Why Climate Change Needs to be Part of Your Global Infrastructure Strategy

Even under typical conditions, Canada and Bangladesh are two nations where weather can have a big impact on business and everyday life: extreme cold in the former and tropical heat in the latter. Climate change is intensifying this impact—and business risk—even more.

In Canada, for instance, climate change is expected to bring changes in weather like more storms. Mountain Equipment Co-op in Vancouver anticipates that these changes will make its distribution center and supply chain vulnerable to road closures due to flooding, landslides, and snowstorms, and its store floors susceptible to flooding.

On the opposite side of the world, rising seas may cause the nation of Bangladesh to lose up to 10% of its territory to the ocean in the next few decades, displacing as many as 18 million people. In the transport and shipbuilding industry, M/S Rocky Dockyard is preparing itself for the impacts of rising temperatures, erratic and heavy rainfalls, salinity, and more frequent storms. After conducting a cost-benefit analysis of different adaptation measures, the company is prioritizing navigation training and equipment to adapt to rougher weather and silted waterways, and improved anti-corrosive paint to increase the lifetime of its ships.

Climate change ascends as a business priority

Rising temperatures, natural disasters like floods, and other climate-related events are impacting infrastructure worldwide—for countries, cities, and individual businesses.

A recent survey by the Casualty Actuarial Society ranked climate change as the number one risk faced by the insurance industry. And 72% of companies who submitted information to international non-profit CDP say they now integrate climate risk into their business strategy.

What does this mean for businesses with international operations? Climate change vulnerabilities, risk, and preparedness must be part of any new market assessment—and part of decisions and investments to keep current infrastructure, like the stores and ships mentioned earlier, up to speed.

How companies are assessing—and preparing—their infrastructure

Climate change impacts are a necessary element of any new market feasibility study: In markets where a company already has a presence, infrastructure resilience is a necessary—and valuable—investment. According to the World Economic Forum, an average of 3% of additional capital investment is required to build resilience into infrastructure, yet every dollar invested in resilience generates four dollars of economic value.

To achieve this awareness and resilience, global companies are using sophisticated models and methodologies and seeking specialized expertise.

M/S Rocky Dockyard, mentioned earlier, is applying a methodology developed by a German organization, Climate Expert, to assessing its risk and identifying adaptation measures. And

roughly half of companies surveyed by CDP survey are using or planning to use scenario analyses to assess climate risk. One tool that’s been developed for this purpose is the HazAtlas by Danish engineering and consultancy company Ramboll, which can pinpoint vulnerabilities like the risk of flooding at a specific shipping terminal.

“It’s really easy to make the point that as our climate changes, we’re getting increased damages from events like flooding and wildfire,” consultant Kaitlyn Lieschke told NPR. “This tool helps people prepare for the future.”

Zurich Insurance Group notes that the insurance industry has developed sophisticated natural catastrophe models to assess the impact of physical risk on many regions and industries—with a caveat. “Current models are generally designed to reflect current climate conditions. It’s important for businesses to incorporate the latest climate and natural catastrophe modeling capabilities to better understand the impact of climate change on physical risks.”

Steps your company can take

Analysis, adaptation and mitigation for climate change is an evolving area and can feel overwhelming. To improve your odds of success:

  • Focus: Prioritize the facilities, locations, and products that are most important to your business.
  • Localize: Every climate change assessment and strategy is different. Tailor best practices to the on-the-ground realities of your international operations.
  • Look at the big picture: Integrate climate change into your overall plans for risk management and sustainability.

Ready to get started?

Specialized consultants and advisors can direct you to tools and resources for assessing climate change risk and developing a resilience strategy. For more information, contact us.