Extreme weather events pose long-term problems

Climate change and extreme weather events will present constant challenges to global supply chains in the years to come, even as obstacles related to the pandemic ease.

Only in 2021, the repercussions of the hurricane Ida, a typhoon near Chinese ports, a frost in Texas, a flood in British Columbia and the monstrous tornadoes of December in U.S they make clear that world trade is struggling to cope with much more than a health crisis.

As temperatures rise, nature is likely to be an increasingly frequent, intense and random factor of disturbance.

“It’s not the next big supply chain crisis. They are the next big supply chain crises. In plural“, He said Jason Jay, director of the sustainability initiative of the Sloan School of Management of the WITH.

In addition to warmer temperatures and an increasing frequency of extreme weather events, companies will need to invest in climate change mitigation initiatives, such as the transition to green energy and regulations on environmental due diligence.

Plant closures

These changes create cost pressures and can lead to accidental disruptions, as noted in China this year when the closure of coal plants caused an energy crisis, he said Ethan Harris, Head of Global Economic Research at Bank of America.

A first step companies can take to mitigate the impact of extreme weather conditions is to map their supply chains to better understand where exactly risks lie, whether it’s a hurricane-susceptible Gulf Coast supplier or a hub. of transport vulnerable to floods.

While disruptions from climate change will not occur everywhere at once, as did the pandemic, the severity of the impact will only increase over time. And many companies are not prepared.

“Stable weather assumptions are built into all aspects of our daily lives in ways we don’t understand.“, He said Mekala Krishnan, partner of McKinsey Global Institute, specialized in climate risk.