Allan Britnell
Corporate Risk
Companies know climate change is real | Canadian Insurance
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Companies know climate change is real

It's hard to run a ski resort without any snow

It’s hard to run a ski resort without any snow. And golf greens have to stay green if they’re going to stay open. With various climate change models predicting global temperatures could rise from four to 40 degrees by 2100, Killington Resort in Vermont has good reason to become self-sufficient in terms of its water supply.

The company has negotiated the right to draw water from a nearby reservoir to fuel its snowmaking equipment. It’s pulled from the lower parts of the lake, where it’s cooler, requiring less energy to convert the liquid into white powder. They’ve also been recycling water from bathrooms in six base lodges, conserving as much as 35,000 gallons of water a day.

Yet even these baby steps put Killington ahead of the curve. “The ski industry as a whole, even its most progressive members, have not taken steps exclusively aimed at adapting to climate change,” says Auden Schendler, vice-president of sustainability for the Aspen Skiing Company in Colorado. He believes that many ski operators actually deny the science. But that’s changing, he says, due to the National Ski Area Association’s Climate Challenge. In the program’s first year, 2011, only eight American resorts reduced 295 metric tonnes of carbon, but last year 30 resorts reduced 1,700 tonnes.

It’s not up for debate anymore; leading scientists have concluded the climate is changing, perhaps irreversibly. While some businesses—ExxonMobile for example—have been well-documented in their efforts to debunk and debate the reality of climate change, more than 1,000 companies, ranging from small mom-and-pop operations to corporate giants including Disney, Nike and Apple, have signed the Ceres Climate Declaration. The declaration says in part, “We cannot risk our kids’ futures on the false hope that the vast majority of scientists are wrong.” And a small number of proactive businesses are actually doing something about it.

In most cases, any action backing up the acknowledgement that climate change is a reality tends to take one of two routes: buying carbon offsets and/or implementing a variety of “green” initiatives. The latter option is the easy route, as many eco-friendly measures have the added benefit of reducing operating costs. Green roofs reduce heating and cooling expenses, while harvesting and recycling water helps cut utility bills. In some cases, the long-term savings offset the initial capital cost and more. Adaptation—actually changing how and where a company operates—is the harder sell.

Move it or lose it

The decision to do anything about climate change risks is more often that not a reactive one. “It’s management by disaster,” says Blair Feltmate, head of the Intact Centre on Climate Adaptation at the University of Waterloo and chair of the Climate Change Adaptation Project Canada. Companies “typically wait until a disaster happens twice. If it happens once, they see it as a one-off affair. But when they see it twice….”

Entergy Corporation, a New Orleans-based utility company with facilities across the southern and eastern U.S., was hit with a one–two punch by hurricanes Katrina and Rita in August and September of 2005. Numerous facilities were knocked out of commission, including two natural gas plants that were completely submerged, more than 400 substations taken offline, and staff was even turfed out of corporate headquarters for 10 months after the levees broke.

The company took a hard look at the potential implications of climate change and calculated that the Gulf Coast could see cumulative losses of $370 billion U.S. between 2010 and 2030. The threat of rising seas levels helped lead to the decision to move a key data centre out of New Orleans—much of which actually sat below sea level—to Little Rock, Arkansas, as well as move a transmission center to Jackson, Mississippi.

Johnson Controls, a Milwaukee-based multinational conglomerate that makes everything from car batteries to HVAC systems, has also learned from Katrina, making the decision to move several facilities out of low-lying areas to higher ground elsewhere in Louisiana and Texas. In an article available online, “Position on Energy and Climate Change,” the utility states bluntly: “At Johnson Controls, we acknowledge the scientific consensus that the Earth is warming, and that it is at least partially caused by the actions of man.”

Superstorm Sandy, which submerged much of lower Manhattan in October 2012, was a half-billion-dollar wake-up call for energy production and distribution giant Consolidated Edison. While not explicitly admitting it’s a climate change adaptation program, Con Ed is investing a billion dollars over four years in its New York City infrastructure to protect the city from, in its own words, “the next storm of the century,” acknowledging “it’s not a question of if, but when.”

The measures include installing more than a mile’s worth of concrete floodwalls to protect critical infrastructure, installing 180 watertight flood doors on facilities, and redesigning their underground electrical networks so that flooded areas can be isolated, leaving power running in areas at higher elevations. They’re also installing power lines and poles that will be able to withstand downed tree branches and winds up to 175 km/h.

