July 23, 2013
by Tom King and Jeff Sterba
Extreme weather events are on the rise. With 800-plus extreme events worldwide in 2012 resulting in more than $130 billion in damages, adjusting to a “new normal” of a more adverse and costly climate is a challenge for every community and business.
A single event, widespread flooding in Thailand in 2011, disrupted the supply chain for the electronic and automotive industries, swelling overhead for Dell, Cisco, Ford, Honda and other global companies.
While no single event can be directly attributed to climate change, the overwhelming evidence from the international scientific community is that we should expect more of these damaging extreme weather events.
A new study by the nonprofit Center for Climate and Energy Solutions, “Weathering the Storm: Building Business Resilience to Climate Change,” takes a sobering look at how leading global companies are beginning to assess and address these new risks.
As leaders of two of the largest energy and water providers in the country, we know firsthand the increasing toll of extreme weather on the communities we serve. Our customers and communities have been pummeled by one extreme weather event after another.
Following Superstorm Sandy, American Water had to rely entirely on emergency power for up to 15 days in some areas to keep water flowing to approximately 2.8 million customers in New Jersey and New York. Just 14 months earlier, Hurricane Irene flooded out several upstate New York communities and washed away National Grid substations, also knocking out power to 1.4 million customers throughout New England.
The report found that 55 of the Standard & Poor’s Global 100 companies have already experienced the effects of extreme weather or expect to within the next five years. Condemned factories, loss of power and water supplies, rising insurance and raw material costs, and disruption of supply and distribution chains, are just a few of the many brutal business realities.
Yet relatively few companies are systematically factoring these increased risks into their planning and operations. Lacking good data on future risks, they continue to rely on a historical picture of past assessments. As a result, they are unable to accurately identify the level of resilience needed for future extreme weather events.
If we are to continue to responsibly serve our customers and communities, we must learn from recent events and make our companies, communities and the services we provide more extreme weather-resilient.
At American Water, we are improving our resilience to drought, flood and other extreme events by hardening our infrastructure, enhancing backup power supplies, promoting efficient water use, and coordinating more closely with government on disaster response.
At National Grid, we’re strengthening resilience by assessing key vulnerabilities throughout our system, flood-proofing critical equipment, prepositioning more repair equipment and fuel supplies, reducing the risk of downed power lines from fallen trees and limbs, and enhancing communications with our customers and stakeholders.
Modernizing our networks to make them resilient to extreme weather carries costs. But these proactive investments will go a long way in protecting our communities from the far greater costs of frequent, ferocious extreme weather resulting from a changing climate.
As the new report makes clear, government has a critical role to play. Among its suggestions: a national clearinghouse of reliable, localized climate projections to help companies pinpoint and reduce their vulnerabilities. Without the invaluable public-private partnerships between government and business, any effort to protect communities from extreme weather is futile. Breaking down red tape and streamlining the ability of energy and water providers to fulfill their critical role as infrastructure first responders must be advanced.
Our weather is telling us something. It is time we pay heed and get business and government working together to strengthen our resilience to extreme weather for our communities, our economy, and our critical infrastructure.
Tom King is the U.S. president of National Grid, an electricity and natural gas company serving 7 million people in New York and New England. Jeff Sterba is CEO of American Water, a publicly-held water utility serving 14 million people in more than 30 states and Canada. Both companies are members of the nonprofit Center for Climate and Energy Solutions Business Environmental Leadership Council, a group of 34 companies committed to addressing climate change.
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