Weather and Natural Disasters

Big companies getting serious about environmental risks

While there's much focus on the California drought and the impact it has on farmers, some of the world's biggest companies are increasingly concerned about the effects of severe weather shocks to their bottom line.

Kibae Park | Getty Images

As a result, many big companies are pursuing more low-carbon energy and making other changes, such as how they procure raw materials, according to new data.

The research was complied by CDP, an organization that gathers environmental data reported voluntarily by companies and other entities. As extreme weather has intensified in recent years, more large public companies are building environmental concerns directly into business strategy.

Read MoreAmid drought, some California farmers in near 'survival mode'

For example, more businesses that report data to the CDP say they're inquiring about greenhouse gas emissions and other environmental risks from their suppliers of raw materials and parts. The companies that ask their suppliers about climate risk through CDP have a total supply chain purchasing power of $2 trillion in 2015, which is up from $1.3 trillion in 2014.

Measuring climate risk management another way, more company suppliers are setting emissions targets. In 2014, 48 percent of suppliers set targets, up from 44 percent in 2013 and 39 percent in 2012, according to CDP data.

Questions about carbon footprints and changes to supply chains may sound wonky, but experts point to a shortage of hard drives that struck tech firms after the severe flooding in Thailand in 2011. That disaster hit some businesses including Intel, which cut revenue forecasts as personal computer sales declined. A large chunk of computer chips are manufactured near Bangkok.

This is a natural disaster that's slowly unfolding.
Toby Ault
Cornell climate scientist on greenhouse gas emissions

"The new data shows an increased awareness of the effects of climate change on these major businesses," said Dexter Galvin, CDP's head of supply chain research. "Climate change has moved from the environmental and sustainability side of the organization to becoming a hard-nosed procurement business issue," he said.

CDP collected anecdotes from large, public companies that are addressing climate risk, especially with their supply chains:

  • Bank of America now asks suppliers specifically about greenhouse gas emissions, energy use and goals.
  • AT&T has set a goal that by the end of 2015, the majority of its key supply chain spending will be with suppliers that track their own greenhouse gas emissions and have specific greenhouse gas goals.
  • At L'Oreal, suppliers' performance on climate change issues is regularly challenged during business reviews.
California drought: Are farms draining cities dry?
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California drought: Are farms draining cities dry?

Those and similar steps come as the idea of human-induced climate change sparks more debate.

Sen. Ted Cruz, R-Texas, now a presidential candidate, speaks for many when he compares climate change activists to "flat-earthers."

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On the flip side, scientists argue that climate change could trigger a so-called megadrought—one as severe as the Dust Bowl of the 1930s, but longer lasting—unless greenhouse gas emissions are reduced.

"This just emphasizes how precious water is, and how we need to manage it on a decades horizon," said Toby Ault, assistant professor at Cornell's department of Earth and atmospheric sciences. "This is a natural disaster that's slowly unfolding," he said.