Businesses, find extreme weather and other environmental information in your areas with AreaHub Enterprise
As our climate changes, the frequency and intensity of extreme weather is increasing. These events include hurricanes, heat waves, droughts, heavy rainfall, floods, severe winter weather, hail, and tornadoes. In 2023, there were 28 extreme weather disasters in the US resulting in losses involving a billion dollars or more. In contrast, during the 30 years between 1980-2010, there were an average of five billion-dollar disasters per year. For businesses, the consequences of extreme weather go beyond simple property damage and include energy volatility, infrastructure damage, operational or agricultural disruptions, and supply chain issues that can combine to cause enormous and immediate economic losses. The World Economic Forum places risks of climate change for businesses, including the increase of extreme weather, into three broad categories–physical risks that include direct damage, transition risks that involve complying with new laws and regulations, and liability risks that result from failures to comply with changing legal and regulatory expectations. Here, we will focus on the physical risks directly related to extreme weather.
Source: U.S. struck with historic number of billion-dollar disasters in 2023
Source: U.S. struck with historic number of billion-dollar disasters in 2023
The US has experienced 74% more storm-related major power outages in the last ten years than in the previous decade. How does power loss affect business continuity? Blackouts and other energy disruptions can stop manufacturing, delay the delivery of goods and services, cause supply chain bottlenecks, make databases inaccessible, and decrease employee attendance and productivity.
Extreme weather events heavily impact energy production, transmission, and distribution infrastructure. Severe winds are one of the most critical threats to electrical grid systems, and wind speeds are predicted to continue to increase during extreme weather events, including hurricanes. Flooding can damage underground power lines, access roads, pipelines, and storage facilities. High temperatures affect the efficiency of thermal and solar power plants and also decrease the power transmission capacity of electrical grids. Higher temperatures also increase the energy demand, putting additional strain on the electrical system, which can increase the frequency of power disruptions. Cold temperatures damage energy transmission and distribution because power lines become stiffer and are more easily damaged by ice, snow, and wind.
In September, 2024, damage from Hurricane Helene knocked out power to almost 6 million customers in 10 states. High winds and flooding caused so much damage to power lines and substations that power was not restored in some locations for nearly three weeks. In the summer of 2021 in Portland, Oregon a heatwave with temperatures reaching 115 F melted streetcar powerlines, and sagging overheated power lines resulted in power outages.
Flooding shuts down transportation and damages structures; hurricane winds destroy buildings and manufacturing equipment; extreme heat damages physical infrastructure, including roads and bridges, and negatively impacts employee health and productivity. According to NOAA, severe weather events caused more than $1 trillion in damage between 2017 and 2023, nearly three times the inflation-adjusted average for the previous 42 years. In September 2024, Hurricane Helene damaged 6,000 miles of roads and over 1,000 bridges and culverts, including Interstate 40, which remains closed and is not expected to reopen until 2025 between Tennessee and North Carolina.
It happens more often than you might think, and the damage can be difficult for a business to recover from. According to the National Association of Development Organizations, 36% of commercial property owners reported damage from natural disasters in the last five years, and the Insurance Information Institute estimates that 30% of businesses never reopen after being closed down due to damage from hurricanes, floods, tornadoes, or other extreme weather.
Agriculture contributes over $300 billion to the US economy each year and is critical to the food supply in the US and worldwide. Extreme temperatures, floods, and droughts can harm crops and reduce yields. Livestock and poultry account for over half of US agriculture cash receipts. High temperatures, including during heat waves, cause heat stress in livestock that affects weight gain, milk production, and fertility.
In 2023, NOAA estimates the total crop losses from major natural disasters was nearly $22 billion. About 75% of these losses resulted from drought, heat, and wildfire; 18% from flooding, heavy rain, and hurricanes; and 6% from hail. In 2022, thousands of cattle died from heat stress in Kansas when daytime temperatures reached 104 degrees, affecting beef prices nationwide.
Source: Major Disasters and Severe Weather Caused Over $21 Billion in Crop Losses in 2023
All of the extreme weather impacts on energy, infrastructure, and agriculture combine to create innumerable disruptions in the supply chain. According to Everstream Analytics, extreme weather is one of the top risk factors facing supply chains in 2024. Flooding and high winds can slow or stop transit, causing delays in various types of transport, including shipping and trucking. Roads, bridges, or ports can become damaged, making transportation routes unavailable. Damage to structures and equipment can impact production and reduce capacity and inventory. Damage to the electrical grid can temporarily stop production or services. Reduced crop yields from drought or flooding can limit access and increase prices of product ingredients.
The impact is acutely felt at many points in the transportation process, even thousands of miles from the business or product destination. Panama Canal, which generally carries about 8% of global container volume, has been experiencing drought conditions since 2022. Due to the low water levels, restrictions have been imposed limiting the height and number of daily vessels that pass through the canal. In 2022, Hurricane Ian increased export dwell time (the amount of time spent loading and unloading) by 200%, and in 2023, when Hurricane Ida hit, truck transportation service levels fell by 20%.
As a business owner, you can use AreaHub Enterprise to identify and assess the climate and area risks and the related resiliency and environmental considerations of your locations–whether those locations are potential sites or existing key business locations. The ability to identify risks in advance can not only allow you to protect your property investments but also reduce insurance costs and mitigate operational disruptions, all of which combine to increase stakeholder confidence.
Prepare a comprehensive emergency plan that includes worst-case contingencies. Ready.gov provides information about assessing a business’ needs, emergency plan information for specific types of natural disasters, training, and incident management. Some of the key considerations when developing an emergency plan include:
Protect your employees: saving lives should always take priority. Develop safe evacuation procedures and off-site meeting areas. In situations where this was not done, businesses have been held liable for employee deaths.
Minimize potential damage to your physical property: identify essential structures, equipment, and utility services and install prevention and safety systems to protect them.
Secure records and data: set up scheduled data backups to external local hard drives and remote servers using a cloud-based service.
Operate from remote locations: include a business continuity plan that outlines how you will continue to serve your customers and clients if your primary facilities are damaged.
Communicate with your workforce and customers: establish a plan for backup electrical power and consider setting up a mass texting SMS service to simplify instant communication to large numbers of employees and customers.
Evaluate your insurance policy to understand what types of damage will and will not be covered.
After the fact: Apply for assistance from state and federal agencies: The Federal Emergency Management Agency (FEMA) is the primary federal resource for relief and assistance during and after natural disasters.
If you are a business owner, you can use AreaHub to evaluate the risks and climate resiliency of a property or area in advance.