A recent report published by the Center for Climate and Energy Solutions explores the current challenges facing global supply chains, including man-made and natural disasters. It reviews the existing supply chain resilience frameworks, emphasizing viability, flexibility, contingency, and supplier collaboration. The crux of the report is the absence of climate-specific metrics and decision-useful disclosure tools made available for supply chain managers. In an era of economic volatility and climate change, companies are navigating turbulent waters. Current barriers facing the implementation of climate risk analytics include data challenges, limited supplier transparency, and mismatched climate assessments and goals. The report calls for integrated approaches that align climate and supply chain practices and greater collaboration among businesses.
This report addresses the critical gap in current supply chain management: the lack of integrated climate analytics. It highlights how this absence prevents managers from being informed about existing and impending climate risks. The report advocates for the adoption of integrated strategies that blend climate and supply chain management, stressing the importance of enhanced business collaboration to achieve this.
I spoke with Sadie Frank, one of the contributors to the report, who worked with C2ES in the past, helping inform the private sector on regulation developments. She is now a co-founder of a climate risk analytics firm, N4EA. Through her work, she found that climate professionals think of supply chains fairly narrowly and focus primarily on asset risk. As we know, the supply chain is a multi-disciplinary space that includes trade finance, warehouse operations, planning, transportation, and much more.
The need to develop tools to harmonize climate risk, including floods, fire, and asset risk. While working on informing the climate risk community of the true expansiveness of what supply chains truly entail, and the rich history of supply chain resilience.
How are companies implementing Climate Risk Assessments today?
“It’s a spectrum; companies such as those in the rail industry are more forward-thinking due to their vulnerabilities to flooding, temperatures, and weather.” Companies are also already thinking about climate reporting, citing two climate reporting bills in the state of California, SB 261 and SB 253, impacting over 4500 companies with revenues greater than $500 billion.
Operational pressures are growing as global climate targets slip out of reach, making climate risk management more urgent. “We are starting to see that companies are not as likely to carve out a climate risk function, and are thinking more broadly about enterprise risk management, which includes new sources of risks and increasing volatility within their existing risk management framework.” She finds it more exciting, as this is a more effective strategy to think about climate risk.
What opportunities does collaboration bring for companies?
Fostering closer collaboration with suppliers, beyond mere document exchange for disclosure, is encouraged. This direct engagement allows for a deeper understanding of how suppliers perceive and manage risk.
“There’s a significant opportunity to merge expertise in supply chain risk assessment and climate risk management, translating this into improved operational outcomes.” A better operational understanding of extreme weather will enhance short-term operational resilience, while climate risk professionals will gain a more comprehensive, long-term view of supply chain resilience.
Going Beyond Risk Alerts:
Risk alerts are helpful, but they are not the full package. Typically, you will be pinged if your supplier is impacted by an incident such as a fire or flood, but the alerts fail to provide further details on the extent of the impact. These warnings should include more context and meaning so supply chain managers can better understand the true impacts of the incident to plan accordingly.
How are supply chains today preparing for climate disruptions?
“Significant advancements have been made in the core areas of resilience, flexibility, contingency, and collaboration within supply chains.” While substantial progress has occurred since the COVID-19 pandemic, same-day shipping models have inadvertently introduced considerable fragility. Additionally, tariffs have heightened global awareness among companies, prompting them to develop more strategic approaches to sourcing and planning.
“The future of supply chain management lies in a comprehensive understanding of transport networks, encompassing both their physical risks and vulnerabilities. This involves accounting for human-made factors like tariffs, alongside the evolving changes to our planet.” Strategic warehouse placement is crucial, but it’s equally vital to integrate climate risks associated with your transport networks into the decision-making process.
Closing thoughts: “This is the new normal. There is no way we can engineer our way out of increased supply chain volatility and climate risks. As supply chain professionals, we must accept that our world is more chaotic and find solutions to better manage the future.”
Organizations Included:
C2ES: The Center for Climate and Energy Solutions (C2ES) is a nonprofit, nonpartisan organization dedicated to advancing practical policies and actions to address climate change and promote clean energy. It works with businesses, policymakers, and communities to develop innovative solutions that reduce greenhouse gas emissions and strengthen climate resilience.
N4EA: is a predictive analytics company focused on climate and weather risk in global supply chains, using real-time data and geospatial modeling to simulate disruptions and their impact on logistics, emissions, and costs.
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