![]() ![]() Earlier this year, for example, the Metropolitan Water District of Southern California imposed mandatory water cutbacks on 6 million people amid extreme high temperatures, urging the public to conserve water and reduce electricity use. Meanwhile, the frequency and severity of these perils are growing with each year.Ĭlimate change is also taking a toll on the communities where businesses operate, affecting their employees and customers. Many businesses have underestimated the likelihood of such events and their exposure to them, relying on a narrow set of risk-transfer tools (e.g., insurance or financial hedges) rather than a broader set of strategic and operational levers for building resilience. Insurers will incur $50 billion to $75 billion in losses due to Hurricane Ian, a 1-in-1,000-year rain event, and yet just the most recent in a series of catastrophes pressuring the insurance market. Constellation Brands had to halt construction of a nearly completed, $1.4 billion brewery in Northern Mexico in early 2020, in response to increasing drought and water availability concerns in the region. ![]() This summer, global giants Apple, Intel, and CATL suffered a weeklong shutdown of most of their production facilities in Sichuan, China, where a generational drought stalled multiple hydropower plants. The business impacts of extreme natural events are here now, and growingĬompanies are already experiencing the effects of climate change across their end-to-end value chains. As climate challenges mount, adaptation will be an increasingly important source of competitive advantage for every company. And they think broadly and strategically about resilience and adaptation-treating this work not purely as a risk management exercise but as a chance to assess how climate change will impact their growth, operations, and engagement with stakeholders over the long term. They systematically integrate new predictive analytics tools into corporate planning processes. Leaders are also finding that many corporate planning processes, such as those covering engineering standards and insurance availability, are premised on “normal” weather patterns and have not been adjusted for a different climate in the future.Īdaptive companies take an end-to-end view of climate impacts across the value chain, not just within their four walls but also upstream and downstream of the business. Customers are impacted by climate change as well. On the horizon, they see that natural resource availability may be constrained, and critical facilities-whether their company’s own or those of key suppliers-may be severely damaged or out of operation for extended periods. Looking ahead, corporate leaders are seeing more risk than ever before and are asking how to be ready to survive and thrive in a changing climate. With the world well off track of the goal to limit warming to 1.5 degrees Celsius, and with potential climate tipping points approaching, such events are likely to intensify over the coming decade. While it is challenging to tie specific weather events to long-term climate trends, it’s clear that weather-related disasters have increased five-fold in the past 50 years and that the number of 1-in-500-year weather events is growing. In 2022, we’ve seen everything from unprecedented floods in Pakistan to generational droughts in Europe to severe drought in China. Despite decarbonization efforts, the effects of climate change are here now and will grow through this decade and beyond.Įxtreme weather events have become a distressingly regular occurrence. ![]()
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