Manufacturing Climate Change Resilience

Despite progressive action on climate change by both governments and companies, temperatures will still result in 3.3°C of warming by 2100, according to the UN Intergovernmental Panel on Climate Change, which exceeds the 1.5°C threshold to avoid climate change impacts.

It is, however, clear that even with efforts to reduce greenhouse gas emissions we cannot avoid all the consequences of climate change. This creates a number of business risks, which is of particular concern for those in the manufacturing industry who may have premises or suppliers in climate-vulnerable zones.

The threat from climate change creates a number of physical and operational risks from extreme weather events, such as flooding, extreme temperatures, and increasingly frequent storm and hurricane events. For manufacturers who often have their products embedded in complex supply chains or operations across the globe, climate change is a significant risk to business operations.

Building Climate Change Resilience

The global pandemic has highlighted the interconnectedness of supply chains and businesses, and the need to better understand, prepare, and mitigate new exposures. Combine the current pandemic disruption with the approaching storm and flood season, the negative effect on businesses will likely intensify.

An end-to-end catastrophe approach will help organisations build resilience through the following phases:

  • Diagnostic: Profile and prioritise which sites drive Natural Catastrophe (Nat-Cat) risk as this will drive insurance premiums, deductibles, and terms and conditions.
  • Survey and build: Explore an asset-specific resilience assessment and action plan to identify areas in need of further risk mitigation.
  • Implement: Act on the survey/action plan and produce a Hazard Emergency Response Plan. This will also enable insurers to better understand the exposures and rate accordingly.
  • Insurance: Recognise risk and resilience improvements, so that insurers will have a broader view of the risk and provide appropriate pricing, deductibles, and terms and conditions.
  • Monitor: Review and update plans and mitigation strategies based on the changing nature of the risk.

While many businesses are taking action to mitigate the effects of climate change, building resilience to quickly bounce back from shocks, such as storms and floods when they do strike is imperative — particularly as they become more frequent, complex, and unpredictable.

Meet the author

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Anthony Monaghan

Manufacturing and Automotive Industry Leader, UK & Ireland