GENEVA (Thomson Reuters Foundation) - In the Philippine capital Manila, retail giant SM Prime Holdings Inc. has built a mall without walls on its bottom floor, so floods can pass through, while the main shopping areas are elevated above ground.
When Typhoon Ondoy hit in September 2009, all the extra investment was recouped because retail losses were avoided, and local people were able to seek shelter inside, Hans Sy, the company's president told an international conference on disaster risk reduction in Geneva on Tuesday.
"The global private sector is becoming increasingly aware of the importance of disaster resilience. My experience has proven that investing in resilience simply makes good business sense," said the executive, who has harnessed technology to make another mall near a faultline more able to withstand earthquakes of up to magnitude 7.
"(This) is not just the private sector's business, it is everybody's business."
In Sendai, the main city in Japan's northeast region hit hard by the 2011 earthquake, the local government has been working with civil engineering firm Kokusai Kogyo Co. Ltd to build an eco-town that draws its energy from a smart grid that can be supplied with solar, natural gas or battery-stored power.
The need for a diverse energy supply became clear after nuclear power stations were hit by a huge tsunami, causing major blackouts. Sendai's mayor, Emiko Okuyama, said before the disaster, people thought it was the authorities who should take the lead in protecting them from disasters, but many now realise this is not enough.
"There is more initiative to collaborate between the public and the private sector," she told a discussion on how the business world can help make societies more resilient.
Jan Eliasson, United Nations deputy secretary-general, told reporters that disaster risk reduction is a "shared responsibility" that cannot be assumed just by one type of organisation in such a complex world.
He called for a "division of labour", under which governments team up with the private sector and local communities, with the United Nations helping to make it happen.
Speaking to Thomson Reuters Foundation on the sidelines of the meeting, he urged companies to invest more in making their business resilient to disasters "out of enlightened self-interest".
"I would hope that the private sector and the financial sector would find it good business and a good investment to do disaster risk reduction because they pay a tremendously heavy price if the infrastructure is gone," he said.
Last week, U.N. Secretary-General Ban Ki-moon said economic losses caused by disasters have been underestimated by at least 50 percent, and are "out of control".
According to a new U.N. report on the business case for disaster risk reduction, direct economic losses are likely to be much higher than thought, reaching between $2.5 trillion and $3 trillion since 2000.
In a survey of 1,300 small and medium-sized businesses in six disaster-prone cities in the Americas, it found that three quarters had suffered business disruptions related to damaged or destroyed power, telecommunications and water utilities.
Andrew Maskrey of the United Nations Office for Disaster Risk Reduction (UNISDR), one of the report's lead authors, told the Geneva conference that disaster risk has only been on the horizon for the private sector in the past few years, but is now finding its way into corporate strategies.
"If a trillion dollars that are going to be invested in new cities, agribusiness and tourism and other sectors in the coming years are resilient, then disaster risk will go down. If they are not, it will go up, it's as simple as that," he said.
The private sector accounts for 70 to 85 percent of worldwide investment in new buildings, industry and critical infrastructure, according to the United Nations.
This offers a "huge opportunity" to construct disaster-proof infrastructure, Maskrey said, such as buildings that can withstand a high level of earthquake activity.
EFFICIENT USE OF RESOURCES
Roger Sutton, chief executive of the Canterbury Earthquake Recovery Authority in the New Zealand city that was hard hit by major quakes in 2010 and 2011, said that even the though damage, at more than $30 billion, amounted to around a fifth of the country's gross domestic product, "the economy has never stopped" with five big local companies working together to rebuild at a low price.
"Speed counts," he said. "Fix your infrastructure quickly, or nothing else gets going." Bringing in the best experts is also important, as well as working closely with government, he added.
The United Nations and global consulting firm PwC have set up a platform to encourage the private and public sectors to collaborate on disaster risk management. In the next two years, it will hold discussions on the best policies and put in place roadmaps to implement these at global, regional and local level.
The private sector is also expected to play a much bigger role in the next global framework on disaster risk reduction due to be introduced from 2015. Businesses had little involvement in the Hyogo Framework for Action, the current 10-year plan agreed in 2005.
The focus is now on persuading them it is in their financial interests to invest in protecting their assets and staff.
Aris Papadopoulos, CEO of Titan America, said this was a much more efficient use of resources than rebuilding after disasters or trying to make infrastructure safer at a later date.
"Resilience carries a premium but the most expensive choice is not having it," he said.
Our Standards: The Thomson Reuters Trust Principles.