The financial impact of climate change on organizations

The costs associated with climate change are mounting, with significant financial losses affecting organizations across industries. The financial impact of climate change is expected to become more extreme with time. Without proactive measures in place to protect organizations, the costs alone could devastate businesses.

According to the 2022 Navigating Climate Threats and Proactive Mechanisms to Achieve Business Climate Resilience report commissioned by Everbridge, “record numbers of severe weather events attributed to climate change—such as hurricanes, droughts, extreme temperatures, and flooding—have resulted in more than $2.2 billion in damage to physical assets in the US alone.” Climate-related disasters are only increasing, which is in turn increasing the costs associated without proper mitigation steps.

The financial impact of climate change on organizations

The cost of climate change on organizations is multi-faceted, and the consequences can be severe. Extreme weather events such as floods, droughts, and hurricanes can damage physical assets and disrupt supply chains. The cost of replacing damaged equipment and inventory, along with the costs associated with repairs, downtime, and lost productivity, can significantly impact a company’s bottom line. In addition to the direct costs, businesses may also face legal liabilities and reputational damage.

For example, in February 2021 a severe winter storm hit Texas, causing widespread power outages and water shortages. This resulted in disruptions to various industries, including oil and gas, chemical, and manufacturing, and the estimated cost of damages was over $10 billion. The storm forced companies to halt production, leading to lost revenue and supply chain disruptions. In addition, companies faced legal liabilities and reputational damage due to their inadequate preparation and response to the extreme weather event.

The impact of climate change on supply chains can also be significant. As climate change affects agricultural yields, energy availability, and transport infrastructure, organizations that depend on global supply chains may face disruptions and increased costs. This can lead to increased prices for consumers, decreased demand, and lower revenue for businesses.

Real estate and infrastructure assets are also at risk due to climate change. Rising sea levels, increased flooding, and extreme weather events can damage properties, resulting in loss of property value and repair costs. In some cases, businesses may be forced to relocate or shut down operations entirely.

For example, in July 2021, parts of Germany and Belgium experienced extreme floods, leading to significant damage to infrastructure, homes, and businesses—not to mention the loss of life. The floods caused disruptions in the supply chain, with roads and railways blocked, and power outages affecting the functioning of businesses. Chemical factories were shut down due to the floods, leading to a shortage of raw materials for other industries. The economic impact of the floods was estimated to be billions of euros, with businesses facing significant costs for repairs, lost production, and lost revenue. This event highlights the need for organizations to consider the potential impacts of climate change on their supply chain and develop proactive measures to mitigate the risks.

The consequences of climate change are not just environmental but also economic and social, with far-reaching effects that are being felt by individuals, businesses, and governments alike. Urgent action is needed to mitigate the effects of climate change, including implementing proactive measures to protect organizations and individuals from the financial impact of climate disasters.

Steps organizations can take to mitigate the risks

To mitigate the risks associated with climate change, organizations can take several proactive measures. One of the most crucial steps is to assess the risks and vulnerabilities of their operations and supply chains. This involves identifying areas that are most at risk and developing contingency plans to manage disruptions. Organizations can also reduce their carbon footprint by adopting sustainable practices, such as energy-efficient processes and renewable energy sources.

Investing in resilient infrastructure and real estate can also help businesses protect themselves from the impact of climate change. This includes designing buildings and properties that can withstand extreme weather events and protect assets. Another key strategy is to build a resilient supply chain by diversifying suppliers, developing local sourcing options, and investing in technology that can monitor supply chain risks.

By taking these steps, businesses can proactively protect themselves from the impact of climate change and create a more sustainable future. It’s not just the right thing to do for the environment and society, but also for a business’s bottom line.

Solutions for your organization

The financial impact of climate change will become more extreme with time, and without proactive measures to protect organizations, the costs could cripple organizations. The evidence is clear that the cost of climate change is significant and growing. It is imperative that organizations take action now to mitigate the effects of climate change and build resilience to protect their people, products, and supply chains.

Everbridge provides organizations with a platform and a comprehensive suite of tools that enable them to prepare for, respond to, and recover from any climate disaster, reducing costs and keeping people safe. With our public safety, digital operations, people resilience, business operations, and smart security solutions, the Everbridge critical event management platform provides organizations with the tools and capabilities needed to reduce financial vulnerabilities and keep organizations running.

Download the complete white paper “Focusing on climate resilience can reduce financial vulnerabilities for organizations” to learn more about how Everbridge can help your organization be successful.