Climate Shocks May Hit Supply Chains Harder Than Pandemic - MIT
(5 October 2022 - Global) Corporates are not doing enough to map out risks from volatile weather, experts strenuously claim.
The pandemic has shocked the global economy, but beyond the transportation delays and parts shortages lies a more enduring challenge for supply chains - climate change.
Consider in 2021 alone the world saw Hurricane Ida, a typhoon near Chinese ports, the Texas freeze, British Columbia flooding, and freak December tornadoes across the USA, and it’s clear that global trade is struggling to cope with much more than a health crisis. As temperatures creep higher, nature is likely to be a more frequent, intense, and random.
Much like the pandemic, extreme weather events are acute and hard to protect against. They begin in one region but can quickly ripple through supply chains, affecting production and delivery times. In Texas, where temperatures dropped to record lows in February, the petrochemical industry was disrupted for an extended period affecting the supply of resins and plastics, as well as that of widely used chemicals such as citric acid and carbon dioxide.
A first step companies can take to fight extreme weather’s effects is to map their supply chains to better understand exactly where risks lie, whether that’s a supplier on the Gulf Coast subject to hurricanes or a transport hub vulnerable to flooding.
An analysis of 405 extreme weather events over the past decade by Carbon Brief, a website in London devoted to climate science, shows that 70 percent were more likely to occur, or made more severe, because of global warming. “It’s not the next big supply chain crisis. It’s the next big supply chain crises, plural,” says Jason Jay, director of the Sustainability Initiative at the MIT Sloan School of Management. “What it ends up looking like is a set of individual crises in different places at different times. They’re hitting a different part of the supply chain, and they’re hitting it in a somewhat unpredictable way.”
“Companies don’t even know the locations of their first-tier suppliers, let alone who their suppliers are buying from,” says MIT’s Jay. “And many times these supply chains are four or five steps deep.”
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