Climate change and supply chain risk

A new journal article from PwC’s global climate change network is written from a European perspective but has relevance to companies around the world. The article states that “Anticipating and responding to risks is business-as-usual for all sectors. . . . industries are no strangers to dealing with the risks of supply-chain disruption, both man-made (export restrictions) and natural (weather, drought, etc.). What is changing is the complexity of the risks, their interdependence with other risks and the wide-reaching, contagious impact they have. But the other major factor set to exacerbate supply-chain risk is climate change. Often overlooked, climate change adds to complexity. It amplifies or alters existing risks, for example raw material availability (e.g. water, energy) or transport disruption due to extreme weather events. The resulting shocks on the global supply chain can be severe and persistent.

The authors have studied agricultural, energy, and mining supply chains. They have concluded that climate change impacts will likely be greatest on global commodity food supply chains though all international supply chains are likely to be affected. They recommend that:

  • Businesses need to identify not just the risks emerging from the impacts of climate change, but how the resulting impacts interact with existing risks.
  • Governments and the business community need to start considering risk management plans in a world with a climate change of not just two degrees C, but also four degrees C or even 6 degrees C. Effects are already being felt in some regions and they are projected to worsen globally.
  • Competition for scarce resources may intensify, and can be compounded by political and economic developments. Developing a collaborative and sustainable resource management strategy at a global level can help avoid the risks of ‘resource grab’ and conflicts.

The article is available at http://www.pwc.com/gx/en/governance-risk-compliance-consulting-services/resilience/publications/business-not-as-usual.jhtml by clicking on Download a PDF of this article. Resilience: A Journal of strategy and risk is a PwC publication.

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