Overcoming climate displacement disruption
Climate disruption is a very real and pervasive threat to the wellbeing and livelihoods of people around the world. Businesses must be prepared to overcome the challenges this disruption can pose.
As the effects of climate change continue to amplify across the world, extreme weather events such as floods, hurricanes, droughts, and rising sea levels are becoming more frequent. Not only are they increasing in regularity, but they’re also occurring in areas previously unaffected by such adverse conditions. This is forcing many people to leave their homes in search of safer places to live and work — a phenomenon known as climate displacement.
Not only does climate displacement have an enormous effect on the individuals forced to relocate, but it impacts entire communities and the companies that operate within them. It’s therefore vital for businesses to respond to climate displacement — not only to comply with evolving regulations, but also to enhance operational resilience and ESG performance to be well prepared for the potential aftereffects of these types of events.
In this article, EHS & Sustainability Regulatory Consultant Leonor Burguete examines the repercussions of climate displacement on businesses, the laws and regulations it’s influencing, and the ways that companies can prepare themselves for these challenges.
What is climate displacement?
Climate displacement is a climate change-related crisis impacting more and more people as extreme weather events, such as droughts, floods, and cyclones, keep destroying the homes of many every year. The Red Cross Climate Centre defines climate displacement as “a displacement resulting from extreme weather events, slow onset events, or other adverse impacts of climate change”.
There may be some resistance to relating climate change to these extreme weather events, but the correlation is undeniable. In fact, the first step to breaking the cycle of climate displacement is addressing climate change as its root cause, as the UN Refugee Agency (UNHCR) points out.
On 29 October 2024, an intense rainfall resulted in a devastating flooding in Valencia, Spain. NASA explained this phenomenon as “rains coming from a high-altitude low-pressure weather system that became isolated from the jet stream”, resulting in a flood that affected thousands of people, forcing them to evacuate their homes and leaving the city in mud and debris. Scientists have linked the intensification of these extreme weather events to climate change — the influence of rising global temperatures increase the atmosphere’s ability to retain moisture: “For every 1ºC rise in average temperature, the atmosphere can hold up to around 7% more water vapour; with more moisture available, rainfall can become heavier.” With these types of changes, events like the Valencia flooding can become more severe.
TIME also points out that this kind of extreme weather event came after Spain battled with prolonged droughts in 2022 and 2023. Moreover, experts say that drought and flood cycles are increasing with climate change.
This event is just one of several recent incidents to bring the issue to the attention of people around the world. For instance, earlier this year, heavy rain impacted the south of Brazil in the State of Rio Grande do Sul, affecting more than 2.3 million people, among many others.
How does climate displacement affect businesses?
Though primarily considered from a people perspective — and rightly so — it’s an inescapable reality that climate displacement also has an impact and cost for businesses. There are various repercussions in the aftermath of natural disasters that companies must take into consideration to mitigate the risks of climate displacement.
Companies need to be aware of and act on the fact that climate displacement is becoming increasingly problematic. Not properly addressing climate displacement can cause high workforce disruptions, reputational damage, and even — more recently — regulatory issues. Let’s further explore these scenarios…
Workforce disruption
As mentioned in the definition of climate displacement, people are often forced to leave their homes when such extreme weather events occur, leading local companies to lose skilled workers to involuntary migration to different cities or even different countries. These workers also make for a loss of institutional knowledge, which can disrupt productivity and innovation.
Losing these workers will most likely lead to new recruitment processes, which are not only time- and cost-consuming, but arguably unnecessary in this situation. Not to mention the resources that will have to be allocated for onboarding and training.
An even more drastic scenario would occur in a case where people would all together be unable to — or grow indifferent to — working for a company that’s unaware of or unable to tackle extreme crises, such as climate related ones, and their respective social consequences. This would make it harder for the business to attract talent in the first place, leading to a decrease in community support that can affect costumer loyalty and partnerships. Remaining employees may also feel undervalued by the lack of action from the company they work for, potentially leading to reduced engagement.
The impact on the supply chain itself is also important to mention here: The loss of skilled workers and community resources can affect the company’s output, especially if the business is dependent on local services.
Reputational risks
There are various reputational factors that come into consideration in relation to the way businesses tackle issues like climate displacement — whether it’s in their preparedness or in the way that they handle a crisis should one occur. Whether it’s addressing the human rights needs of employees or assuring stakeholder investment, each of these areas present a risk to a company’s reputation if not demonstrably well-considered.
Human rights awareness is a key focus for ESG compliance. It’s role in today’s society is impossible to ignore, and climate crises and displacement are deeply tied to it. These types of extreme weather events, such as the floods in Valencia, force people to leave their homes. Unprepared companies therefore risk losing skilled workers. Failing to act to solve the issue, or prevent it, can damage a companies’ reputation in regards to the treatment of workers.
