Some experts are warning about the risk of climate change to company supply chains. With enormous complexity in the prediction of climate change impacts, how do you go about determining climate change risk in your company’s supply chain.
We have seen how climate change impacts a company’s supply chain. Flooding and fires can result in companies being unable to manufacture their products because of a shortage of raw materials.
I must make clear that the risk of climate change, albeit a major risk now and into the future, should also be considered together with other risks such as health pandemics, social unrest, and cybercrime (to name only a few).
A recent Gartner survey reports that only 27 percent of supply chain leaders have conducted a climate change risk assessment to identify their most critical supply chain risks.
The survey found that just 18 percent of the respondents conduct both risk assessments and scenario planning.
Some international business schools have published research papers on the impacts of climate change on supply chains. This research is helpful as it shows some ways of approaching the impacts of global climate change on companies’ supply chains.
It’s probably best for a company to work collaboratively with other organisations under a non-profit institution to model a country’s and region’s specific climate risks. For one company to do all this on their own is probably an onerous task, to say the least.
However, each business needs to build its own resilience to climate change risk and its impacts on its supply chain.
So how do you determine the impact of climate change on your supply chain?
One way of going about it is using a modelling and forecasting risk approach. This will require specialised knowledge, which means having the required technical experts in your team.
Using digital technology is another way to understand climate change risks. Gartner says organizations are using predictive analysis. They give examples of tools that could be used, including geospatial analysis, drones, and artificial intelligence (AI) capabilities such as ecological simulations.
For more information, refer to the Gardner supply chain survey, which is on their website. Go to this link for a modelling approach: https://dspace.lib.cranfield.ac.uk/bitstream/handle/1826/14318/climate_change_risk_on_supply_chain_performance-2020.pdf?sequence=7&isAllowed=y