HOW EXTREME WEATHER IS ALREADY DRAINING THE BIGGEST U.S. COMPANIES, BY THE NUMBERS
While politicians squabble over whether climate change is real, most of the world’s big companies are already dealing with its consequences. In a new report from the Carbon Disclosure Project (CDP), 60 companies in the S&P 500 reveal the risks and monetary costs that they face as climate change worsens.
The statistics, collected by the CDP between 2011 and 2013, show that companies are already battling the consequences of extreme weather.
Here are some of the issues faced by companies across a number of different sectors:
The food giant reports that it has “experienced weather-related sourcing challenges, such as delayed tomato harvesting due to unseasonably cool weather and difficulty sourcing other vegetables due to above normal precipitation.”
Pepsi spends billions of dollars each year on agriculturally based ingredients and raw commodity-based packaging. As a result, the company says that its revenues are “sensitive to changes in consumer preference due to elevated temperatures, changes in crop yields due to changes in precipitation and temperature patterns, increases in transportation costs and increased supply-chain costs due to changes in crop locations, increased energy cost, increased fiberboard cost or disruptions due to flooding, and our hedging costs can vary drastically due to an increase in perceived risk in the commodity markets.”
From 2004 to 2012, Walmart filed insurance claims for over $3 million dollars in losses annually because of weather-related power outages. Extreme weather events in total are responsible for approximately $20 million in losses each year.
The company writes: “If sea levels rise, devastating effects could result on stores and the communities in coastal or low-lying regions. The example of Hurricane Katrina illustrates the potential effects. As a result of that event, we closed approximately 200 of our stores and clubs for at least some period of time… We had at least six stores or clubs that were shut down for more than 3 months. One of those remained closed until 2010 and two have never reopened. Our average daily sales per store in 2005 were just under $150,000 per day. Had just these six stores remained open, we would have achieved cumulative sales from them to date in excess of $500 million.”
Allstate, a casualty and property insurance company, is most concerned about hurricanes on the east and gulf coasts of the U.S. “Our historical catastrophe experience includes losses relating to Hurricane Katrina in 2005 totaling $3.6 billion, and Hurricane Andrew in 1992 totaling $2.3 billion,” the company writes.
This company offers freight rail service in 23 states, and the outdoor nature of the business makes it extremely vulnerable to wind and flooding from hurricanes. The company reveals in the report that it spent $440 million dealing with Hurricane Katrina, and $29 million handling the fallout from Hurricane Isaac. These events are, according to CSX, indicative of future climate-related risk.
HP is concerned about physical disruption to its supply chain. When Thailand experienced severe flooding in 2011, for example, the company’s production of disk-drive components was impacted. As a result, revenue dropped significantly that year. HP writes: “Based on this previous example, assuming all declines in revenue were a direct result of the flooding event, the cost of a similar regional flooding event, such as the one described in Thailand, could potentially result in a financial implication of an approximate $1B decline in HP’s annual revenue.”
The utility company doesn’t delve into the numbers, but worries that an increase in extreme weather would impact its cost of offering electricity to customers. “We may not recover all costs related to mitigating these physical and financial risks,” Xcel writes.
Over time, concerns about climate risks reported by companies to the CDP have grown. In 2011, 26% of physical risks disclosed by S&P 500 companies were described as either current or likely in the next five years; that number increased to 45% by 2013. In 2011, 34% of responding companies reported that these physical risks were somewhere between “more likely than not” and “virtually certain.” In 2013, the percentage jumped to 50%. The numbers should speak for themselves.
Check out the full CDP report here.