Global warming will likely exacerbate supply chain disruptions. Use these 5 steps to strengthen resilience amid growing climate risks
Supply chain delays and disruptions borne out of the COVID-19 pandemic remain elevated1 and are expected to stay that way through 2023 due to a variety of persistent global factors.2 Climate change, and its impact on natural catastrophes, also threatens to add new forms of volatility to the current worldwide supply chain quandary.
Global warming will likely exacerbate already over-stressed supply chains with more severe consequences and longer-term risk. In this volatile, uncertain and complex environment, risk managers should take action to strengthen their supply chain resilience.Use these Five Steps to Strengthen Supply Chain Resilience
What’s at Stake?
By 2050, global average temperatures are estimated to be at least 1.5 degrees Celsius warmer (compared to the period 1850-1900) and are expected to cause multiple unavoidable climate hazards – many of which have already been observed and are likely to occur with increasing frequency.
According to Aon’s 2021 Weather, Climate and Catastrophe Insight Report, these hazards include:
- More intense events that damage critical infrastructure which will affect road, air and maritime logistics routes as well as public service infrastructure such as hospitals, schools or roads
- Direct damage to manufacturing facilities or equipment
- Reduction in employee productivity
- Increased market prices for labor, energy and logistics (such as transport)3
Many industries beyond transportation and logistics have already been impacted by the increased frequency and severity of severe weather events, including agricultural, life sciences, natural resources and construction supply chains.
Climate projections tell us that such climate-related disruptions will only intensify as global temperatures reach or overtake the 1.5-degree benchmark set by the Paris Agreement. For businesses, there is a distinct threat to most of the world’s 2,738 seaports posed by rising sea level increases of an estimated two to six feet – and perhaps higher – by 2100.4 Rail lines, highways and other integral elements of the transportation and supply infrastructure are also at risk from rising sea levels, but excess rainfall and drought will also play a key part in forcing the adaptation of our global supply chains.