Becoming more resilient to climate change - 5 things all businesses should consider

At a Glance

• Guidance on identifying which areas of your business are vulnerable to climate risks
• Resilience tips to help you prepare for the future and bounce back quickly from any climate-related incidents
• NIG tools that can help you build resilience

Premises

Increased rainfall, severe storms, floods and wildfires can all put businesses’ physical premises at risk. In the UK, we’ve seen incidences of what were previously ‘once in a century’ floods becoming far more frequent. Potentially over half of the British commercial properties at risk are in the retail and industrial categories, and if something does happen, many smaller businesses don’t have the option to temporarily set-up shop elsewhere while repairs are made.

Top tip 1

When it comes to weather, prevention is better than the cure. Sign up for weather alerts to minimise your chances of being caught by surprise. Use the government’s Business flood plan checklist to create a flood plan and put preventative and mitigation measures in place. Simple things like being able to move stock or equipment above flood levels in advance can make a real difference to financial outcomes.

In July 2022, some places had 170% of July’s average rainfall fall in just one hour causing flooding.

Supply chain

As SMEs tend to be reliant on a smaller, and often localised, supply chain, they can be disproportionately affected by climate-related incidents like extreme weather. Being tied into one supplier for a key raw material means that if climate change ruined their entire crop, or a flood halted production of an essential component you could be in a difficult situation. It’s a good idea to think about what the knock-on impacts for your business would be in various scenarios and make adjustments as needed.

Top tip 2

Conduct a supply chain audit. It might be that you need more diversification – ask yourself if your business could keep operating if a key supplier went out of business. If the answer is no, it’s time to bring more suppliers onboard. It’s also worth thinking about the location of your suppliers. If they are all in one area, they’ll face the same weather risks and you could be left with no stock if there’s an issue. Don’t just consider your direct suppliers, map the chain all the way back and consider potential risks at every stage.

On NIG’s Risk Assist you’ll find a great tool to help manage your supply chain or as a broker you’ll get some fantastic advice to share with your client to help them manage any vulnerabilities in their supply chain. You can login here NIG Risk Assist – NIG.

One in four SMEs who have experienced supply chain delays in the last year have seen a financial impact on their business.

Equipment and systems

If your business relies on a few vital bits of equipment, you could face considerable challenges if something broke down and supply chain disruptions meant parts were delayed. This could seriously impact on profitability and your reputation with your customers. Likewise make sure data is backed up – ideally in the cloud – so that if something like a fire or flood were to affect your premises you could get working again at a different location more quickly.

Top tip 3

Make reliability, repairability, recyclability and energy usage part of your scorecard when choosing new equipment. Sometimes paying a higher up-front cost may result in longer-term savings. Some lenders now offer green loans at preferential rates so explore if this is an option.

Workforce

Small businesses don’t have the luxury of having a dedicated person looking at climate risks. To avoid it being no-one’s responsibility make it everyone’s responsibility. Each business and each sector will be facing particular risks and opportunities as they strive towards net zero targets and climate change adaptation. Understanding these will enable your business to benefit from driving growth and diversification while keeping hold of skilled workers as the transition to a low carbon economy plays out.

Top tip 4

From your onboarding process to your annual performance reviews, build in resilience to your company’s DNA. Train staff and encourage them to find ways of saving energy or other resources. Get staff used to applying a climate change lens on their role, or asking what the climate change risks are for particular projects or products so it becomes second nature. Make it easy for your workforce to share climate change issues that affect them – such as working conditions that are too hot – so you can potentially mitigate any issues.

Lack of climate skills and knowledge is preventing 58% of SMEs from taking more ambitious action on climate.

Products and services

Climate change’s effect on the world and an increased awareness of sustainability issues among consumers are both contributing to shifts in demand for various products and services, and businesses will need to stay in tune with this. Changing weather patterns mean that the peak buying times for various items, for example winter clothes or equipment, will shift, while warmer UK summers mean higher demand for items which previously haven’t been regular purchases. There is also increased demand for products which have green credentials as customers look to do their bit for the environment. Failing to adapt to these changes in demand, however gradual they may be, can see businesses falling behind their competitors.

Top tip 5

The most forward-thinking companies can use weather forecasting and insight tools to predict demand and inform stock levels. For example, a roofing company in Florida used such tools to predict an increase in hurricanes and boosted production of roof shingles accordingly. When bad weather hit, they had a head start on meeting demand and boosted their profits.

Having the right insurance in place is a vital part of being resilient and able to bounce back as quickly as possible from any climate-related disasters. Brokers and insurers play a vital role in helping businesses assess the risks they face, and may face in the near future.

How NIG can help

NIG Risk Assist offers an easy-to-use and comprehensive range of online tools to help manage and reduce risks 24/7. The Business Continuity module guides you through step-by-step continuity planning and helps identify key risks and the impact they could have on your business.

Learn more