Value Chain Climate Resilience
Climate variations will have diverse and multiplying impacts, including extreme weather damaging supply chain infrastructure, heat stress on workers and agriculture, and water insecurity for local communities across corporate value chains.
Companies that invest in improved infrastructure, relocate from at-risk locations and adapt products and services will be better positioned to minimize rising costs due to extreme weather and be rewarded with an improved reputation and potential sales growth from new products.
"Ready or not, we are entering an age of adaptation. And we need to be smart about it. Adaptation is not a defeat, but rather a defense against what is already happening. The right investments will deliver a “triple dividend” by averting future losses, spurring economic gains through innovation, and delivering social and environmental benefits to everyone."
Companies that are at the vanguard of adaptation implementation are realizing the benefits of such action. Property insurance company Travelers is exploring new pricing strategies to reward adaptive approaches to climate risk minimization taken by its customers. When insurance companies anticipate and manage climate risks, they can help nudge societies away from poor planning, such as overbuilding in high-risk coastal flood zones, and towards better choices, like building more resilient infrastructure designed to withstand sea level rise.
In the wake of Hurricane Sandy in New York, local utilities provider Con Edison identified a number of essential adaption investments. In 2013, the company proposed changes to its rates in support of $1 billion worth of investments in storm-hardening capital initiatives. The infrastructure strategy had two main priorities: make Con Edison’s assets more resilient to climate-driven failures and reduce the time needed to restore customer service after a disaster. As a result, Con Edison has dramatically increased its flood defenses around vulnerable critical infrastructure. What began as a storm-hardening strategy has now evolved into a comprehensive Climate Change Resilience Plan developed in collaboration with New York City.
Companies who engage in meaningful collaboration with key stakeholders such as customers and regulators will be better positioned to find synergistic resilience measures and adapt to changing regulatory expectations. Early action will also help companies meet investor expectations on risk management as asset managers become increasingly focused on the risks of infrastructure damage and liability.