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More CEOs Try to Get Ahead of Climate Change

For most CEOs, “climate change” has been one of those far-off risk factors that must show up in a company’s shareholder documents for the Securities and Exchange Commission, a vague and pro forma threat like “geopolitical risks” and “acts of God” that read more like fine print than actionable possibilities.

But for an increasing number of business leaders, macro changes in the natural world—affecting their supply chains and other business fundamentals—sure feel like climate change. And an increasing proportion of corporate constituencies certainly believe that “man-made global warming” is a real and active phenomenon.

So more CEOs and other C-suite executives are getting proactive about addressing how apparent changes in the climate and major weather events affect their operations, their planning and their top and bottom lines.

Andreas Fibig, CEO of International Flavors & Fragrances, for example, told Chief Executive that drought in Turkey recently has strapped the company’s efforts to grow and harvest roses whose components go into some of IFF’s perfume ingredients.

“The effects [of drought] aren’t dramatic at this point, at least for material we’re sourcing. But it’s definitely a topic for us.”

“The effects aren’t dramatic at this point, at least for material we’re sourcing,” he said. “But it’s definitely a topic for us.”

And Fibig is concerned about the worldwide drop in the population of honeybees, on which flowers depend for pollination. “For us it’s a cause right now to make sure bees can survive,” he said. “It’s terrible.”

But there’s little that IFF—or any other company—can do other than cope with changes that long-range weather, and the climate, give them. However, Fibig—whose “personal view is that climate change is happening”—has ramped up the company’s “sustainability efforts quite significantly,” he said.

That has meant IFF’s construction of “the biggest solar-energy field in our industry,” at a fragrance plant in New Jersey, which supplies nearly half of the facility’s energy needs. IFF also has built a wind turbine in the Netherlands to supply a plant with energy.

And its corporate goals are to reduce overall energy use by 20% by 2020, cut its carbon footprint by 25% and reduce water usage by half. “We’re very much on track to achieve that, and we take it very seriously,” Fibig said.

In general, corporate leaders need to be more proactive about figuring out how major weather events and climate change will affect their operations and act in light of such analysis, Jeffrey A. Burchill, CFO of property insurer FM Global, wrote recently on

Projections are for higher risks of flooding or drought in certain regions of the United States, for example, while “other regions will likely see less precipitation, prolonged droughts, and potentially increased risk of wildfires.”

To respond, Burchill said, business leaders must be more mindful, for example, of where they site factories. “When you have a choice,” he wrote, “you should try to site your facilities in nothing less than 500-year flood zones.”

Also companies should “shore up existing facilities” against floods. Leaders should make sure a company’s water supplies are protected, take into account the vulnerability of suppliers to major weather events, set contingent plans for transporting goods if roads or bridges are wiped out, and other steps.

Above all, urged Burchill, “Don’t deny [it]. Climate change denial is prevalent and can be especially risky for a corporation. That’s because it can lead to a failure to prepare. And a lack of preparation means vulnerability, which can have costly, tragic circumstances.”


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