Skip to main content

3 things businesses need to know about extreme weather

<p>The changing climate has huge economic implications. Unfortunately, many firms have been slow to appreciate the significance of these changes -- and few have responded at the needed scale.</p>

NOAA called it Meteorological March Madness. Other commentators likened it to science fiction. More than 15,000 daily heat records were broken around the U.S. last month, making 2012 the warmest March since records began in 1895.

Not only was the summer-like spring fact not fiction, but such trends may soon become the new normal as climate change takes greater hold. A long-awaited report from the UN International Panel on Climate Change (IPCC), with input from 220 authors, serves as a stark reminder that the world must brace for more extreme weather and climate events.

The changing climate has huge economic implications. Just ask the farmers and ranchers of Texas, who suffered drastic losses from the devastating 2011 drought. Or ask the global electronic manufacturers, from TVs to car batteries, whose international networks were disrupted by flooding in Thailand last year.

Unfortunately, many companies have been slow to fully appreciate the significance of these changes -- and few have responded at a scale necessary to prepare for the changing climate. So here are three things all businesses need to know about how Earth's climate is changing.

3 things business should know

It's getting hotter: Since 2000, the world has experienced 9 of the 10 warmest years since 1880. And climate change will almost certainly bring more record-breaking temperatures over most land areas, according to the IPCC's Special Report on Managing the Risks of Extreme Events and Disasters to Advance Climate Change Adaptation, released last month. North America, the report warns, will very likely have to adjust to hotter days– and nights. Of the more than 15,000 high temperature marks in March, over 7,500 were nighttime records. Hotter temperatures will likely affect, among other things, food and agriculture production, tourism and human health.

The climate will become more variable: A warming world will heighten some natural variations in climate patterns. In many parts of the world, this will lead to changes in the variability of seasonal rainfall and temperatures, making forecasting and forward-planning more difficult and unpredictable. These changes will have significant implications for many economic sectors, including agriculture, water supply, forestry and urban planning.

Extreme weather is on the rise around the world: The past year has provided a taste of future climate impacts, battering the world with droughts and floods from the Horn of Africa to Colombia, Australia, and the United States. Many regions, especially the tropics and high latitudes, are likely to suffer from more heavy rainstorms that can trigger devastating flooding. Other regions, including parts of central and southern Europe, central North America, Central America and southern Africa, may face longer lasting droughts. Meanwhile, India, the world's fourth largest economy, is projected to face heavier monsoon downpours but over fewer days, making the country susceptible to both more floods and more water shortages.

Impacts on Business

Why specifically should businesses be concerned? First, and most obviously, these changes can have material impacts on a company's operations, from reducing the water reserves needed for production lines, to disrupting the supply of raw materials, or destroying vital infrastructure, such as refineries and transport networks.

In 2011 alone, droughts, floods, hurricanes and other extreme weather cost the U.S. economy at least $55 billion according to NOAA, with 14 events each exceeding $1 billion in costs. One of these was the devastating drought, and associated wildfires, in Texas and Oklahoma, which cost American crop farmers $7.6 billion, on top of around $5.4 billion in losses to the cotton and cattle industries.

Extreme weather events and other climatic changes also affect global supply chains. Disasters that hit manufacturing hubs, like the Bangkok floods, can affect the operations of businesses around the globe. Damage to facilities owned by Western Digital, a leading supplier of computer storage and networking equipment, severely constricted the world's supply of electronic hard drives. The resulting manufacturing slowdown also led companies such as Intel and Apple to warn of profit losses and industry-wide shortages.

The same ripple effect can occur when agricultural regions are hit by droughts or floods. A 2001 drought in the U.S. Pacific Northwest, for example, led to water shortages that squeezed production at Anheuser-Busch, the world's largest beer manufacturer, impacting global prices.

Some companies are starting to wake up to these risks. A 2011 survey of 72 major corporations, for the UN Global Compact, with technical support from WRI, found that 83 percent believed climate change impacts posed a risk to their products or services.

Nevertheless, businesses need to do more to develop comprehensive climate strategies to not only reduce their emissions but also adapt to a changing world. Climate change is no longer some far off threat. It is already happening and the impacts are becoming increasingly clear.

This article originally appeared at and is reprinted with permission from World Resources Institute.

Flooded city image via Shutterstock.

More on this topic