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Climate Change and Supply Chain: What are the Three Key Risks?

Climate Change and Supply Chain: What are the Three Key Risks?

the devastating impact of climate change has affected almost every populated region across the globe. Its hazardous outcomes can impart worse environmental effects. When it comes to climate change and supply chain, there are three major risks involved, check out the listed below: 

-Transient Dangers 

-Physical Risks

-Opportunity risks

Supply chain executives are working on a manifesto after understanding the need and urgency of climate adaptation. Companies are trying to model scenarios and develop leverage management methods to combat transition, physical, and opportunity risks.

The Intergovernmental Panel released a report on extreme weather events on Climate Change (IPCC) adaptation which stated that:

“Climate change is having an impact on every populated area on the biosphere. This encompasses Australia, where rainfall has decreased by 16 % since 1970, and the United States, which saw 20 different billion-dollar weather extremes in 2021.”

Top 3 climate change effects on supply chain management:

As discussed above, the main effects of climate change can be roughly split into three categories.

Transient Dangers:

Transition risks generate through the growing market variations and data differences. It specifically happens when the market goes down to a lower-carbon economy. We can understand it by this example that if the cost of carbon increases, the reserves of fossil fuel become limited and constrained. Constrained reserves do not generate financial returns.

Physical risks:

Physical risks can be both acute and chronic in nature. The affinity of physical risks increases with the extended shifts in climate patterns. High tides, floods, rising sea levels, elevated sea temperatures, and recurrent heat waves can also contribute to physical risks.

Opportunity risks:

Opportunity risks are largely based on the customer’s priority and personal product. For better understanding, we can take the example of vehicle growth. The acceptance of electric vehicles is increasing and their respective infrastructure is based on the phenomenon of opportunity risk and customer demand. The byproducts of any vehicle that will eventually impact climatic conditions will be the customer’s responsibility as well as their choice.

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