Climate Change: What Your Clients Should Know

Linda Conrad
Jim Feltz
Strategic Risk Services
Zurich Risk Engineering

Over the last five years, the world has turned much of its attention to the issue of climate change. Consumers are concerned about the effects of greenhouse emissions on their health and that of the planet. For businesses, the challenge is to capitalize on the transition to a low-carbon economy, whether by choice or through regulations imposed by states or the federal government. Great uncertainty exists among companies, however, on how best to proceed with and leverage new climate-friendly business models or operations.

Early efforts to reduce a company’s carbon footprint usually center on how to optimize existing energy use, as well as the implementation of alternative sources of energy such as nuclear, wind, solar and geothermal. More proactive companies have also begun to consider developing new products and business models to seize on the opportunities that result from lowering carbon emissions.

Determining how to strategize and manage their climate change initiatives is a complex subject for companies, including those in the technology sector. While climate change offers profitable business and brand opportunities, it can also present significant risks which require holistic management across an enterprise. Technology companies involved in the making and powering of computers and networks often produce a high level of greenhouse gas emissions. Data centers, in particular, are facing a rapidly growing carbon footprint. Electronics and medical device manufacturers face the environmental and human factor risks stemming from waste disposal during production. And the technology sector in general is one of the biggest users of an energy-intensive transportation and supply chain network, where components are often shipped from dozens of factories overseas to final assembly here in the U.S.

As a broker working with technology companies, you are in a prime position to help your clients address important issues like climate change which can have a strategic impact on their resilience and growth. To provide guidance in this area, Zurich has developed a Climate Change Business Solutions Matrix that categorizes climate change issues into eight distinct pillars. While not every pillar may be applicable to your customer, we’ve outlined below the five that could be most relevant to a technology client:

1.Green Design for Buildings and Products

Green or sustainable building design through LEED (Leadership in Energy and Environmental Design) certification measures building performance terms of energy savings, water efficiency, carbon dioxide, emissions reduction, indoor air quality and resource management and overall impact to the environment. For example, foam roofing materials, energy efficient lighting, placement and use of low "e" windows increase building energy efficiency. Also, alternative energy sources such as photovoltaics and fuel cells will reduce energy costs.

A Green building may cost more initially, but over the life of the building will impact a company’s bottom line through lower operating costs and a better work environment for your employees. Additionally, businesses may benefit from an improved reputation and increased sales by presenting a positive, greener image which resonates with today's environmentally-conscious consumers and shareholders.

Green product design involves the development of products which are energy/resource efficient or carbon neutral. A simple example is the new types of fluorescent light bulbs which are being created to offer consumers lower electric options. Cars are also being redesigned toward fuel efficiency and lower maintenance requirements. Some white goods manufacturers are developing "smart technology" equipment which will operate during times when energy prices are at its lowest cost. All of these technology advances are beneficial for the environment, but may require additional Research and Development budgets, retooling of existing manufacturing lines in factories, changes in supply chain procurement, and other business impacts.

Is your client ready to go "Green" to modify or redesign building or operations? Are its products designed for a "Green" Lifecycle and according to existing standards?

2. Supply Chain - Purchasing and Distribution Management

The opportunity is huge for technology companies to cut transportation costs and reduce carbon emissions through better supply chain management. A first step to consider is setting low-carbon standards for suppliers and contractors, similar to how cost and quality performance metrics are now developed. Another step is to look for more efficient means of transportation, including consolidating routes for the fleet and even reducing employee commuting by promoting work at home programs.

Can your client’s transportation costs and carbon impact be trimmed through better "green" supply chain management? Has your client assessed its supplier network to ensure it is designed to protect profitability from a break in the chain? For more information on optimizing your client's supply chain, please see Zurich’s Risk Insight on Supply Chain.

3. Energy and Commodities Management

Reducing energy costs and the environmental impact of energy consumption is a critical task for technology companies. Lighting, HVAC systems, water usage, insulation—the list of power generation alternatives and commodities to analyze, select and improve is long. Beyond saving money, the benefits of reducing energy and maintenance costs include: increasing a company’s reputation, creating a market differentiator with green efforts, and reducing its overall reduce carbon footprint.

Is your client’s facility energy efficient? Is water a precious resource for your client that needs to be conserved and managed efficiently?

4. Carbon Management

You’ve probably heard a lot of talk in the media around the issue of measuring a company’s carbon footprint in order to gauge their specific impact on the environment. Voluntary carbon offset programs allow companies to mitigate their own greenhouse gas emissions from transportation, electricity use, and other sources. Pending federal cap-and-trade legislation could impose limits on carbon emissions, and require companies that go above their limit to purchase carbon credits.

Does your client know its carbon footprint and how it can be reduced through smart carbon management?

5. Manufacturing Waste Stream Management and Disposal

Minimizing manufacturing waste is not only good for the environment, but it can also positively impact a company’s bottom line. As landfills close and new ones become more difficult and expensive to open, disposal costs will rise for manufacturers. The more materials that are wasted during production, the more costs rise. Additionally, better management of manufacturing waste can also improve worker safety and create a more positive public image.

Does your client understand the impact of the disposal of all their waste—including the ultimate disposal and final resting place of their product by the end user? Both environmental and human health risks are a concern here, especially with the new legislative and regulatory initiatives being proposed by the new Administration. The benefits of improving a company’s disposal management include reducing product liability, improving a product's life cycle, and enhancing the public’s perception of a company. Has your client considered how much it could save through the efficient management of the waste stream through lean manufacturing methods?

Zurich's Climate Change Business Dynamics services.

To provide individual customers with guidance in managing these climate change challenges and other enterprise issues,, Zurich now offers its Climate Change Business Dynamics services . We can work with brokers and their customers to help identify the specific actions a company can take to both minimize the negative effects of climate change, and profitably capitalize on new market opportunities. Learn more about the strategic risk services available through Zurich’s Climate Change Business Dynamics.