The State of Green Business: Coping with Mother Nature's fury

One of a series of excerpts from the 2013 State of Green Business report (download here).

Risk and resilience haven’t typically been part of most companies’ sustainability vocabularies. But Mother Nature’s fury is changing that, as droughts, floods, hurricanes and wildfires disrupt companies and their supply chains.

Around the world, extreme has become the new normal. Weather was a major factor for many companies in 2012, connecting the dots between sustainability and risk. At the top of the list was Hurricane Sandy, which ravaged the U.S. East Coast in October. It wasn’t necessarily the planet’s biggest storm last year, but its location — in the heart of a heavily populated center of global finance, commerce and media — brought forth a relative tsunami of media attention, compared to an equivalent storm in, say, Bangladesh.

Sandy shined a light on how well companies, cities and communities in one of the world’s richest countries were prepared to cope with an anticipated rise in turbulent, even violent weather, most likely linked to a changing climate. The design and resilience of everything from roads and traffic lights to gas stations and hospitals came under scrutiny — at least for a while. And the cost to business, in terms of disruption, relocating and rebuilding, was in the tens of billions of dollars.

But Sandy was far from the only weather event that upended business and society.

Last year saw drought conditions in 56 percent of the lower 48 United States, the worst since the 1950s. Wildfires consumed close to 10 million acres across the U.S. mainland. In the Philippines, more than 300,000 people lost their homes when Typhoon Bopha struck in December. Fifty major wildfires burned in central and southern Chile, fueled by intense heat, dryness and high winds, causing thousands to evacuate, creating millions of dollars in damages, and destroying hundreds of homes. A severe drought impacted more than 1,000 towns in Brazil, leading to “water wars” and massive livestock deaths.

Europe suffered its worst cold snap in a quarter-century, killing more than 650 people, the majority in Russia, Ukraine and Poland. Record-breaking flooding in southwestern Queensland and northern New South Wales in Australia led to the isolation of entire towns and the abandonment of thousands of homes. Almost 5 million people were evacuated in China due to the rains and flooding, resulting in losses of $2 billion.

Globally, five countries, including the United States, set heat records in 2012. None set cold records.

The economic toll from such events is growing, say experts. In the U.S., the National Oceanic and Atmospheric Administration calculated 11 extreme weather and climate events that reached the billion-dollar threshold in losses during 2012. While that’s down from 14 such events in 2011, the economic losses grew, from $60 billion in 2011 to $100 billion from Sandy alone. That makes 2012 the second costliest in 30 years, trailing only 2005, the year of Katrina. The trend isn’t likely to abate; in fact, it could worsen in lockstep with the growing effects of climate change.

It’s not just the weather. Sustainability and risk issues rising up through investor communities, from so-called socially responsible investors to mainstream pension funds and university endowments, Wall Street stock analysts and the regulatory agencies that oversee publicly traded companies. All are concerned with the risks facing companies in a world of constraints related to the availability of energy, water and other resources; where the toxicity of products or manufacturing processes present perils all the way up the supply chain; and where climate shifts can disrupt the availability of raw materials and threaten the well-being of employees and customers.

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