How climate change is impacting global supply chains

CNBC Television

19 Aug 202104:01

Summary

TLDRThe impact of climate change is disrupting various industries, from agriculture to technology, with significant effects on supply chains. Recent wildfires in the American West and prolonged droughts in Brazil are causing price surges in products like lumber and coffee, while sushi rice supplies are threatened due to water shortages in California. Experts predict over $2 trillion in productivity losses by 2030, urging businesses to adopt innovative strategies for risk mitigation. Companies like Apple are proactively addressing these challenges, aiming for net-zero emissions by 2030. The demand for warehousing is also expected to rise as businesses seek to buffer against these disruptions.

Takeaways

🌍 Climate change is causing widespread disruptions across multiple sectors, impacting everything from lumber to food supplies.
🔥 Wildfires in the American West are significantly affecting lumber supply chains, leading to production curtailments in Canada.
☔ Flooding in Europe and droughts in South America are contributing to rising commodity prices, such as coffee and sushi rice.
💵 The UN Development Program warns that climate-related workplace disruptions could result in over $2 trillion in productivity losses by 2030.
📈 Companies need to adopt proactive and innovative strategies to mitigate climate risks and ensure business continuity.
📝 Long-term planning is essential; companies like Colgate-Palmolive are encouraged to extend their risk mitigation strategies to 20 years.
🍏 Apple aims to achieve net-zero emissions in its supply chain by 2030, highlighting a commitment to sustainable practices.
🔗 Bridging and buffering are key strategies to manage supply chain risks, emphasizing strong supplier communication and maintaining product reserves.
🏭 Increased demand for warehousing is expected as businesses seek to store products safely from climate threats.
🔄 The shift towards e-commerce is also contributing to the growth of the warehousing sector, necessitating adaptation to new supply chain dynamics.

Q & A

What are some examples of climate-related disruptions mentioned in the transcript?
-The transcript mentions wildfires in the American West, flooding in Europe, and drought in South America, which are disrupting supplies of lumber, chocolate, and sushi rice.
How has the drought in Brazil affected coffee prices?
-Prolonged drought in Brazil has caused the price of coffee to nearly double in the last year.
What impact do climate change-related disruptions have on productivity?
-Workplace disruptions caused by climate change could lead to more than $2 trillion in productivity losses by 2030.
What strategies are businesses advised to implement for risk mitigation?
-Businesses are encouraged to engage in strong communication with suppliers and maintain reserve supplies to buffer against potential disruptions.
How does Apple's pledge to cut emissions impact their supply chain?
-Apple's pledge to cut emissions from its supply chain to net zero by 2030 involves evaluating supply chain partners to reduce emissions and lower the risk of disruptions.
What role does warehousing play in responding to climate-related disruptions?
-The transcript suggests that increased demand for warehousing may arise as companies look to store more products to mitigate supply chain disruptions caused by climate change.
What is meant by 'buffering' in the context of supply chain management?
-Buffering refers to maintaining a reserve of products and having backup suppliers to ensure continuity in the event of supply chain disruptions.
Why is communication with suppliers important during climate crises?
-Strong communication with suppliers is essential to manage risks effectively and ensure that all parties are informed about potential disruptions and solutions.
What insights did MIT students provide regarding climate change for Colgate-Palmolive?
-MIT students recommended that Colgate-Palmolive engage in risk mitigation planning beyond its current five-year horizon, suggesting a shift to a 20-year plan.
How has the perception of warehousing changed in light of recent events?
-The perception of warehousing may be shifting from being seen as 'unsexy' to a vital sector due to increased demand driven by e-commerce and the need for climate resilience.