Climate Action

10 ways business leaders can build resilience in the face of climate hazards

Freight Transportation, Freight Train, Train, railway. Business leaders must protect their companies today by taking climate action — a new report details how and where they should start.

Business leaders must protect their companies today by taking climate action — a new report details how and where they should start. Image: Getty Images

Gill Einhorn
Head of Innovation and Transformation, World Economic Forum
Toby Siddall
Managing Director - Resources UKI Lead, Accenture
This article is part of: World Economic Forum Annual Meeting
  • Reduced corporate profitability, damages to fixed assets, and disruptions to supply chains and societies are escalating due to the breakdown of Earth systems.
  • Businesses that fail to adapt to climate risks could lose up to 7% of earnings by 2035.
  • A new report details 10 recommendations to support board members, investors and C-suite executives to promote business longevity and resilience.

Without climate resilience and adaptation, businesses will face disruption and, ultimately, redundancy. A new report Business on the Edge: Building Industry Resilience to Climate Hazards by the World Economic Forum in partnership with Accenture, provides a comprehensive assessment of risks and resilience strategies for boards, investors, C-Suite executives and operations managers.

The report quantifies the risks to company fixed assets across 20 global industries from seven climate hazards: extreme heat, wildfires, drought, water stress, tropical cyclones, coastal flooding and fluvial flooding. It offers a comprehensive assessment of supply chain risks in five socio-economic systems: agriculture, the built environment, technology, health and financial services.

The first of its kind, the report was commissioned by world-leading scientists from the Earth Decides community, who recognized the need to build a bridge between the latest Earth system science and implications for business — from profitability to supply chain stability and the impacts to the societies they serve.

Have you read?

Business at risk of growing climate hazards

Fixed assets — property, plants and equipment — are compromised by climate hazards. For example, data centres that struggle to cool or crop failures from flooding or drought. As the climate crisis gains pace, businesses face growing fixed asset damage, higher repair and operating costs and productivity challenges.

Climate hazards could drive $560-610 billion of fixed asset losses per year across listed companies by 2035, depending on the emissions scenario, rising as high as $1.1 trillion by 2055. The leading cause of losses is extreme heat. This equates to a drop of between 6.6% and 7.3% in average company earnings every year by 2035. The risk rises to over 20% in the most exposed industries: utilities, telecommunications and travel.

Total estimated fixed asset losses for listed companies under high and low emissions scenarios, by climate hazard (USD billion per year, 2035-2055)
Total estimated fixed asset losses for listed companies under high and low emissions scenarios, by climate hazard (USD billion per year, 2035-2055) Image: Business on the Edge: Building Industry Resilience to Climate Hazards

Recurring annual losses like these would weigh heavily on performance and become increasingly challenging to safeguard against through insurance and offsets. Associated impacts include lower company valuations, disruption to the financial systems we rely on for trade and investment and reduced global social and economic prosperity.

Additionally, the CEO Climate Leaders Alliance has published The Cost of Inaction: A CEO Guide to Navigating Climate Risk, a report highlighting that businesses tend to underestimate the financial impact of inaction in the face of physical and transition risk and showcasing the imperative for action from CEOs.

10 ways to enable resilience and adaptation

Business leaders must act swiftly and collaboratively to decarbonize operations, safeguard nature, build resilient value chains and adapt to climate risks.

The framework below sets out 10 recommendations — across three different categories — and the corresponding business enablers:

Avoid economic loss - Enhance resilience

1. Develop a process and partner ecosystem to understand and map exposure to climate hazard risk at an asset level (including IT and IoT estates).

2. Integrate site-specific continuity, crisis management, and recovery planning to mitigate exposure to water stress and extreme weather events.

3. Address single points of failure by increasing service delivery and supply chain options.

4. Develop contingency plans and practices to maintain workforce well-being and productivity through periods of extreme heat.

Increase revenue, cost savings, and sustainability - Capitalize on opportunities

5. Understand long-term trends and evolve local propositions to capture adjustments in consumption preferences and emerging needs.

6. Pivot R&D to reinvent core products, services, and infrastructure with new materials, formulations, and circular business models.

7. Build climate-smart portfolio strategies to capitalize on climate risk mitigation opportunities as a strategic advantage, alongside deep decarbonization.

Protect communities and ecosystems - Shape collaborative outcomes

8. Work across the value chain with private, public, and grassroots stakeholders to develop system-wide frameworks that elevate economic, environmental, and social interdependencies, engaging in local advocacy and assistance programs.

9. Collaborate across the value chain to realize breakthrough solutions, for instance:

- Circular business models to recycle, reuse, and reduce scarce resources and extend product life.

- Productivity and regenerative practices to increase food yields per unit of land and water that mitigate extreme weather risk.

- Shared industry data and technologies to build and implement early warning systems that identify and mitigate damage.

- Public-private financial models to protect natural assets and communities they support.

10. Take responsibility for tackling biodiversity loss and promote nature-based solutions and business models that help reduce climate-related risks.

Businesses have a unique opportunity and responsibility to lead the adaptation effort, taking a central role in shaping cross-border investment decisions, driving market innovation and supporting policies that enable long-term resilience.

Taking action to deliver real impact

By acting on the following enablers, leaders can start, within 24 months, to take action:

1. Integrate climate change adaptation with net-zero transformation and mainstream climate risk considerations into business decision-making.
Make it the remit of the full C-Suite to understand double materiality, challenge and agree as a foundation to systemic enterprise risk management.

2. Conduct a detailed audit of core capabilities and processes.
Ensure climate resilience and adaptation percolates to every level of the organization and its ecosystem partners.

3. Master the non-financial data for ESG intelligence and strategic foresight.
Understand new risks and opportunities presented by the climate crisis. Invest in the required skills, technology, and responsible use of AI to accelerate insights, decision-making, and portfolio reinvention.

4. Tie climate risk into every capital maintenance and investment decision
Build resilience criteria with cost-benefit analysis into every capital investment decision to taper stranded asset risk whilst promoting socio-economic opportunity at local levels.

5. Sponsor and integrate evolving scientific insight with commercial models
Improve the quality of analysis and interpretation shaping strategic and operational decisions to account for cascading exogenous shocks. Work in partnership with the scientific community to develop more useful insights into potential local impacts in key regions.

Now, more than ever, business leadership must build on net zero and nature-positive goals to foster deep, forward-looking industry and societal resilience and adaptation. The ability of businesses to address emerging climate risks today will directly affect the lives and livelihoods of millions, underscoring the urgent need for credible and proactive action.

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CEOs need to bridge the corporate cost of climate inaction

Pim Valdre and Nicolas Salomon

December 11, 2024

Business on the Edge: Building Industry Resilience to Climate Hazards

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