Canadian businesses worry extreme weather will impact profits, KPMG research

More than nine in 10 (92 per cent) Canadian business leaders fear that the extreme weather events over the last year are the new normal and that their organization will be hit by a climate-related event this year, finds new KPMG in Canada research.

A recent survey of 350 Canadian business leaders found that 56 per cent of companies suffered a hit to their profitability from last year’s extreme weather events, while 49 per cent saw their costs rise significantly due to issues ranging from productivity loss to broken supply chains to increased insurance costs.

“The extreme weather events of the last couple of years have driven home the cost of climate change to the Canadian economy and the bottom line of individual businesses,” says Roopa Davé, KPMG in Canada’s National Climate Risk Leader. “Devastating forest fires, floods, hurricanes, and extreme heat have impacted profitability for more than half of Canadian companies. Even those that escaped damage fear they will be hit this year – with over two-thirds being very or extremely concerned.”

“Companies are beginning to treat climate risk the same as other enterprise risks and taking the necessary steps to adapt and build mitigation strategies that help them navigate increasingly unpredictable weather events. A robust climate risk assessment includes multiple integrated factors, including potential impacts on a company’s facilities, supply chains, and business model.”

• 92 per cent of Canadian businesses now factor in an expectation that extreme weather could and will happen at any time
• 92 per cent fear that their organization will be hit by a climate-related event this year
  • 21 per cent are “extremely” concerned
  • 46 per cent are “very” concerned
  • 25 per cent are “slightly” concerned
• 56 per cent say they suffered a hit to their profitability from last year’s extreme weather events
  • 49 per cent faced significantly increased costs
  • 41 per cent reported loss of revenue
• 57 per cent had their operations directly impacted (including a loss of power, water supply, communication, and other utilities)
• 50 per cent reported that employee productivity was directly impacted, that is, lost productivity
• 47 per cent experienced supply chain disruptions or broken supply chains
• 30 per cent say their insurance was either cancelled or the “costs increased significantly”
• 89 per cent are more determined than ever to find ways to reduce their impact on the environment
• 88 per cent are willing to make more investments to support their climate-related goals

Faced with the reality of more extreme weather, increased demands from stakeholders to make sustainability a priority, and the recognition that regulations are coming that will require disclosure of their decarbonization plans, most (89 per cent) Canadian businesses say they are more determined than ever to find ways to reduce their impact on the environment.

“Companies have strengthened their commitment to addressing sustainability and are willing to make more investments to deliver on their climate-related goals, however many are dealing with a number of hurdles,” says Doron Telem, Partner and National ESG Leader for KPMG in Canada. “Most are struggling to find the capacity, collect the required data and navigate an increasingly complex regulatory environment.” Mr. Telem says this has slowed decarbonization investments, noting that only a third of companies (33 per cent) have integrated sustainability criteria into product design, manufacturing process, and supply chain operations.

“Organizations should not wait for regulation to drive their sustainability goals. They should focus on value creation and protection by developing and executing transition plans to lower emissions today. It is critical to understand which projects can have a positive ROI and, in parallel, which operations create challenges for meeting sustainability goals and require alternative approaches,” says Mr. Telem.

• 91 per cent have strengthened their strategic commitment to addressing sustainability, climate risk, or decarbonization
• 80 per cent say their company “lacks the time and resources” to make reducing their carbon footprint a “top or immediate” priority
• 75 per cent say their company also lacks the data that they need to effectively measure, implement, and evaluate their carbon footprint
• 89 per cent believe regulations are needed to drive decarbonization across all industries and create a level playing field globally
• 29 per cent have set specific targets for carbon emission reduction
• 33 per cent have integrated sustainability criteria into product design, manufacturing process, and/or supply chain operations
• 42 per cent have invested in renewables