Maplecroft, a global risk and strategic consulting firm in the U.K., noted recently that “resilience to major weather ….events is not improving in some of the world’s most important growth markets, leaving large sections of their populations, essential infrastructure and economies at ‘extreme risk.’” That view aligns with that of Notre Dame Global Adaptation Index. The open-source GAIN Index underlines that climate change, population growth, urbanization and resource scarcity jeopardize urbanizing nations.
Why should we care? Because we care about humanity and should make it a priority to help the most vulnerable adapt. And because supply chains and investors are exposed to greater risk than anticipated as natural disasters exacerbate other political and societal risks.
Maplecroft describes an interesting contrast. Its Socio-Economic Resilience Index ranks the U.S. at 169th and ‘low risk,’ even though it features in the “20 most at-risk countries for exposure to hurricanes, tsunamis, extra-tropical cyclones, storm surges, flooding, volcanic risk and wildfires.“ The Philippine’s socio-economic resilience to natural disasters, meanwhile, ranks No. 65 and ‘high risk’ Because, while it has registered strong economic growth over the last four years, “better disaster resilience has not materialized,” which keeps its index ranking unchanged.
The WEF Global Risks 2013 Eighth Edition posits that the twin threats of economic upheaval and accelerating climate change will collide during the next decade, delaying adaptation efforts while exposing nations to unpredictable financial loss from disasters. It contends that denser cities are more threatened by higher temperatures, exacerbated drought, storms and heat waves, although rural areas certainly are vulnerable from many of these weather-related events. I do see a big climate risk derived from the ongoing population shift toward coastal zones.
In the CDP Supply Chain Report 2012-13, “Reducing Risk and Driving Business Value,” 70 percent identify a current or future risk related to climate change. Seventy-three percent say they feel that climate change presents a physical risk to their operations. More than half of the supply-chain risks identified due to drought and precipitation extremes already are affecting respondents’ operations or are expected to have an effect within the next five years. According to the survey, the primary impacts will be a reduction/disruption in production capacity and increased operational costs.
Since 2011, the World Economic Forum has been leading a Supply Chain Risk Initiative to consider safeguards for global supply chains. Among other priorities, it aims to:
- More explicitly assess supply chain and transport risks as part of procurement, management and governance processes
- Develop trusted networks of suppliers, customers, competitors and government focused on risk management
- Improve network risk visibility, through two-way information-sharing and collaborative development of standardized risk assessment and quantification tools
- Improve pre- and post-event communication on systemic disruptions and balance security and facilitation to bring a more balanced public discussion
Combining those with a Ten Point Checklist for Making Corporations Resilient and Asking the Climate Question: How to Create a Climate Adaptation Plan, would deliver a robust execution plan.
So, as you consider your supply chains, you might want to ponder if food shortages, fragile states, variable water supplies and the vagaries of emerging economies have affected it before, since these geopolitical, societal, environmental and economic factors are likely to be stressed simultaneously by climate change in the future.
Especially since these issues are likely to take priority for limited resources, it is worth considering how climate adaptation can be a collateral benefit of actions aimed primarily at nearer-term economic, geopolitical, societal and environmental factors. If we don’t, twining these threats with accelerating climate change could collide in the next decade, delaying adaptation efforts while exposing companies to unpredictable financial loss from disasters.