Extreme weather events such as floods, heatwaves and bushfires are occurring more frequently, disrupting operations and damaging infrastructure in Australia and globally.
According to Gallagher, these developments are driving a greater need for businesses to prepare for and address climate-related challenges – and it has made a number of suggestions that brokers can pass on to their clients.
Australian companies are contending with evolving environmental regulations designed to lower carbon emissions. These rules bring compliance costs and operational changes. Workplace health and safety requirements are also shifting to address risks such as heat stress, with breaches potentially leading to penalties and reputational impacts.
Read more: Gallagher releases guide to navigate Australia's climate reporting rules
Consumer expectations are also changing, pointing to increased demand for sustainable products. Businesses that do not adapt may lose market share to competitors with stronger environmental initiatives.
Gallagher’s research finds that climate change is influencing profitability and long-term viability. Rising costs stem from infrastructure adaptation, investment in sustainable technology, and compliance with disclosure requirements on climate-related financial risks. Alongside direct property damage and business interruption, companies are increasingly exposed to contingent business interruption caused by events in other regions.
Supply chain vulnerabilities are another concern identified by Gallagher. The restriction of marine traffic through the Panama Canal in 2023 and 2024, following record low water levels from drought, demonstrated the impact of extreme weather on global trade. Water scarcity also poses operational risks for sectors such as agriculture and manufacturing.
Climate-related litigation remains a risk for businesses that fall short of publicly stated environmental, social and governance commitments.
To address these risks, Gallagher advises measures including energy efficiency audits, upgrading to LED lighting, optimising heating and cooling systems, and adopting smart building technology. The firm also recommends waste reduction, use of sustainable materials, and diversification of supply chains across different regions while assessing supplier resilience to climate impacts.
Gallagher further suggests that companies conduct comprehensive climate risk assessments, implement disaster recovery and continuity plans, and maintain transparent sustainability reporting to meet regulatory and stakeholder requirements.
Insurance has a vital role to play too, with products specifically designed for climate-related risks, including parametric solutions that cover events not addressed by traditional policies.
Gallagher concludes that as environmental conditions continue to evolve, businesses must decide how they will integrate climate risk management into their operations.
How is your organisation preparing for these challenges? Share your thoughts in the comments below.
