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How climate change is impacting the health of your workforce

Climate change is increasing health risks and costs for people and businesses worldwide.
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By Amy Barnes , 

Head of Climate & Sustainability Strategy

08/04/2024 · 6 minute read

Climate change is increasing health risks and costs for people and businesses worldwide. While regulators and organisations recognise that climate risk is a business risk and, to date, they have typically focused on opportunities to drive decarbonisation efforts, a growing risk that cannot be overlooked is the impact climate change is having on workers’ health and safety.

Consider an office worker in Amsterdam, a firefighter in British Columbia, or a truck driver in Cairo. All will likely experience health and productivity implications due to climate change, whether from exposure to poor ventilation, wildfire smoke, or pollution. Health impacts can range from mild to severe, acute to chronic. For instance, a wildfire can lead to direct health harms such as heat stroke, asthma, and mental ill health. Over time, this may amount to indirect health issues such as worker absenteeism, reduced productivity, and increased healthcare costs. Climate change can also lead to increases in infectious diseases and injuries secondary to disasters. And by 2030, climate change is expected to cost US$2-4 billion per year in direct damage costs to health.

Business resilience relies on employee health and well-being. When people thrive, so do organisations and societies. The consequences of organisations overlooking this growing risk are significant, potentially spanning reputational, productivity, and economic costs. Fortunately, with foresight and preparation, an organisation can protect its most valuable and vulnerable asset — its people — against climate-related health risks.

Why employers should care

The impact of climate-related health incidents is already extensive. Furthermore, climate change health impacts are expected to intensify over time due to worsening air quality, deadlier heatwaves, and more frequent and severe natural disasters.

The Global Risks Report 2024 names extreme weather events as the top risk most likely to present a material crisis on a global scale this year. As these events become more frequent and widespread, the cost to businesses from disruption is expected to increase.

Across the US, for instance, high heat costs US$100 billion annually in reduced productivity, a figure expected to double by 2030. In Southern Europe, an average wildfire season leads to an annual production loss of €13-21 billion. Heat exposure in India led to the loss of 490 billion potential labor hours in 2022. All of these instances suggest that at the country and business level, preparedness efforts may be falling short.

Business strains due to climate hazards may include:

  • Spikes in health care needs and costs.
  • Infrastructure fragility affecting workforce access, safety, and transport to and from work.
  • Increases in health and safety risks.
  • Productivity loss from worker absenteeism.
  • Reputational, legal, and regulatory risks as low-paid and migrant workers are more exposed to climate threats and often least capable of coping.

Not all organisations’ workforces will be affected by climate change in the same way. Much of your organisation’s risk exposure will depend on where you operate, the working environment, and your supply chain. Different climate events impact health outcomes in different ways, as outlined by Oliver Wyman. 

For instance, people risk can be found along your supply chain, especially if a tier-2 or tier-3 supplier has a workforce exposed to climate-related health issues. Extreme heat may mean factory or agricultural workers in another part of the world have a reduced ability to undertake work, while sectors such as construction and transport services — vital to supply chains — may also experience productivity losses, leading to operational challenges in industries reliant on these services. Additionally, transient workers may also be affected by natural disasters or extreme heat in their country of origin, which can lead to disruptions in their personal and professional lives.

What employers can do to help protect its workforce

Even if you are not in an industry with higher exposure to climate risk, it is important to consider how climate change affects your employees. Legislation and regulations may increasingly come into force to protect workers from issues such as extreme heat, such as the one mandated in California, which requires employers to take steps to protect outdoor workers from heat illness with water, rest, shade, and training.

Generally, two types of action are required: reactive (supporting employee well-being in the face of climate events) and preventive (helping to reduce the impact of climate change and thus the need for reactive action).

By acting early, organisations have an opportunity to minimise health harms and inequities and avert drastic and expensive changes in the future. Building resilience will include steps to identify and quantify risks, and collaborating with specialists to determine optimal mitigation, retention, and transfer strategies based on your specific exposures, as well as your risk and resilience objectives. For example:

  1. Monitoring climate-related risks to physical and mental health.
  2. Understanding health access and considering digital models to address challenges during crisis.
  3. Mitigating risks through training and changes to work sites, schedules, practices, and equipment, such as protective equipment and limiting outdoor work during unsafe conditions.
  4. Ensuring there is guidance and support for affected workers. This should include investing in training on best practices to prepare the workforce for new challenges and ways of working.
  5. Improving socio-economic determinants of health, such as financial resilience.
  6. Investing in resiliency measures, such as parametric insurance solutions.

Organisations can use innovative insurance solutions and risk management services to help protect their workforce from climate-related risks. In one example, Marsh McLennan and a consortium of insurance companies launched Blue Marble to provide parametric climate solutions to communities. Partnering with Nespresso, Blue Marble delivers weather insurance to coffee farmers when bad weather impacts coffee production, thereby easing the financial stress for many coffee-growing communities and improving supply chain resilience for coffee buyers.

Protecting your workforce

Climate change is the biggest global health threat of the 21st century. Besides reducing carbon footprints, employers should make important and commonsense investments in workforce resilience. Given the clear links between climate and health harms, urgent action is vital. How organisations respond today will go a long way toward reducing risks and the need to take more drastic and expensive action tomorrow.

Legislation and regulations may increasingly come into force to protect workers from issues such as extreme heat, such as the one mandated in California, which requires employers to take steps to protect outdoor workers from heat illness with water, rest, shade, and training.

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