From the record-breaking Black Forest wildfire in Colorado to record-low water levels for the Great Lakes, extreme weather events seem to be more the norm of late than the exception. Earlier this month, NOAA ranked 2012 as the United States’ second most costly year for damages from extreme weather events.

The increasing financial risks associated with extreme weather have not been lost on the business community. Companies have always had to navigate a changing business environment. But now they face a changing physical environment, as climate change leads to higher sea levels and more frequent and intense heat waves, droughts, wildfires, and downpours.

A new C2ES report released today, “Weathering the Storm: Building Business Resilience to Climate Change,” takes a comprehensive look at how major global companies view these rising risks and what they are beginning to do to better understand and manage them. 

Over the past year, we reviewed the public disclosures of S&P Global 100 Index companies related to climate impacts and resilience, and conducted six case studies of practices at American Water, Bayer, The Hartford Group, National Grid, Rio Tinto, and Weyerhaeuser.  The resulting report examines how companies perceive their climate-related risks, the steps they are taking or plan to take, emerging best practices in building business resilience, and what’s standing in their way.

We found that 90 percent of the S&P Global 100 companies identify extreme weather and climate change as business risks, and most have experienced climate impacts or expect to within 10 years.  Top concerns include damage to facilities, increased insurance and commodity costs, loss of water and power supplies, and disruption of supply and distribution chains.

Yet, despite growing awareness of these rising risks, relatively few companies are investing in resilience beyond “business as usual” because they lack sufficient information and tools to help them relate these risks to their business operations.

To help overcome such barriers, the report recommends that businesses and governments work to:

• Create a clearinghouse for reliable, up-to-date data and analytical tools. Companies need user-friendly, localized projections of climate changes and models that link projections to impacts germane to company operations.
• Invest in public infrastructure resilience. Companies rely on public resources, including roads, bridges, and ports, to get their goods and services to market and need these resources to withstand extreme weather and climate impacts.
• Consider resilience needs where state regulations apply. Companies in regulated sectors such as water, electricity, and insurance need regulators to be forward-looking and open to companies making the case for more spending and appropriate policies for resilience.
• Set up voluntary, public-private partnerships. Bringing together government and business expertise will improve resilience planning.

Governments have begun to step up their resilience efforts. In response to Hurricane Sandy, New York Mayor Michael Bloomberg announced a comprehensive $20 billion plan to make the city less vulnerable to future storms by erecting flood barriers, expanding the capacity of storm-water systems, preventing flooding of subways, and so on.

In the speech announcing his climate change action plan, President Obama called for federal agencies to support local investments in climate resilience and convene a task force of state, local, and tribal officials to advise on key actions the federal government can take to help strengthen communities. A new Department of Energy report warns of climate-related risks to our energy system and outlines measures to reduce vulnerability.

Businesses must step up their efforts as well. Tomorrow we’ll focus on our report’s findings on the steps leading companies are taking to better understand and manage their growing risks from a changing climate.