Extreme Weather and Impact on Global Business

The relentless surge of extreme weather, driven by climate change, is leaving its mark on global business operations and climate-related disasters such as wildfires, floods, and heatwaves are not only endangering lives but also disrupting business continuity on a global scale. The acceleration of climate pollution, largely stemming from the consumption of coal, oil, and gas, is propelling these catastrophic events into more frequent occurrences. In the business world, where financial stability and operational consistency are paramount, companies are grappling with the repercussions of these environmental shifts. As we delve into this discussion, it's important to understand how global business dynamics are being reshaped by climate change and what organizations can do to adapt to this new normal.

According to data from the Copernicus Climate Change Service, the summer of 2024 was the warmest in recorded history. With temperatures soaring across the globe, it was particularly significant in Europe, where the season averaged 1.54°C above the long-term average between 1991 and 2020. This unprecedented spike broke the previous record set in 2022. Furthermore, Copernicus researchers are now suggesting that 2024 may go down as the warmest year on record, as the global average temperature anomaly through July was already 0.27 degrees Celsius higher than the same period in 2023. This trend highlights the increasing likelihood that a global temperature rise will soon surpass critical thresholds, bringing with it devastating consequences for communities and businesses alike.

The World Meteorological Organization (WMO) has also issued warnings about the likelihood of global temperatures reaching new highs before 2025. The possibility of the earth warming by 1.5°C above preindustrial levels is now a very real concern, according to their latest decadal outlook. Such a rise would inevitably fuel more extreme weather events, significantly impacting food security and endangering both human life and business stability. The Met Office of the United Kingdom has echoed this prediction, further amplifying the urgency for businesses to take action in mitigating risks associated with these climatic changes.

Extreme weather events are no longer sporadic, isolated incidents; they are becoming routine occurrences in various regions of the world, each one leaving a trail of devastation in its wake. For example, in Brazil, the state of Rio Grande do Sul faced one of the most extensive climate-related catastrophes in its history during the spring of 2024. Over a ten-day period spanning late April and early May, the region experienced unprecedented rainfall, with parts of the state recording between 500 and 700 millimeters. To put that into perspective, this is equivalent to one-third to nearly half of the average annual rainfall in just a matter of days. The disaster claimed the lives of over 100 people, left 130 others missing, and injured almost 400 individuals. With more than 425 municipalities affected, the scale of the destruction was vast, and the economic fallout was severe.

Meanwhile, the United Arab Emirates was not immune to climate-fueled chaos. In April 2024, the country experienced the heaviest rainfall it had seen in 75 years. The downpours caused widespread flooding, bringing major highways and even Dubai International Airport—one of the busiest international travel hubs—to a standstill. Cars were stranded, and flight delays cascaded, disrupting both business and personal travel across the region. The financial implications of such disruptions, especially in a country that thrives on tourism and international commerce, were significant.

In another part of the world, Canada faced its own climate battle in the form of wildfires. Western Canada has increasingly been experiencing earlier and more aggressive fire seasons, and 2024 was no different. Wildfires, fueled by years of drought and an abnormally low snowpack during the preceding winter, wreaked havoc across the region. The fires forced the evacuation of entire towns and left firefighters struggling to contain the blazes. These fires followed what was already dubbed as Canada’s "Black Summer" in 2023, which saw the country endure its longest and most destructive fire season to date. With over 250,000 Canadians forced to flee their homes and a record number of fires, the impacts were not confined to the country alone. Thick smoke from the fires traveled as far as the United States, affecting air quality in several states. The wildfires also released 2.98 metric tons of CO2 into the atmosphere—an amount equivalent to the emissions of 647 million cars, or four times the emissions produced by planes in 2023.

As businesses navigate this challenging landscape, it is crucial to address the direct and indirect impacts that extreme weather has on operations. Quoting David Brinkley, who once said, “A successful man is one who can lay a firm foundation with the bricks that others throw at him,” we can extend this sentiment to the world of business. Companies today are facing unprecedented challenges, and success is defined not just by profitability but by resilience. For businesses located in areas prone to natural disasters—such as the Pacific Ring of Fire or the hurricane-prone East Coast of the United States—the threat of extreme weather is ever-present. These enterprises must prioritize business continuity planning to safeguard against financial losses stemming from environmental catastrophes.

Understanding the impact on customers is the first step toward resilience. Different business sectors face different challenges during extreme weather. For instance, retail businesses that rely on foot traffic may see a sharp decline in sales during blizzards or heavy rains, unless they can pivot by offering essential items that are in demand during such conditions. On the other hand, businesses that operate primarily online must ensure that they have reliable internet and power backups, as disruptions to these services can halt operations entirely. For these businesses, contingency plans must include alternatives such as backup internet connections and the ability to operate remotely.

Employee safety is another critical consideration. Ensuring that staff members can commute to and from work safely during extreme weather events is not only a legal responsibility but also an ethical one. Striking a balance between maintaining productivity and prioritizing the well-being of employees is challenging, particularly in regions where severe weather is frequent. Businesses can mitigate these risks by cross-training employees, so that essential tasks can still be performed even if key personnel are unable to travel to work. This strategy is similar to preparing for flu season, where redundancy in skills ensures that the business can continue to operate even if several employees fall ill simultaneously.

Another area where extreme weather significantly affects businesses is in the supply chain. Companies that rely on the timely delivery of goods and raw materials face substantial risks when transportation routes are disrupted by natural disasters. For instance, severe floods or snowstorms can halt deliveries, causing production delays and revenue loss. Businesses that fail to account for these disruptions in their continuity plans may find themselves unable to fulfill customer orders, leading to reputational damage. To avoid this, companies must establish relationships with multiple suppliers and have backup plans in place to ensure that operations can continue even when primary supply lines are compromised.

Financial preparedness is key to surviving these disruptions. Extreme weather can lead to substantial financial losses, as demonstrated during the Polar Vortex of 2014, which cost the U.S. economy more than $5 billion. Airlines alone reported losses of $50 million to $100 million due to canceled flights. For businesses operating in regions where extreme weather is a rare occurrence, the financial impact may be less severe. However, companies located in high-risk areas must create financial buffers and invest in insurance policies tailored to weather-related risks to protect themselves from potential income fluctuations. These measures are crucial for long-term financial stability.

Moreover, businesses must invest in protecting their physical infrastructure. For example, in earthquake-prone regions, companies should construct buildings that can withstand seismic activity, while those located near floodplains should build flood defenses. While these investments come with high upfront costs, they are often cheaper than the long-term expenses associated with repairing damage and replacing lost inventory after a disaster. Proactive measures can prevent costly operational downtimes and protect the company’s bottom line.

One of the most effective strategies businesses can adopt is to develop a comprehensive continuity plan that addresses the unique risks posed by extreme weather. This plan should be regularly updated to reflect new threats and should be communicated clearly to all employees. By monitoring weather forecasts and implementing short-term strategies—such as remote work policies or staggered shifts—businesses can minimize disruptions. In some cases, temporary shutdowns may be necessary to protect both employees and the business, but having a plan in place ensures a swift recovery once the weather stabilizes.

Operating a business in areas with high weather risks requires careful planning and proactive strategies to ensure continuity. From understanding customer needs and ensuring safe employee travel to managing supply chain disruptions, businesses must address multiple facets of resilience to survive in this volatile environment. By building strong foundations and preparing for the inevitable challenges posed by climate change, companies can navigate the increasingly severe impacts of extreme weather and emerge stronger on the other side.