Climate change risk assessments are vital, says Gartner
A survey by technological research and consulting firm Gartner has revealed just 27% percent of supply chain leaders have conducted a climate change risk, while 44% only have a general sense of potential future climate change risks based on past events.
“The effects of climate change are hard to predict, but it is possible to model the risks and opportunities that might occur,” says Heather Wheatley, Senior Director Analyst with the Gartner Supply Chain practice. “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 of 320 supply chain leaders in December 2021 and January 2022 found the biggest barriers to planning for climate change in the supply chain were a focus on short-term decision making (57%) and an inability to link the cause and investment to benefits (57%).
Invest in climate change adaption
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. “For example, in a future that includes raw material scarcity and trade uncertainty, organisations that rely on more resilient inputs such as drought resistant crops can gain a competitive advantage,” says Wheatley.
Despite this, only 19% of surveyed companies are using digital technology to help understand climate change risks. However, of those organisations that are using technology, 85% are utilising predictive analysis, which suggests that the majority of them are quick to appreciate its benefits.
Examples of tools that could be used include geospatial analysis, drones and artificial intelligence (AI) capabilities such as ecological simulations. Many organisations are also partnering with external consultants to help model scenarios.
Wheatley explains, “Investments in climate adaptation require a certain level of foresight. An increasingly popular tool is the shadow carbon price, which applies a notional cost to greenhouse gas emissions, effectively translating a future risk into a present-day operational cost that attracts the attention of business leaders.”
“For those organisations that are not using digital technology, it is unclear what information is being used to help model scenarios and to identify and assess risks. CSCOs should ensure that this blind spot is not overlooked,” concludes Wheatley.
About Heather Wheatley
Heather Wheatley is a Senior Research Director in the CSCO Enablement team. Wheatley’s research interests include supply chain risk strategy, risk identification and assessment, risk reporting, sustainable supply chain, and risk assurance.
Wheatley helps Gartner clients to effectively identify, analyse and manage supply chain risks based on organisational risk appetite, process and product type. Her work aims to show how proactive supply chain risk management can increase stakeholder value, enhance agility and help to deliver organisational goals. Her interests include helping organisations to consider and implement optimum risk responses to diverse and complex challenges.
Johnson Matthey, Head of Security and Risk, 5 years
Tesco, Enterprise Risk Manager, 1 year
About The Gartner Supply Chain Practice
The Gartner Supply Chain Practice provides actionable, objective insights for supply chain leaders and their teams, so they can respond to disruption and innovate for the future through leading-edge supply chain management practices.
Gartner delivers actionable, objective insight to executives and their teams. Its expert guidance and tools promise to enable faster, smarter decisions and stronger performance on an organisation’s mission critical priorities.