A Harvard Business Review study found that just 11% of suppliers in the U.S., China, and Taiwan are prepared for weather-related disruption. Yet 50% of U.S. suppliers and over 90% of Chinese and Taiwanese suppliers have already experienced climate volatility.
What are these weather disruptions? They include everything from tornadoes, heat waves, wildfires, flooding, and hurricanes. In particular, the frequency of supply-chain-disrupting hurricanes in these areas is expected to quadruple in the next 15 years.
The damage caused by climate change-related weather events leads to cost spikes in labor, energy, and logistics on top of costly manufacturing downtime.
And as a reminder, we’re talking about supply chain risks. So even if a company’s direct operations are insulated from catastrophic weather disruptions, they’re likely have suppliers who are not.
As a business, what can you do to mitigate supply chain disruptions?
This is where the Taskforce on Climate-related Financial Disclosures (TCFD) comes in. Guidance from this framework is designed to help companies assess their own climate-related risks. Companies can also use it to gauge the level of risk within its supply chain via supplier questionnaires.
When it comes to mitigation strategies, these will all be specific to each business and its unique risk profile. But, in general, buffering your inventory so you have reserves in the event of a disruption and maintaining close communication with suppliers are both key to mitigating supply chain disruptions.
- Harvard Business Review. “How Exposed Is Your Supply Chain to Climate Risks?” https://hbr.org/2022/05/how-exposed-is-your-supply-chain-to-climate-risks Accessed February 15, 2023
- Supply Chain Digital. “Climate change an ill wind for supply chain risk management” https://supplychaindigital.com/sustainability/climate-change-an-iil-wind-for-supply-chain-risk-management Accessed February 15, 2023