Economic damages from weather-related disasters climbed to near-record levels in 2012, with over 800 major events worldwide causing an estimated $130 billion in losses. Munich Re reported that it was the third-costliest year on record behind 2011 and 2005. Many of the most costly events occurred in the United States, including the devastation caused by Superstorm Sandy and the widespread, prolonged drought in the Midwest. Companies and their stakeholders—governments, employees, communities and customers—are increasingly concerned about the costs associated with more frequent and intense floods, droughts, hurricanes and wildfires. Many companies are taking steps to begin to enhance their resilience to these growing risks. However, companies traditionally have planned based on past weather events, and few have attempted to integrate the increasing risks associated with the changing climate into their planning and operations. Initial efforts to do so suggest that barriers and uncertainties often stand in the way, preventing companies from achieving resilience against the rising risks of climate change impacts.
This report, Weathering the Storm, provides an in-depth look at the ways multinational companies are beginning to assess and address the risks of extreme weather and other climate change impacts. The companies examined play strategic roles in the global economy in a wide range of sectors including banking and financial services, consumer goods, healthcare, information communications, manufacturing, and materials. The report is based on two complementary lines of research:
- A comprehensive review of the perspectives and activities of companies listed in the Standard and Poor’s (S&P) Global 100 Index, based on their reporting to the Carbon Disclosure Project and in their corporate sustainability reports and annual financial filings; and
- In-depth case studies of the practices and experiences of six companies in diverse sectors: American Water, Bayer, The Hartford Group, National Grid, Rio Tinto and Weyerhaeuser.
Together, these sources provide a detailed snapshot of the state of resilience planning among a cross-section of global companies: how they perceive and talk publicly about their climate-related risks, the steps they are taking or planning to take, and the barriers that stand in their way. The research in this report also establishes a baseline that can be used to monitor risk management activities related to climate impacts over time.
Broadly speaking, the research reveals that while the vast majority of companies recognize risks from extreme weather and climate change, and many see these risks in the present or near term, uncertainty about the precise nature, timing and severity of climate impacts often inhibits investment in resilience beyond “business as usual.” A few leading companies are taking steps to address climate risks where they see significant opportunities to become more efficient, reduce costs, or provide greater value to customers—in other words, where there is a clear business case to do so. By and large, however, the business response thus far is largely a continuation of existing practices based on a historical picture of past risks, and often fails to adequately consider changing climate and weather conditions. Thus, the most common strategy for addressing climate-related risks leaves most companies without the resilience they need to weather future physical impacts of climate change.
Beyond these broad conclusions, the report outlines a set of more detailed findings on prevailing attitudes and practices among S&P Global 100 companies. And, to help encourage and inform stronger resilience efforts, it lays out a four-step framework for managing climate risks that incorporates the emerging best practices from case-study companies already working to prepare for the very likely prospect of increasing extreme weather and climate change impacts.