to create powerful solutions to challenges created by changes in the environment.
At Zurich, we help customers mitigate the risks and understand the opportunities associated with climate change, as well as other environmental challenges. This includes placing more emphasis on risk reduction, preparedness and resilience, in addition to recovery and rebuilding.