Report provides eye-opening new insights into the demographics of commercial victims of climate change. Young firms, which comprise not only the lifeblood of many communities but are central to national economies, do not insure against what they consider to be less frequent, extreme events, and are therefore, disproportionately bearing the costs of the vagaries of weather resulting from climate change.
With the frequency and severity of extreme weather events and unseasonal weather increasing as a result of climate change, Weather & Economics has reported on the far-reaching effects to a wide range of sectors, including agriculture (particularly for farmers of citrus fruits, avocadoes, cocoa, viticulture, and cereals) as well as for the sectors of finance, sporting events, travel, transport, automobile parts, fashion and apparel, construction, food and beverages, and snow removal, to name but a few.
When it comes to weather affecting consumer behaviour and purchase decisions, it has long been known that weather has an impact on consumer demand. The food we eat, clothes we wear, and how, where and how much we buy has all been scientifically proven to be influenced by the weather, it being second only to the economy in being the biggest single influencer on consumer behaviour.
Indeed, every day people make purchasing decisions based on the weather, from buying ice cream, sandals and swimsuits in the summer, hot soups and snow tyres in the winter, and less of beer and bottled water as autumn approaches. In turn, the seasonal cycle of weather purchases are accounted for by supply chain managers in stocking store rooms and giving discounts to clear out product before the seasonal event- or the season itself- leaves stockpiles of unsellable wares in their hands.
But what if everything we have known to be true about how the weather affects consumer behaviour and our ability to control this relationship was wrong? What if the seemingly uni-directional, unmanipulatable relationship between the weather and consumer behaviour was now being found to be being turned on its head? Specifically, what if a business could influence the relationship between the weather and consumers to its advantage?
DOI: 10.15200/winn.146521.13799 provided by The Winnower, a DIY scholarly publishing platform
Historically, companies lost money as a result of the weather, sometimes a significant percentage of their profit margins, and it was generally accepted that there was little to nothing they could do about it. But recently, the outlook has changed, and there is an unprecedented increase in the number of companies who insure, or are about to insure, against the consequences of unfavourable weather. Long confined to the ranks of fate, the consequences of weather on a business’s profits are now manageable like all other risks. Many understand and welcome this development, while others struggle.
Over the last ten years, we have met many business leaders, treasurers, CFOs and marketing analysts seeking to better understand the vulnerability of their business to the daily vagaries of weather. In most cases, the a priori assumption was that whilst weather was affecting sales, production costs, yields, prices or results, it was an external factor not worth attention, investigation or the allocation of resources. Whether the agricultural sector, manufacturing, transport, tourism, retail, mining, or beverages, the conclusion was always the same: these companies had always lived with the weather, and accepted its effects, and there was no reason to change that.
DOI: 10.15200/winn.145881.12906 provided by The Winnower, a DIY scholarly publishing platform
Download the White Paper
A new white paper has been released today by the researchers of Meteo Protect exploring the impact of changes in weather to find the maximum potential loss caused by adverse weather for any business. This innovative approach allows risk managers to have a full understanding about the impact of daily deviations from expected or seasonal weather and to be able to evaluate, for the first time, the total extent of their exposure to the weather. In turn, they may determine how much of this risk should be hedged in order to secure their sales and EBITDA, and to assess the changes they need to make to their operations and business practices to mitigate risks attributed to climate change.
Given the heightened attention to the effects of climate change on all sectors of society at the recent Cop21 climate conference in Paris at the end of the year, businesses are facing increased scrutiny of their contribution to climate change by governments needing to meet emissions targets. At the same time, the effects of climate change are already impacting business profits, and investors and shareholders alike are also applying pressure, demanding climate vulnerability assessments to study the weather risks to which the business in which they have invested is exposed, and how the company is mitigating these risks.
DOI: 10.15200/winn.145805.51190 provided by The Winnower, a DIY scholarly publishing platform