While climate change is often associated with extreme acute weather events – like heat waves, hurricanes, or wildfires or chronic events, e.g. worsening air quality, crop failures and population migration resulting in loss of access to goods and services, price rises and general uncertainty for businesses.Whilst these risks have not been perceived as a significant cause of physical damage to industrial assets in the UK to date but will become more real as the climate events worsen across the globe and in the UK. Climate-related risks and adaptation are now high on the agenda for manufacturers when considering their business resilience capability. Our aptitude to manage an evolving risk landscape depends on our ability to both predict and adapt to identified and unexpected challenges.
Building resilienceInvesting in technology and digitisation has provided numerous benefits for the manufacturing sector, from increasing productivity to improving the standardisation of output and reducing waste. While there is no single solution for building effective adaptation and resilience, there are a range of steps.
- Commit: Reducing greenhouse gas emissions remains the key task for the manufacturing industry and it is vital that this is at the top of every manufacturers agenda. In our Demystifying Net Zero Report we called upon government to introduce mandatory reporting of emissions to ensure that companies of every size measured their carbon emissions and accelerate the understanding of the value chain.
- Identify: Inspired Energy’s top tips when reviewing your risk management strategy are to build a fully developed cost analysis, to get to grips with both your actual energy costs and to gain a clear view of your future cost. Consider market volatility including:
o supply chain disruptions caused by extreme weather events, price risks for example cost of storage space;
o product risks, some products were no longer in need while healthcare products were in high demand. Others may become unpopular due to consumer demand for greener products; and
o risk linked to external stakeholders are also significant as the whole social and political landscape is changing so fast.
Environmental impacts on manufacturers must now be given detailed consideration when evaluating the UK’s resilience. The Committee on Climate Change, however, has recently shown that the measures put in place by the Government on adaptation are very much insufficient to provide protection and that only 1 in 5 out of recommended measures have failed their target and that most measures recommended have not yet been put in place.
The current model of conventional risk governance which focuses on single events and single sectors does not account for these types of risks. Adaptation actions include increased global capacity building for climate resilience including supply chains, health systems and early warning systems and identifying financial risks to businesses through setting international standards for eligibility of green projects and transparent reporting.
Make UK and its members are ready to work with policy makers to deepen understanding of manufacturing resilience and plans to mitigate risk from future crises.
Visit our Net-Zero Hub to find out more.