Supply chain leaders are largely ignoring the business hazards posed by global weather trends, with barely a quarter having conducted a climate change risk assessment, much less prepared a reaction plan, a Gartner survey shows.
The results showed that just 27% of chief supply chain officers (CSCOs) have conducted a climate change risk assessment, and only 18% have conducted both risk assessments and scenario planning, according to the survey conducted among 320 supply chain leaders in December 2021 and January 2022.
One impediment to being better prepared is that fewer than half (44%) of respondents have a general sense of potential climate change risks based on previous events; meaning they understand those risks are materializing, but have not identified or quantified the impact.
A second challenge is the sheer difficulty of predicting specific impacts, especially when models indicate that the severity and impact of climate events will escalate over time. “The effects of climate change are hard to predict, but it is possible to model the risks and opportunities that might occur,” Heather Wheatley, senior director analyst with the Gartner Supply Chain practice, said in a release. “Chief supply chain officers (CSCOs) regularly assess various risks and opportunities as part of normal business – this must be done for climate change as well.”
The survey also revealed that the top barriers to planning for climate change in the supply chain include a focus on short-term decision making (57%) and an inability to link the cause and investment to benefits (57%).
However, that lack of long-term decision making could be costly, since climate adaptation must be included in investment decisions. For example, if building a new manufacturing plant, design considerations should be made for future climate change threats such as heat waves or water shortages, Gartner said.
“Scenario planning is a crucial part of the process, as it highlights key elements of a possible future and helps draw attention to the key factors that will drive future developments," Wheatley said. "For example, in a future that includes raw material scarcity and trade uncertainty, organizations that rely on more resilient inputs such as drought resistant crops can gain a competitive advantage."