Another downside worthy of mention is potential insurance challenges. Companies frequently affected by the consequences of climate displacement can have increased premiums or experience difficulties obtaining adequate coverage. This can have knock-on effects when it comes to stakeholder and investor perceptions of the company and whether it’s a sound investment.
Of course, the reputational aspect goes beyond this and also relates to the perception that companies unable to respond to workforce and other operational disruptions are often perceived as incapable of handling future crises. This perception will most likely lead to investors prioritizing companies with stronger ESG performance, while stakeholders may increase their demands to respond to these challenges — increasing pressure on management.
Finally, failing to implement proper EHS measures or adequately respond to climate-related emergencies, like displacement, can cause companies to face lawsuits, further exacerbating the financial and reputational consequences.
Regulatory risks
Besides these highly important downsides of not addressing climate displacement, companies can, of course, face regulatory risks from failing to comply with EHS and ESG guidelines for preventing and mitigating the effects of climate displacement. Despite not being uniformly enforced throughout the globe, companies operating in jurisdictions with stricter compliance standards must be particularly vigilant to avoid penalties or other consequences.
ESG policies are becoming increasingly demanding for companies, and it is of the utmost importance for them to tackle problems before they occur.
What should companies do to address climate displacement?
Companies must anticipate these unwelcoming events and adopt EHS and ESG policies that align with the dangers of extreme climate events, such as the Valencia floodings.
But how? And what are the already existing regulations to look out for?
Remote and hybrid working
One way companies could approach this would be, for instance, by adopting remote work when possible. Employees are allowed to relocate without losing their positions in the company, whilst the company reduces losses in downtime and productivity. Companies with remote-friendly policies help adapt to possible future crises, ensuring business continuity and reducing unnecessary additional costs.
Prepare staff with the right equipment and training
For “unprotected” employees, ensure PPE and training. For instance, companies located in areas where a wildfire could happen should have all their personnel trained for such an event. This is part of the California Wildfire Smoke Protection Law, which mandates protections for workers exposed to hazardous air conditions by obliging companies to provide “effective training and instruction in a language and manner readily understandable by employees.” By ensuring their employees have the adequate PPE and training, companies are promoting their safety during these crises, doing what they can to minimize injuries and fatalities.
Build defenses into infrastructure and policies
Preventive measures also include infrastructure investment, and proper land use practices, such as described in Bangladesh’s National Strategy on Climate Displacement. The Strategy also establishes a framework for relocation and collaboration with governmental programs to ensure resources and services during said crises. Despite being only a strategy and not enforceable, aligning with this allows companies to strengthen and align with global ESG policies and objectives.
Similarly, in the European Union, the Corporate Sustainability Due Diligence Directive (CSDDD) integrates companies’ operations in a more sustainable and human rights-oriented way, aligning with the goal of preventing and mitigating any potential harm to people, as well as remediating in case of such detrimental circumstances.
Germany is also aiming to tackle the negative effects of climate change, including climate displacement, with the Climate Action Plan 2050. This document is a long-term climate strategy that aims to adopt measures to address negative effects, directly addressing climate change-related displacement of communities and workers. The Plan “recognizes the importance of cooperative approaches, including … approaches for dealing with the displacement caused by climate change.” This could mean that, depending on further regulation, companies could, in the future, face higher premiums or difficulty obtaining insurance. It would mean a necessity to adopt climate-resilient practices and implement climate risk mitigation measures to maintain affordable insurance.
This proliferation of regulations, directives, and initiatives stands as proof that governments are taking further steps to mitigate the climate crisis — especially those in areas more susceptible to such disasters. For instance, in the State of Amazonas, Brazil, a law proposal aimed at “Establishing the Law for the prevention and confrontation of extreme climate events” is currently pending decision in the Legislative Assembly of the State of Amazonas (ALEAM). Among other things, this Proposal aims to ensure the cooperation between private and public entities to enforce contingency plans, including, for example, training programs. Despite not being directly aimed at companies, they could benefit from it — and ensure a safer workplace and more sustainable ESG policies in the process.
Don’t let climate displacement disrupt your business
Climate displacement poses a real threat to businesses — operationally, legally, and reputationally. It can cause workforce disruptions, such as loss of talent and unnecessary recruitment processes, as well as insurance difficulties.
Companies tackling these adversities by implementing proactive measures — such as remote working policies, ensuring proper PPE and training for employees, and in some cases investing in climate-resilient infrastructure — can improve resilience and protect their operations, as well as their reputations.
Meanwhile, the growing need for compliance with evolving regulations like the EU Corporate Sustainability Due Diligence Directive and climate action plans is crucial for businesses to avoid penalties, build strong ESG policies, and improve their own sustainability.
