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How climate change is affecting supply chains

At the end of April, 110 shipping companies signed a letter calling for mandatory slow-steaming to be adopted by the International Maritime Organization’s (IMO) greenhouse gas (GHG) working group. The letter did not include the signatures of any container carriers, and has created quite a stir. There are ongoing debates over whether slow steaming would work for the container sector, especially when it comes to perishables, such as fruit.

This news comes just months before the IMO’s 2020 low-sulphur fuel requirements come into effect—underlining the deep impact climate change is having on supply chains worldwide.

The reality of climate riskClimateChange_28218782_s

The United Nations Environment Programme’s (UNEP) Task Force on Climate-related Financial Disclosures (TCFD) has articulated two categories of climate risk:

  1. Physical climate risks. These are the risks from severe weather events and changing climate patterns. The impacts of these include disruptions in raw material availability, energy supply, supplier operations, and impacts in local communities along the supply chain.
  2. Legal and policy risks. Regulations are changing as a result of the transition to a low-carbon economy. Pricing is increasing for fuel and greenhouse gas emissions. Consumers are demanding low-carbon and climate-resilient goods.

Building resilience

Rather than waiting for new regulations to send you scrambling, or the next hurricane to disrupt your operations, the time to start adapting is now. Building climate resilience in your supply chain is essential to meeting and adapting to climate risk.

Assess both physical and regulatory risks throughout your supply chain. Focus where you have the greatest impact and influence and take these resilience-building steps:

Step 1:

Consider the range of climate risks and prioritize parts of the supply chain that are most at risk. Is transport your biggest challenge? Or are you dependent on raw materials or agriculture that may be affected? Examine your whole supply chain and identify the priority areas.

Step 2:

Identify and implement supply chain actions to adapt to climate risk. Be proactive and inclusive. Include your internal procurement teams, suppliers, and consider broader collaboration to meet your goals. Develop measurable targets for your efforts.

Step 3:

Evaluate the impact of your supply chain actions. Share knowledge within your community and industry to continue improving processes. Adjust your programs and goals over time.

As your international logistics partner, Cole has been managing change and risk in supply chains for more than half a century. Contact us today to learn how we can help optimize your supply chain.

 

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