Driving net-zero: how climate change is disrupting the global supply chain
Climate change is already affecting supply chains. Here is what you can do to make yours more sustainable and stay ahead of the curve.
We all think we know what to blame for supply chain disruption in the past two years: COVID-19. But while the pandemic has certainly wrought chaos in the short and medium-term, there is evidence that climate change presents a greater long-term risk.
Weather extremes caused significant issues to supply chains around the world last year.
Extreme weather such as wildfires and floods is already causing issues in ports, highways and factories. Austin Becker, a maritime infrastructure resilience scholar at the University of Rhode Island, recently told WIRED climate change is “long-term dire" for supply chains.
At the same time, calls to make the process of getting goods from A to B more sustainable are growing louder. So what can companies do to ease their carbon footprint and become more resilient to the disruption caused by unexpected fires, floods, typhoons and freezes?
According to the National Academy of Sciences, global warming “can produce unusually high or low levels of rain or snow, temperature, wind, or other effects. Typically, these events are considered extreme if they are unlike 90% or 95% of similar weather events that happened before in that same area.”
Speaking to HERE360, Principal Analyst at ABI Research Susan Beardslee added: “Not everybody realizes global warming is not just heat, it's extreme weather. In addition to the terrible human toll, it can have a very real impact on operating facilities and transportation. It affects the entire supply chain.”
Some examples of supply chain chaos unleashed by unpredictable conditions last year included a big freeze in Texas, which caused energy blackouts. Samsung stopped its chip production there for over a month as a result.
In Asia, typhoons swept across Malaysia and the Philippines at the end of 2021, killing hundreds of people and causing port closures. Meanwhile, Canada's supply chain was hit by fire and floods, and flooding in the Rhine, an important shipping route for commodities in Germany, caused serious delays last summer.
“Tornadoes in Kentucky and Illinois recently not only resulted in a loss of life but also caused a roof collapse of a 1.1 million-square-foot warehouse," Beardslee added. “Some of these are now hitting areas that weren't previously considered major tornado paths in the US."
In some regions, there has been talk of raising ports and other coastal infrastructure to cope with rising sea levels. Another response has been to reduce dependency on parts and materials from far-flung locations and concentrate on nearshoring instead to reduce risk. Many companies have already moved from a just-in-time model with inventory to storing three-four months' worth of goods at a time, in response to the shortages of the past 24 months.
But Beardslee said visibility is key to responding quickly and effectively to sudden events. “It is a combination of the inventory and location that gives you the flexibility to alter those plans, sometimes close to real-time. What can you intercept or redirect — where is it, and how can you get it to a different place?" she said.
“When you have built-in transparency and flexibility, you can react so much more quickly.”
At the same time, there is a lot that logistics companies can do to reduce their own impact on the environment. That might not prevent unpredictable weather events in the near future, but it will help mitigate climate change if we can collectively reduce emissions going forward.
Transportation accounts for about a fifth or more of global emissions, so there is work to be done. Alex Osaki, Product Marketing Manager at HERE, said part of the challenge is that few fleets are fully digitalized. This makes it hard for them to get an accurate account of their own operations, including whether drivers stick to the route chosen, how long the vehicle spends idling, where delays happen, and other information that affects emissions.
Shorter last-mile routes from urban warehouses lend themselves to two-wheel modes of delivery.
“Only once fleet companies know how much carbon they are producing can they look at measures to reduce it," he said. “That might not mean replacing an entire fleet but could involve other approaches such as using renewable energy in your warehouses or purchasing carbon offsets."
A tool such as CO2 Insights, a partnership between HERE and Migros, allows fleets and shippers to compare the emissions they would generate using different kinds of vehicles. But other less radical options are also available, Osaki said.
“Most last-mile delivery routes are under 150km, and some are as little as 15 or even 10km," he explained. “If you know how far you need to travel on each trip, you know if you can electrify your fleet or a part of it. A fleet could, for example, electrify 80% of its fleet while leaving 20% for long-haul diesel trips, but offset that with carbon offsets."
Understanding fleet operations in more detail can lead to innovative solutions. While deliveries are only set to increase — traffic in urban areas is predicted to rise by 30% by 2030 purely because of deliveries — that does not have to mean a correlating uptick in emissions.
“For example, you could create virtual fleets that share deliveries for different companies. That would be an efficiency gain for fleet operators too — but it is difficult to implement when fleets don't even know how many vehicles they need, and a lot of these details are estimated or not tracked at all," Osaki said.
As last-mile companies move warehouses closer to the city center, this also creates an opportunity to use more e-scooters and e-bikes. “There is a realization that two-wheel routing is more effective if your warehouse is close to your final customers," Osaki said.
In many of these examples, optimization leads naturally to sustainability. This is the opposite of the continuing perception that steps to become more carbon-neutral are necessarily a cost rather than a saving, in the form of carbon taxes, for example. Becoming more efficient can save money and help to save the environment at the same time.
Amid supply chain disruption, sustainability measures may seem more difficult to implement. But with the right approach including the right technological tools, preparing for the future becomes a good deal easier.
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