8 September 2022

Building climate resilient supply chains


By Cervest

Building climate resilient supply chains

A business’s most vulnerable point may not be internal but actually external. Supply chains are vulnerable to disruptive events that can have far-reaching consequences. Businesses dependent on others to manufacture or transport goods suffer if any link in the supply chain is put out of action by an external factor. It is therefore essential for companies to understand the supply chain risks they face and to take action to safeguard against disruption.

Supply chain disruption occurs for a range of reasons. Last year, the Ever Given blocked the Suez Canal holding up an estimated $9 billion worth of goods a day, the COVID-19 pandemic caused widespread disruption through interrupted manufacturing, worker absences and out-of-kilter inventory-to-sales ratios.

Events of this nature can impact and damage businesses. This is also the case for extreme weather events and climate-related disruption. This can wreak havoc on supply chains and is a long-term problem that businesses must face.

How climate-related events disrupt supply chains

Hurricane Ida hit the U.S. Gulf Coast in August 2021 temporarily shutting ports and halting oil production. This year, the reduced water level of the River Rhine caused by low rainfall and glacial ice formation disrupted the transport of goods along this key European waterway.

Droughts affect how much water is available which in turn can reduce, or completely stall, operations in water-intensive industries such as manufacturing or big pharma. Entire economies feel the impact, so much so that drought losses are estimated at 9 billion euros annually across the EU and UK.

Many manufactured products, including cars and electronics, have multiple components and complex supply chains that connect raw materials, assemblers, manufacturers, transporters and retailers. Any incident impacting any part of this chain can have serious knock-on repercussions.

There is a longer-term impact of climate-related change too. Coastal flooding as a consequence of rising sea levels threatens ports and rail and road networks. Around 90 percent⁠ of global freight moves by ship. If sea level rises an estimated two to six feet or more by 2100, it will threaten the ports that occupy an essential role in global trade.

How businesses can protect themselves

Many of the assets – such as factories, office buildings and power plants - and systems of today’s manufacturing supply chains and transportation networks were built for climate conditions that have since changed, or that are forecast to change. Buildings, for example, weren’t generally designed to withstand the climate hazards, such as heatwaves and extreme temperatures, that we now experience.

Companies working within supply chains need actionable intelligence on their climate risks so they can adjust and take mitigating actions to protect their assets and their businesses. This is ‘adaptation’, a process of adjusting due to realized or expected climate conditions. However, to make such an adjustment, businesses need high-quality information to base their decisions.

Without such insight, businesses are at the mercy of change and will be reactive to events as they happen.

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What is climate intelligence?

‘Climate intelligence’ is best described as business intelligence for managing asset-level climate risk – and opportunity. The World Economic Forum (WEF) explains it as “historical, current and predictive information on our natural and built systems used to power insights for climate mitigation and adaptation”. It’s a broad term that captures a variety of climate analysis services, at various levels of detail and sophistication.

This gives companies the insight they need to make informed decisions on matters such as where to manufacture, which suppliers to partner with and any adaptations they need to make to operations or processes.

Why entire supply chains need to use climate intelligence

This knowledge is invaluable to all stakeholders across supply chains. By forming these climate intelligent networks, it helps them build resilience to climate-related risks that could jeopardize their current and future business and adapt at scale.

When partnering, climate intelligence should form part of supply chain due diligence, supplier onboarding and supplier risk reporting.

Although an organization may only own a handful of assets, they may rely on thousands. Ultimately, climate intelligence is the only way to build climate resilient supply chains. Its insights can identify supplier vulnerabilities across different locations, timeframes and hazards. In this way, organizations can choose to engage suppliers that have risk ratings in line with their own expectations, or work with their suppliers to identify risks and adaptation measures needed to mitigate them.

How Cervest can help

EarthScan™, from Cervest, provides science-backed climate intelligence that can help supply chain members discover and quantify the climate risks to their assets and operations so they can make targeted interventions and adaptive action. Businesses can quickly and easily search its global asset library of over 220 million built assets to locate their assets and create portfolios. Users can even bulk upload via a .csv file and include custom fields, such as property value, age and building type to enable advanced analysis and comparison.

EarthScan translates multiple datasets to provide actionable insights into the probability of the impact of climate change between 1970 and 2100 at a portfolio and asset level.

It covers five risk categories: heat stress (including heatwaves), precipitation, flooding (coastal and riverine), wind and drought. Output can be presented at a single-risk or combined-risk level, the latter providing an indicator of the overall risk facing an asset.

Climate intelligence can help companies within supply chains build resilience into their portfolios and operations. Climate risks cannot be eliminated, but the impact they can have can be mitigated through preparation and sound business planning. This approach is dependent on high-quality information which only climate intelligence can provide.

To find out more, get in touch with our team.

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