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COLUMN: Is your company ready to deal with unexpected disasters?

by Colin Isaacs
EcoLog, 8/31/2018 11:49:00 AM

The report of the federal government’s Expert Panel on Climate Change Adaptation and Resilience Results, published in late June 2018, focussed on measures the panel considered to be priorities for government action (see also here). The panel’s report was generally aligned with its mandate but, as with so many aspects of our response to climate change, the necessary steps are not matters that government alone can address. 

In 2017 Andrew MacDougall and John M. Valley, Toronto-based partners of the business law firm Osler, published a paper entitled “Climate Change - Why boards need to be proactive”. A top line of this paper was that the “boardrooms of corporate Canada . . . must consider the potential long-term impact, risks and opportunities of climate change for the organizations they oversee.” So far only a few companies have published climate change adaptation plans, and the looming risks arising from climate change are being ignored in far too many boardrooms. 

Although the Osler lawyers are encouraging boards to get involved, there are few frameworks for industrial climate change adaptation planning and no comprehensive national standards. However, the lack of structured approaches will likely not deter insurers (and lawyers!) from seeking out plans when renewing policies, banks from asking for copies of plans when extending loans, and shareholders from asking tough questions during annual meetings. 

The summer of 2018 is more than enough evidence to illustrate to these groups that climate change is not only real but also a looming threat to their investments in industry. 

As a very preliminary first step, I suggest a company might usefully ask the following questions: 

  • Are any facilities at risk from wildfire? Wildfires are not limited to the dry forests of the U.S. Southwest. They can occur anywhere, for example where forests or grasslands are in close proximity to industrial facilities or where residential neighbourhoods become engulfed by fire and spread embers to industrial sites. 
  • Is everyone prepared for possible flooding of a plant? Unexpected torrential downpours, snowfalls and ice storms are a growing part of the new normal. Some industrial plants are built on the floodplains of rivers and lakes. Floodplain mapping can help identify where vulnerabilities exist. In case of major storms, projected to be more likely because of climate change, drains can be overwhelmed and structures may not be able to withstand the new loads of ice and snow. Insurance may or may not cover force majeure events. 
  • Are the homes and families of workers vulnerable to climate change impacts and, if so, what can a company contribute to ensuring protection of its workforce and their families?
  • Are inbound and outbound transportation networks secure from flooding, washouts, and fire hazards? A plant itself may be in a secure location, but if it becomes impossible or very costly to get raw materials in or finished goods out, the most costly consequence may be a significant loss of business. 
  • Are connections to energy resources sufficiently robust? Many electricity networks are vulnerable to breakdown as a result of extreme heat, extreme cold, unusually high winds, or other factors. Fuel oil and natural gas supplies may not be as robust in the middle of an intense storm as they appear to be on a pleasant fall day. Depending on the nature of a business, a loss of energy for heating or cooling or both may be enough to shut the business down for as long as the supply interruption continues. 
  • Are water supplies upon which a plant depends robust enough to survive through extremes of weather? Even if the pipes to a facility are good, is it known where the water comes from and has the possibility been evaluated that there will be an extended interruption of supply from drought or pumping station breakdown? Industry in New Orleans learned the hard way how unexpectedly vulnerable water supplies can be when pumping stations failed in August 2005 during Hurricane Katrina. Water can be flooding the entire community, but if water of needed quality is not being pumped through the pipes then a water shortage will just be an unwelcome addition to the misery. 
  • Have suppliers and customers conducted their own climate risk assessments and put climate risk adaptation plans into force? Everything may be totally hunky dory with a plant, but if suppliers or customers are shut down by climate events then the impact may be just as devastating as if the business had been hit directly. 

Each industrial facility is different, as is the level of acceptable risk, but climate change is already having enough impact that wise boards and managers are taking the time to evaluate the potential risks. 

It may be next year, or the following year, or maybe even the year after that, but sooner or later shareholders and investors will start asking questions about a company’s readiness to deal with unexpected disasters. It is not whether one believes that climate change is caused by human activity. Weather patterns are changing, in some cases quite dramatically, and many investors are likely to begin to shy away from companies that they perceive to be ignoring the looming risks.

Colin Isaacs is a scientist and analyst with CIAL Group who focuses on sustainable development for business. He has been involved in undertaking and reviewing a number of LCA studies. He can be reached at (416) 410-0432 (phone); (416) 362-5231 (fax); and colin@cialgroup.com (e-mail).

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