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Mitigating Climate Change Impacts on Supply

When weather patterns change or extreme weather occurs, be sure your “umbrella” covers your entire supply chain—not just select pieces of it.

* By Fiona Soltes *

Marcel Proust famously quipped that “a change in the weather is sufficient to recreate the world and ourselves.”

There’s no doubt that the weather keeps changing. So how are supply chains doing with the re-creation end of the equation?

In recent years, temperatures have continued to rise. The U.S. Global Change Research Program points out impacts already visible, from flooding in the Midwest and drought and wildfires in the Southwest, to erosion in the Northeast and decreased water availability in the Southeast.

In addition, Munich Reinsurance Company, which has followed climate change for more than 40 years, predicts hurricanes that will be stronger and more intense; increased likelihood of heatwaves and heavy rainfall; more frequent and more extreme monsoons in South Asia; more frequent flooding in Europe; and other challenges.

“I do think we talk about preparedness a lot,” said Kathy Fulton, executive director of the American Logistics Aid Network (ALAN), an industry-wide philanthropic organization that assists disaster relief with free logistics assistance. “But we don’t always see action. Someone may say, ‘We have a business continuity plan,’ but what that really means is that they’re backing up their data offsite and that they have insurance. That’s not really sufficient, even for an everyday disaster.”

So what is sufficient? How important is it? And what can supply chains be doing now to mitigate the risk?

First, let’s explore the angle of importance. Supply chains face an increasing variety of threats, and many, like cybersecurity, trade wars and civil unrest, are not likely driven by weather. Even so, when supply chain risk management platform Resilience360 pulled together its annual risk report last year (http://bit.ly/2O5CJ22), climate change was one of the top 10 supply chain risk named. North America may have experienced fewer disasters and weather-related incidents in 2018 than in 2017, the report stated, but “the Asia Pacific suffered eight major tropical storms, which caused significant supply chain disruptions in Japan, China, South Korea, Taiwan, and the Philippines. A month-long summer drought in Europe brought water levels on the Rhine and adjacent rivers to record low levels, halting shipping traffic on large stretches and causing multiple chemical and steel makers to declare force majeure.”

Overall, the report stated, “a hotter atmosphere is linked to a range of problematic effects, including an increase in the frequency and severity of drought conditions, periods of intense rainfall, tropical storms, and damaging wildfires. The timing and severity of climate related disruption can be as unpredictable as it is dramatic, however. Water shortages had a material impact on supply chains in Europe during 2018, with low water levels disrupting inland shipping.” Over the long term, climate change can be “expected to drive increased risks of flooding and extreme weather patterns.”

Those not paying close attention, then, would do well to begin.

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This issue of MHI Solutions focuses on sustainability and its progression in the supply chain. Consumers are becoming more interested in making environmentally friendly decisions when it comes to their buying habits and the brands to which they are loyal. Studies have found anywhere from 80-85% of consumers are more likely to buy from a company with a reputation for sustainability than from a neutral company, if their prices are equal.

Leading firms are tapping into this mindset by building more sustainability, and transparency, into their supply chains. They know that more sustainable operations will drive long-term brand loyalty and competitive advantage while having bottom line impacts on efficiency and profitability.

This issue of MHI Solutions will help provide you with the information and resources you need to address sustainability across your supply chain to improve your overall business performance.

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