How do climate risks affect supply chains?

Climate risks significantly affect supply chains, particularly through disruptions caused by extreme weather events and resource scarcity. Extreme weather, such as hurricanes, floods, and wildfires, can halt production facilities, destroy inventory, and hinder transportation networks. This leads to delays in the delivery of goods, increased costs, and difficulties in sourcing raw materials. Additionally, as certain resources become scarcer due to climate change, organizations may experience increased competition for these resources, affecting pricing and availability.

The operational challenges posed by climate risks require companies to adapt their supply chain strategies to mitigate these disruptions. This includes investing in resilient infrastructure, diversifying suppliers, and enhancing logistics planning. Unlike options that suggest no impact or always decreasing costs, the reality is that climate risks create complexities that necessitate careful management and strategic responses to maintain continuity in supply chains.