Adapt or fail: climate change resilience for organizations

With the growing concern over climate change, organizations are starting to take notice of the risks that come with it. Unfortunately, many organizations are still not fully aware of the consequences of ignoring these risks, which can lead to significant business disruption and financial losses. According to research conducted by Verdantix, “more than half of organizations have less than $1 million to respond to catastrophic events, and 41% of participants stated that they had no budget at all for catastrophic events” (Navigating Climate Threats and Proactive Mechanisms to Achieve Business Climate Resilience, November 2022). With climate change disasters on the rise, it is nearly inevitable that organizations will face a crisis at some point in the near future, and the time to begin preparing is now. 

The current systems and solutions in place for managing climate hazards are often inadequate, and the reliance on traditional insurance has become insufficient. But there’s more to it than just the financial impact—organizations must take the necessary steps to become more resilient to the risks of climate change, keep their people safe, and position themselves to succeed in a dynamic market. 

What is climate resilience? 

Climate resilience refers to an organization’s ability to anticipate, prepare for, and adapt to the impacts of climate change while maintaining essential functions and keeping people and assets safe. It requires strategies, actions, and technology that enable organizations to manage and reduce climate-related risks and seize opportunities to build a more sustainable and resilient future. 

The insufficiency of traditional insurance 

Organizations often rely on insurance providers to provide protection against the impacts of extreme weather events. However, traditional insurance models are becoming less reliable due to the unpredictability of such events. There are often significant delays in the dispersal of funds from insurance companies, or sometimes they do not cover the claim at all. The report found that “over two-thirds of organizations had a loss caused by an extreme weather event in the two last years, with most submitting an insurance claim for these events” (Navigating Climate Threats and Proactive Mechanisms to Achieve Business Climate Resilience, November 2022). These delays or denials of funds can leave organizations unable to react and adapt quickly, leading to business disruption and financial losses. 

Increasing external pressure 

Soon, if they haven’t already, organizations will face significant external pressure in the form of new sustainability regulations. In fact, “74% of participants in the [Verdantix] study highlighted regulatory pressure as a key factor influencing climate risk management budgets” (Navigating Climate Threats and Proactive Mechanisms to Achieve Business Climate Resilience, November 2022). This will require organizations to evaluate their exposure to climate hazards, which means that organizations must take the necessary steps to develop adaptive strategies for risk reduction when dealing with climate hazards due to global warming, ultimately increasing their resilience. Failing to do so will result in further costs and consequences down the line.

Invest in the future, not just the present

Many organizations focus on short-term costs, ignoring the long-term benefits of investing in resilience. It is concerning that “most firms are not planning to invest in critical climate change risk management solutions” (Navigating Climate Threats and Proactive Mechanisms to Achieve Business Climate Resilience, November 2022). This lack of preparedness can lead to significant costs later on. By investing in an adaptive resilience solution now, organizations can save potentially millions down the line. 

An adaptive resilience solution: How to improve climate resilience 

To build resilience in the face of climate change, organizations need to take a proactive approach. Some tangible steps they can take are: 

1. Implementing adaptation measures, such as reviewing and updating business continuity plans and identifying potential supply chain disruptions. 
2. Exploring alternative finance options, such as parametric insurance. 
3. Reviewing and updating risk management processes to ensure they are inclusive of climate change risks. 
4. Investing in new technologies and solutions that can help better predict and respond to extreme weather events.