Extreme weather: what are the legal implications for my business?
Floods, fire, drought, storms: it seems every day brings a new story about the impact of extreme weather and climate change. Aside from the physical loss and emotional impact on individuals and communities, there are many legal issues caused by severe weather that organisations need to consider.
Large areas of Australia’s east coast are undertaking the huge task of cleaning up after floods, from repairing damaged properties and roads to finding housing for displaced people. How are planners and planning frameworks responding to the challenges caused by extreme weather and climate change?
Recently, the supply chain was again thrown into disarray, with a train derailment at Inverleigh in Victoria cutting the Melbourne-Adelaide rain line, demonstrating the chaos that severe weather can cause.
As we lead in to the busy festive season, what are the implications of supply chain disruption and physical damage for industries such as the Fast Moving Consumer Goods (FMCG), agribusiness, retail and manufacturing?
Climate change and human rights: displacement of communities
With the serious floods hitting Australia’s east coast over the past few months, questions have been raised about the viability of building houses in high-risk floodplains or bushfire zones.
Federal Emergency Management Minister Murray Watt was reported as warning current planning systems are not fit for purpose in the face of escalating natural disasters driven by climate change.
‘We must think more seriously about climate and disaster risk when planning future housing development. It makes absolutely no sense for all levels of government to spend billions in disaster recovery while we continue to see housing built on floodplains,’ Mr Watt said.
Partner Brendan Tobin said government, through planning laws and zoning, does need to be more systematic about how it deals with the impacts of climate change and severe weather events. The role of climate change and its impact on human rights also needs to be factored in.
Recently, the United Nations Human Rights Commission decided that the Australian Government had not done enough to mitigate the impact of climate change on Torres Strait Islanders, he said.
‘We’re also seeing human rights arguments being interposed in planning and environment decisions, particularly in relation to new fossil fuel projects,’ he says.
The issue of climate change, human rights and displacement of people also goes beyond what is happening in Australia, with our neighbours, such as the Pacific Islands, threatened by rising sea levels. But Brendan said moving people is not necessarily an easy solution.
‘Planning will also need to accommodate displaced people as a result of climate change.’
Brendan said Hall & Wilcox was acting pro bono for a man who lost his property in the NSW north coast to bushfires in 2019. He does not have the funds to rebuild his property to conform with new bushfire standards. The firm is also acting in a case in the town of Lismore, which has a clear need for housing but also needs to move people out of flood zones.
‘But the question is where do you put them? And generally, you need to put people in locations which will cause other environmental planning issues, such as displacing koala habitats, or a threatened species, or they will require traffic and electrical upgrades. So, it’s not easy to relocate people and it has flow-on consequences.’
How does severe weather impact transport and the supply chain?
Approximately A$1.7 billion of consumer goods are imported and exported annually. The majority of that trade comes to Australia by ship, and is therefore vulnerable to weather events.
‘Ships lose containers. Although they are responsible for worldwide trade day in day out, they are not designed to withstand all loads in terms of extreme weather,’ says Lawyer Kendall Messer.
Once the goods have arrived, they are stored, imported and distributed – all stages which carry the risk of rain, flood or fire damage.
Special Counsel Nicole Tumiati said severe weather can damage physical assets such as premises, plant and equipment, inventory and also impact the availability of labour. But for businesses, such as those in the FMCG sector, which are dependent on complex supply chains, any disruption in that supply chain caused by weather can have a domino effect on other parties who directly or indirectly rely on that supply.
‘The knock-on effect can be seen as increased prices, delays in supply and, in extreme cases, certain essential components being unavailable,’ Nicole said.
Are my contracts and insurance adequate to cover me?
Partner Chris Sacré said it was essential businesses examined their contractual arrangements, both with suppliers and customers, and ensured that both direct and indirect risks associated with severe weather were properly addressed.
He said if companies couldn’t manage the risk under contracts, they would look to insurance to cover it. But he warned that there were myriad clauses to consider when purchasing cover and not all risks would be insured. For example, the standard Institute Cargo Clauses exclude all loss, damage or expense caused by delay.
‘Without wanting to be the bearer of bad news, when it comes to supply chain delays caused by extreme weather, the insurance market is unlikely to be picking up the tab. It therefore becomes all the more important to shift risk contractually or by good operational planning.’
Top tips for managing and mitigating the risks of extreme weather
Businesses should look closely at their insurance arrangements, pay close attention to their transport arrangements, and make sure their supply chain is resilient.
Tune into our ‘Extreme Weather’ podcast series to hear more from our experts.
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