Are U.S. businesses investing adequately in climate resilience planning? During today's OnPoint, Janet Peace, vice president for market and business strategies at the Center for Climate and Energy Solutions, discusses a new report analyzing the climate resilience investments of S&P Global 100 companies. Peace also gives recommendations on how small businesses can manage risks associated with climate change.
Monica Trauzzi: Hello, and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Janet Peace, vice president for market and business strategies at the Center for Climate and Energy Solutions. Janet, thanks for coming on the show.
Janet Peace: Oh, it's my pleasure, Monica.
Monica Trauzzi: Janet, CCES recently released a report focused on business climate resilience planning. You focused on S&P Global 100 companies. What did you find in terms of overall preparedness.
Janet Peace: Well you know, we looked at the S&P Global 100, we also had a workshop with business leaders, and we did a deep dive on six case study companies. And when you think about the S&P Global 100, we found that 90 percent actually identified climate risk and extreme weather risk as a current or a future business risk to them.
Monica Trauzzi: But that means what then in terms of how they're planning for or mitigating that risk as they move forward with their business strategies?
Janet Peace: And that's one of the things we were really interested in. We wanted to know what companies were saying, what they were doing, what the best practices were. And when we looked at these companies we saw that they were concerned about impact to their facilities, supply disruptions, distribution disruptions, impact on their customers and on their employees. But also the majority of companies actually identified these risks, by and large most companies use business continuity or emergency management planning for these processes, and they're looking backwards. They're looking at what the risks have been in the past and they're not looking forward. So it's primarily kind of business as usual in terms of their management strategies.
Monica Trauzzi: So how do businesses make that leap to planning for the future?
Janet Peace: And that's the question of the day, right? How do they go forward on this? And there are few leading companies really taking that extra step. They're using climate-specific forecasting tools to try to assess those risks, they're coming up with strategies. That's what businesses do, they do scenario planning, they try to identify risk, they manage those risks, they invest in infrastructure. And leading companies that are in this space are looking forward. They're using specific climate-related tools. But the reason some companies aren't doing more is because the information out there is lacking.
Monica Trauzzi: So which companies are providing the best examples?
Janet Peace: Well, we identified six case studies in our report, but we actually looked at a broad spectrum. So we have different examples from different sectors of what companies are doing. And basically the companies that are leading in this area are really taking kind of a four-step process to address these risks. And the first thing they're doing, they're looking across a company and trying to get a general understanding of what these risks are and how they're going to change. So a general raising awareness of the issue across the company. For example, Rio Tinto, the big mining company, they actually brought climate scientists in to talk to senior executives. And now when they're doing their engineering they're thinking about how the risks to energy and water are actually changing. The second thing they're doing is they're, okay, now that we have everybody on the same page about what these risks are, now they're diving deeper into how does risks actually affect their operations. For example, National Grid, after the floods in the UK in 2010, they did a comprehensive assessment of flooding on their substations. So about 130 substations they looked at and they found about 13 that actually needed to be rebuilt or elevated to deal with the threat of flooding. The third thing that we're doing is, okay, now that we've talked about it, we got everybody on the same page, we have identified the risk, now they have to come up with a strategy for managing those risks.
Monica Trauzzi: So are they doing all of this without sort of any blueprint from the government, and to that end, what's in this report for policymakers, how should the government be stepping in on this?
Janet Peace: Companies do identify a role, and we identify a role in our report for government, for sure. Supporting research on climate science is probably the first and foremost. Secondly, companies not only have risks within their own fence, but actually outside the fence gate as well. Think about the roads, bridges, ports. If you can't move your product to your customers, if you can't get your supplies into your facilities, that's a cost, and it's a cost to the economy. So having governments invest in public infrastructure is really important. And finally, companies that are in the regulated sectors, like water, energy, insurance, they told us they really need their regulators to be open to them making the case to invest in more resilience. And finally, we do think there's a role for a public/private partnership here. Think of climate leadership program, the old climate leader program and the climate leadership program that exists today, where there's actually government helping figure out what are the emissions, how to manage those emissions. I think there's a similar program that would be very useful for companies in the resilience space, how to identify what their risks are, take that science, make it more localized, figure out what the impacts to companies are. We think a public/private partnership would be really helpful here.
Monica Trauzzi: So when we talk about supply chains, small businesses are just as important as the big guys, so how should small companies be managing the risks perhaps differently than these larger companies?
Janet Peace: That's a very interesting question. We didn't look at small companies. We looked at the S&P Global 100, and then companies within our business counsel, so pretty big companies. And then we also included the Hartford Insurance Casualty provider. None of those are small. But all these companies use smaller providers. So the infrastructure, again, that's public infrastructure investment is really important even to small companies. And small companies don't tend to have the same resources that a big company would have. They might not have an internal scientist. So again that makes the government provision of this science information even that much more important. The tools to help you assess the risks. Those are the kind of things that small companies, medium-sized companies and even big companies actually really need.
Monica Trauzzi: OK, we're going to end it right there. Thank you for coming on the show.
Janet Peace: Great, thank you, Monica, for having me.
Monica Trauzzi: And thanks for watching, we'll see you back here tomorrow.
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