The hidden costs of climate change

Key Takeaways
• Climate change poses significant risks to employee health, including physical conditions such as heat-related illnesses and mental health challenges like eco-anxiety.
• Companies must assess and address these risks through comprehensive audits, early-warning systems, and mental health programs.
• Learning from the public sector and collaborating with experts can provide valuable insights for businesses.
• Transparent communication and proactive leadership are essential in fostering employee trust and engagement during climate events.

As climate change accelerates, businesses have taken proactive steps to safeguard their physical assets and supply chains. Seawalls are being built around coastal facilities, warehouses are being relocated from flood-prone areas, and supply chains are being adapted to withstand climate shocks. However, one critical area remains overlooked: the health and well-being of employees. As extreme weather events such as wildfires, extreme heat, and flooding become more frequent, companies are facing hidden costs associated with the impact of these climate events on the workforce. These costs, which include higher healthcare expenses, reduced productivity, and the increased risk of mental health issues, are already having a significant financial effect.

A growing body of evidence suggests that climate change is having a profound effect on employee health, both physical and mental. Research indicates that four in ten non-elderly workers are employed in occupations that are at increased risk for climate-related health impacts. Extreme heat, wildfires, and flooding are not only taking lives but also affecting employee engagement, productivity, and mental health. In fact, eco-anxiety, a condition marked by stress and hopelessness about environmental change, is becoming an increasing concern for employees, particularly younger workers.

The costs are substantial. Climate change already incurs direct health costs that exceed $800 billion annually in the U.S. These costs are borne by employers, who face increased healthcare coverage expenses, from treating asthma and chronic conditions to addressing mental health challenges. Performance and engagement also suffer as health declines, reducing productivity. Additionally, extreme heat alone costs an estimated 2.5 billion hours of labor in the U.S. annually, with the global total reaching 490 billion hours.

While much of the focus has been on protecting physical assets, the impact of climate change on employee health is becoming a pressing issue. The physical and mental well-being of workers is directly tied to the financial health of a company. A study by the Kessler Trauma Center highlighted that even short-term exposure to extreme heat or wildfire smoke can dramatically reduce worker performance and cognitive function. With many workers living in areas vulnerable to climate risks, businesses are faced with mounting challenges. It is no longer enough to simply prepare for physical risks; companies must also account for the health risks posed by climate change and integrate employee well-being into their long-term strategies.

Barriers to Addressing Climate Change and Employee Health

The primary barrier to addressing these risks is a lack of awareness within organizations about the long-term impact of climate change on their workforce. Many companies are focused on physical infrastructure and supply chain resilience, but fail to acknowledge that their employees, who are their most valuable assets, are just as vulnerable. Climate change poses both direct and indirect risks, from heat-related illnesses to mental health challenges such as eco-anxiety and PTSD. Furthermore, disadvantaged communities are often the most affected, exacerbating existing inequalities within the workforce.

Another challenge is the difficulty of accurately assessing climate risks to employee health. Many companies lack the tools to track these risks effectively, particularly in a rapidly changing climate. This oversight can lead to missed opportunities for intervention and prevention, allowing the problem to grow unchecked.

Five Key Actions Organizations Can Take

1. Conduct a Climate Change and Health Audit

To mitigate the risks posed by climate change to employee health, companies need to conduct a comprehensive climate change and health audit. This audit should include mapping out climate risks to both physical assets and the workforce, considering factors such as geographic diversity, industry-specific risks, and historical exposure to climate events. For instance, companies in flood-prone areas should assess how climate change might impact their workforce’s health and safety, including potential evacuation and communication strategies during extreme weather events.

Additionally, companies can leverage tools such as heat maps and climate-risk analytics to track and assess risks to employee health over time. Citigroup’s use of heat maps to track both physical and workforce-related risks provides a valuable example of how companies can forecast the impacts of climate change on their employees and prepare accordingly.

2. Develop and Deploy Early-Warning Systems

Timely information is critical in addressing climate-related health risks. Early-warning systems can help prevent exposure to dangerous conditions, such as poor air quality during wildfires or extreme heat. Companies should adopt systems similar to Google’s, which tracks employees’ locations during climate risks and sends them relevant safety advice. Google’s system, for example, offers guidance on preparing for poor air quality, evacuations, and power outages during extreme weather events.

These systems should be integrated into existing communication channels and be flexible enough to adapt to multiple climate risks. Additionally, companies must prioritize data privacy when implementing these systems, ensuring that employee information is handled responsibly.

3. Learn from the Public Sector

The public sector has been at the forefront of developing frameworks to mitigate climate-related health risks. Companies can adapt these frameworks to fit their specific needs. The CDC’s Building Resilience Against Climate Effects (BRACE) framework, for example, helps public health departments forecast the impacts of climate change on health and implement interventions. Companies can adapt this model to create employee health programs that address climate risks, from heat stress to eco-anxiety.

In addition to adapting frameworks, businesses can partner with public health organizations and experts to gain insights into how to best address employee health in the face of climate change. This collaboration can also enhance corporate social responsibility efforts, as companies demonstrate their commitment to the well-being of their workforce and the broader community.

4. Address Mental Health and Eco-Anxiety

As climate change exacerbates mental health challenges, companies must take proactive steps to address eco-anxiety and stress among employees. Many workers, particularly younger generations, are experiencing heightened levels of anxiety about the future of the planet. Employers should integrate mental health support into their climate response strategies, offering resources for employees to cope with the psychological stress caused by climate events.

For example, some organizations have begun developing specific mental health programs focused on climate anxiety, providing employees with coping mechanisms and emotional support. These programs can help reduce stress, improve morale, and prevent burnout, ultimately leading to higher employee engagement and productivity.

5. Communicate Transparently About Climate Risks

Transparency is key when addressing climate-related health risks. Leaders must communicate openly about the potential impact of climate change on employee health and the steps the company is taking to mitigate these risks. This communication should be empathetic, acknowledging the challenges employees face and the company’s commitment to safeguarding their well-being.

Google’s approach during the California wildfires, where CEO Sundar Pichai communicated directly with employees about safety measures and work-from-home advisories, serves as a model for effective leadership during climate crises. Clear, compassionate communication can foster trust and ensure that employees feel supported during challenging times.

So what next?

It’s time for corporate leaders to recognise the importance of employee health in the context of climate change and act to create a resilient, healthy workforce. The future of work depends on it. If youd like to learn more, or discover how Locate Global are taking steps to improve workforce safety across the globe, contact our team at info@locate.global.