Looking for a silver lining behind the gloomy clouds of climate change? One positive thing you might say about it is that climate change has stimulated private-sector decision-makers to focus on the vulnerabilities of their facilities and operations to the effects of extreme weather.
A recent report on Physical Risks From Climate Change highlights climate-related events that can affect companies. Prepared by Calvert Investments and co-sponsored by the aid organization Oxfam America and Ceres, a consortium of institutional investors, the report discusses such forces as “increasing temperatures, rising sea levels, changing weather patterns, and more frequent or intense droughts, floods, and storms” and how they can “pose serious challenges for company facilities, supply chains, employees, current and potential customers, and the communities on which companies depend.”
Some critics argue that the effects of climate change are uncertain and possibly over-exaggerated. Even if the worst apocalyptic scenarios never arise, it’s undeniable that businesses are affected by extreme weather, and this is particularly true for manufacturing and industrial firms, which produce physical goods, rely heavily on natural resources, materials and components, and run extensive and vulnerable physical facilities.
Building Organizational Resilience
Given the many and varied ways companies can be affected by climate disruption, one of the most important concepts emerging in the field of business continuity is “organizational resilience,” which the Business Continuity Institute (BCI) defines as “the capacity of an organization to plan for and adapt to change or disruption, through anticipation, protection, responsive capacity, and recoverability.”
“This whole topic of resilience is at the heart of the climate challenge,” Scott Griffin, chief sustainability officer (CSO) of industrial packaging firm Greif, recently told me in an interview. Greif believes that building a resilient enterprise requires working outside of the company’s boundaries. “Collaboration is critical,” Griffin said. Every company relies on the surrounding society in order to function. “We believe firmly that the best way forward to respond to events is to have public-private partnerships and collaborate effectively.” Greif works with governments, non-governmental organizations (NGOs), other companies, and local communities to build resilience in the more than 50 countries where the company operates.
As a practical matter, many companies are taking measures to beef up their physical facilities to better withstand extreme weather events. Phil Samson, who leads the U.S. business continuity and resiliency practice at professional-services firm PricewaterhouseCoopers (PwC), tells me this can involve things like “engineering the weight load on roofs” to accommodate potential increases in rainfall. “The service life of a facility can easily be 30 years,” so the wise course for engineers might be to “go ahead and model it much further for the change in rainfall — it may be a little more expensive to build it that way now, but it’s covered, and it won’t require a retrofit later.”
Andrew Sachs, vice president for government services at Witt O’Brien’s, a consultancy in disaster and crisis management, told me in an interview that such mitigation efforts “don’t always have to be expensive.” For example, strengthening a facility to hold up under high winds can be simple: “Sometimes an extra $50 worth of ten-penny nails can be enough to hold a roof on. Hurricane straps that anchor to the foundation running up through the walls can connect to the roofing system and hold the roof down.”
Risks “Outside the Fence Line”
Sachs thinks it’s over-simplifying to focus just on the company’s own facilities. “Your business is not only what’s inside your fence,” he warned. “The problem is, much of the infrastructure your business relies on — transportation, power, the workforce — is all outside the fence line.”
Sachs pointed to the effects of Superstorm Sandy as an example. The actual storm damage was all very close to the coast, he said, “however, two-thirds of the state was out of power for 10 days. It basically shut down industry in that state for more than a week.” Many businesses make the mistake of “looking at what is in their direct control, and that becomes their universe for planning.” But in reality, planning for climate disruption requires engaging with the work force, suppliers, the community and government agencies.
The Calvert report asserts that “Virtually every sector of the economy faces risks from the short- and long-term physical effects of climate change.” Such impacts can affect a company “across the entire business value chain, from raw materials through to the end users.” The report discusses examples of climate effects as they can apply to various industries. Some impacts are fairly obvious, such as damage to infrastructure and facilities from storm surge and rising sea levels, increased wildfires, exposure to disease, and water scarcity. Other impacts might be less direct but nonetheless real, such as:
- Fluctuating availability, quality, and cost of materials and supplies
- Disruptions in the labor force and distribution networks
- Changes and instabilities in the availability and demand for electric power and fuels
- Disruptions in transportation routes and port operations
Managing such complex and wide-ranging risks, Sachs said, requires business continuity planning. But given the time frames involved, he stresses, “when you do business continuity planning, you do it not just for today but for 25 years from now.”
Is It Ever Okay to Let a Facility Fail?
As a counterpoint to all the talk about strengthening roofs and building higher seawalls, not everyone thinks the answer to climate disruptions is ever-stronger facilities. University of New Hampshire civil-engineering professor Paul Kirshen thinks sometimes the best solution is to let systems fail, but in a controlled way. Kirshen tells Jennifer Weeks of The Daily Climate that “We’ve got to stop tying designers’ hands. Conventional civil engineering design can be more creative.” Building an indestructible seawall might not be the best solution to protect a facility from storm surge. The better solution might be to let the water come in but find a way to minimize the damage through controlled flooding. As an example, Weeks writes, “A community might opt to build a dam designed to contain up to a 100-year flood, then develop a comprehensive evacuation plan for the surrounding area in the event of a more severe flood.”
In line with this thinking, Sachs cautioned that good disaster preparedness has to take place with consciousness of priorities. “Businesses tend to think that everything they do is critical,” he told me, “but in reality that’s not the case. Certain things will cause massive losses if shut down for five minutes. Other things will cause minor losses if they’re out for a whole week. Businesses need to be able to really decide the level of criticality of the various functions that go into their business. There isn’t enough money in the world to do everything. You have to figure out what the priority is.”