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Chemical makers must boost their resiliency — that is, their ability to withstand, recover from and continue to prosper in the face of an increasing number of natural and man-made disasters. Natural disasters, including those due to climate change, come in both acute and chronic forms. Acute shocks are storms, hurricanes, tornados, earthquakes and floods, while chronic stresses are longer-term impacts such as droughts or rising sea levels.
The increasing trend of natural disasters since 1980 is irrefutable. Figure 1, developed by Munich Reinsurance America, New York City, clearly shows this. That company noted 2020 was a record hurricane season, with more storms in the North Atlantic than ever previously recorded. Worldwide disasters accounted for losses of $210 billion, with only 39% covered by insurance. The United States incurred 45% of these losses.
The United Nations Office for Disaster Risk Reduction (UNDRR), Geneva, Switz., reported that 7,348 disasters took place from 2000 to 2019, a 74% increase over the previous 20 years. Financial losses during 2000–2019 approached $3 trillion! Moreover, the global trend of population migration to major metropolitan areas puts more people at risk to the impact of disasters.
To counter this trend, chemical manufacturers must consider adaptive actions to reduce risks today and prepare for further changes in the future as well as mitigative moves to address the root causes of climate change (e.g., atmospheric greenhouse gases and current industrial emissions) to secure long-term solutions. This article highlights steps a company may take to reduce its risks from climate change and resulting disasters — with an emphasis on adaptation.
Improving resilience by implementing adaptive actions to climate change should be a strategic priority. Facilities operating in high-risk locations may become undisclosed liabilities to shareholders, with significant potential impact on financial performance. This also is true of members of the supply chain that provide essential supplies and services.
The Financial Stability Board, Basel, Switz., an international body that looks at global financial vulnerabilities, set up a taskforce in 2015 to develop voluntary, consistent climate-related-risk disclosures for use by corporations. That taskforce in 2017 outlined a framework for reporting climate-related financial information. In 2010, the U.S. Securities and Exchange Commission (SEC), Washington, D.C, published guidance for public companies to disclose the impact of climate change on their business and the costs of complying with climate-related laws. There is speculation the Biden Administration will do more to have companies disclose potential liabilities from climate-related events.