In a report by UK Trade & Investment, Adapting to an Uncertain Climate: A World of Commercial Opportunities, Andrew Brown, climate change and environmental performance manager for Anglian Water, says the implications of climate change “cover almost every element of our business.” As a result, Anglian Water is installing flood-prevention measures at 20 of its facilities across the UK. A risk assessment also identified regions where customers were heavily reliant on a single source for their water supplies. More than $63 million has been invested to create emergency reservoirs.

Port and Fine Wine

Rising sea levels have obvious implications for port authorities. After assessing that forecasted models could see earnings drop by three to seven percent by 2030, Colombia’s Muelles el Bosque invested $10 million in flood-protection measures.

Closer to home, last year’s flooding in Calgary prompted property management company Bentall Kennedy to modify plans for a building under development. Changes include elevating sump pump controls and diesel storage for the emergency generator, relocating mechanical equipment to an area between the first and second floors, and ensuring that the only possible entry point for flood waters is the garage entry ramp, which can be sandbagged in the event of flooding.

Sometimes the measures simply require planning for the future, without immediately doing anything about it. Mining firm Total E&P Canada designed a tailings pond for its Joslyn North mine so that additional raised barriers could be easily added in the event of future flood risks.

Adaptive design isn’t limited to commercial projects. In the past, residential real estate developers may have simply plowed over wetlands found on their project sites. But now the Minto Group, based in Ottawa, is at least one example of a large developer that’s recognized wetlands’ ability to act as a sponge that absorbs excess rainfall. Instead of burying wetlands, the company builds around them—and uses the natural spaces as part of the development’s marketing appeal, as seen in its Isles of Collier Preserve in southwest Florida.

In some cases, the wise decision is to not build at all. TransAlta, an energy company that has operations in Canada, the U.S. and Australia, did just that. With record-low water levels already impacting generating capacity at facilities in the Canadian Rockies, the company decided to shelve a power project that would have generated energy from steam in the southwestern U.S. out of concerns over the long-term availability of water rights.

At the other end of the spectrum, few agribusinesses seem to be doing much so far over severe drought. An exception is Spanish winery Torres. Speaking at a TEDx conference in London in 2012, company and family head, Miguel Torres, told attendees the company had recorded a one-degree temperature rise in the past 40 years at some of their vineyards. The knowledge led the firm to introduce a whole slew of sustainability measures, including solar panels and a biomass boiler to generate electricity, harvesting rainwater and installing drip irrigation systems.

But the company has also started buying up land at home and abroad in regions that are currently inhospitable for wineries. In 2014, it purchased 230 hectares of land in a Chilean valley in anticipation of rising temperatures making it suitable for harvests. (A 2013 paper, “Climate change, wine, and conservation.” published in the Proceedings of the National Academy of Sciences of the United States of America suggested that parts of northern Europe and China could become future wine regions.)

Another winery in Chile, Montes Wines, is experimenting with “dry farming,” which relies almost exclusively on rainwater for irrigation. Over the past seven years, they’ve reduced the amount of water needed for their grapevines by about 65 percent, but at the cost of a 50 percent drop in yield.

Meanwhile, here at home, forestry giant Weyerhauser is actively monitoring for “early indications” of climate change at its various locations, and its R&D wing is developing tree species that are more resilient to drought.

While many companies have acknowledged that climate change is real, the reality is that most haven’t done much about it, finding it difficult to justify the capital costs in long-term measures to deal with it. And the long-term implications of inaction could prove costly.

On the homefront

On July 8, 2013, a torrential downpour hit Toronto, dropping as much as 126 mm of rain on the city in one day, exceeding the typical monthly average of 100 mm. Road and railways were submerged and thousands went days without power. But the single biggest area of damage was to residential basements. “Flooded basements [are what’s] costing the country the most” in terms of extreme weather events, says Blair Feltmate, chair of the Climate Change Adaptation Project Canada.

A CCAP pilot project (one of 20 funded by Intact Insurance) in Calgary audited 100 homes for flood-resistance and offered homeowners a slew of steps they could take, from directing downspouts away from the foundation to installing sewer backflow preventers and adding battery backup systems to sump pumps. By the CCAPC’s calculations, every dollar spent on adaptation measures would see anywhere from $7-8 in avoidable basement flood losses by the average homeowner over the following decade.

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Copyright 2015 Rogers Publishing Ltd. This article first appeared in the Winter 2015 edition of Corporate Risk Canada magazine