Sep 15, 2022
Forty-four percent of chief supply chain officers say they have a general sense of potential climate change risks based on previous events, but they have not methodically identified or quantified those risks, according to a Gartner survey.
Of the rest, 27 percent have conducted a climate change risk assessment to identify their most critical supply chain risks and 18 percent have conducted both risk assessments and scenario planning. Only 11 percent felt climate change wasn’t a future risk.
The National Centers for Environmental Information, a federal agency, estimates that the number of billion dollar weather and climate disasters taking place in the U.S. each year has skyrocketed to an average of 20 in the last two years, including winter storm/cold waves, droughts/heat waves, wildfires, tornadoes and tropical cyclones. In the 1980s, there were only about three per year.
The pandemic and Russia’s invasion of Ukraine proved that the world’s delivery network is fragile, threatening ports, roads, railways, bridges and factory closures. As evident with chip makers in Southeast Asia, many of the world’s factories are far too geographically concentrated.
Longer term, rising sea levels are a particular threat to ports, while increasing average temperatures and changes in precipitation patterns will require overhauls to the world’s food supply.
Any increasing frequency and size of supply chain-related disasters will also work against company efforts to decarbonize and reach other environmental goals. New costs could arrive from carbon taxes when shipping goods across borders, as well as higher transport costs for moving products by sea or air.
Gartner finds the top barriers to planning for climate change in the supply chain include a focus on short-term decision-making (57 percent) and an inability to link the cause and investment to benefits (57 percent).
Some see supply chain management being hampered by built-in inertia.
“[Long-term] strategy and logistics are opposite things,” Dale Rogers, a business professor at Arizona State University, told Wired. “Logisticians are always trying to execute the strategy but not necessarily develop it. They’re trying to figure out how to make something happen now, and climate change is a long-term problem.”
DISCUSSION QUESTIONS: Do you think retailers are doing enough long-term strategizing when it comes to the risks posed by global warming on the supply chain? Where do you see supply chain vulnerabilities and how well are retailers prepared, for example, to deal with extreme weather events tied to climate change?
“Do you think retailers are doing enough long-term strategizing when it comes to the risks posed by global warming on the supply chain?”
