Impacts: Supply Chain

Climate change-related events such as extreme weather, droughts, forest fires, and floods are disrupting local and global supply chains on an increasingly frequent basis. This impacts the movement of goods around the world. As temperatures continue to rise, so will the magnitude of impacts on supply chains.  

In the context of supply chains and trade, the impacts of climate change primarily manifest in the form of dwindling supply, disruptions in transportation, and human resource implications.  These impacts lead to the rising costs of goods. 

How does climate change contribute to diminishing supply? 

For many industries, climate change has direct implications for supply through the changing the climatic suitability of a region (e.g., for crop growth) and increasing the occurrence of extreme weather events.  

Climatic suitability refers to conduciveness of an area’s climatic conditions for growth of one or more crop or livestock species. For example, Ontario’s climate is suitable for the growth of certain crop species and is different from that of California or Brazil. As climate change progresses, the suitability of a region changes, meaning that adaptations or more inputs are required to produce the same outputs. Thus, the supply of certain weather-dependent raw materials (e.g., crops, trees) will be strained by changing climatic suitability – either diminishing in production or being pushed to other regions. 

Yields can decrease as climatic suitability changes

Such changes are of particular relevance for organizations in the agriculture, forestry, and fisheries sectors, as well as the companies that depend on their products such as food and beverage manufacturers, grocery stores, restaurants, and lumber and construction companies. As the climatic suitability of a region continues to change with a warming climate, businesses will see supplies dwindle and be forced to adapt. This has important consequences for both local and global supply. For example:  

• As mentioned previously in Impact: Agriculture and Food Security resource, Ontario is already seeing changes in the suitability of its wine regions as they continue to transition from cool to warmer climates that better suit warmer-climate grapes^[1]. These changes are forcing the province’s wine growers to adopt measures such planting new grape varieties and enhancing vineyard irrigation.  
• First Nations communities in Northern Ontario are seeing traditional food supplies diminish as forest loss from forest fires and increasing pest infestations, along with changing precipitation patterns are making land less suitable for hunting and trapping. Warming temperatures are changing what can be harvested as foods such as raspberry and blueberry yields decrease and shift further north^[2]. 
• New York and New England have seen their lobster industries virtually collapse by 98% between 1996 to 2014 as a result of warming ocean temperatures^[3]. Significant lobster die-offs and migration to cooler regions are causing supply shortages which negatively impact the businesses in the lobster industry supply chain. This increases product cost, stock-shortages, and forces restaurants and grocery stores to procure their supply from other regions^[4].  

Production capabilities can decline as extreme weather increases

The increasing occurrence of extreme weather events such as droughts, wildfires, flooding, and storms further contributes to diminishing supply through direct damage and destruction of crops, livestock, and forest resources. Such events can also result in damage to buildings as well as local water and power supplies, further reducing the production capabilities of other industries and resulting in supply shortages. Here are some examples:  

• Mining companies in Ontario’s North are already seeing an increased number of down days because of extreme heat^[5]. This means a reduction in production or additional investments that must be made to adapt to changing climate conditions and extremes. 
• Research on the sustainability of Canada’s forestry sector projected that impacts from drought and wildfires, particularly in western regions, would lead to significant declines in biomass and available supply^[6]. Without taking adaptation action to lower existing and future vulnerabilities, maintaining long-term harvesting levels is expected to be extremely challenging^[6]. 
• Developing countries in the Global South are expected to be the hardest hit by future climate change impacts and extreme events. Many of these countries are major suppliers for Ontario’s food and beverage industry, which has important consequences for future production, particularly for climate sensitive crops like coffee, tea, cacao, cashews, etc.^[5] 

With many supply chains spanning the globe, businesses must consider the impacts of climate change on a global level. The droughts and forest fires taking place in Europe and Asia have consequences for economic activity in North America. The inter-connectivity of global supply chains means that significant reductions in the availability of raw materials and natural resources in one region can lead to increasing stock-outs, costs, and bottlenecks that disrupt procurement and manufacturing in another region^[7]. Many businesses are still dealing with the supply chain impacts caused by the COVID-19 pandemic or the war in Ukraine and may expect similar disruptions as the climate continues changing over the 21^st Century. 

What does transportation have to do with supply? 

Warming temperatures and extreme weather events disrupt supply chains through impacts on transportation. As discussed in the Impact: Buildings and Infrastructure resource, infrastructure damage can lead to the loss of production time and impact goods movement. Consider the following examples: 

• The extreme precipitation event in southern British Columbia in November 2021 interrupted local supply chains through flooding and damaging roads and railways, effectively cutting off ground transportation in the region. This led to an increase in the cost of goods across Canada as aspects of the regional and national supply chain were disrupted^[8].  
• Europe’s extreme heat event in July 2022 saw significant workplace and transportation disruptions with the temporary shutdowns of airports, railways, and warehouses causing further delays in the movement of goods^[9].  
• Rising sea levels and increasingly powerful storms also present risks to ports and shipping lanes across the globe with significant impacts on supply chains and the economy. Without significant mitigation and adaptation efforts, climate change is expected to cost the shipping industry up to $25 billion per year by the end of the century^[10]. 

The Region of Peel recently assessed the risks of climate change on its goods movement sector, which adds $1.8 billion to Ontario’s GDP and accounts for roughly four in nine jobs in the Region when including manufacturing^[11]. The study, conducted by Waterloo’s Terrametrics Research Lab, found that damage to regional roads, railway, and transportation hubs is likely to increase with the rising occurrence and severity of extreme precipitation, extreme heat, freeze-thaw cycles, and compounding events as a result of climate change^[11].  

These impacts are both immediate, such as flash flooding brought on by extreme precipitation, and long-term, such as the chronic damage caused by more freeze-thaw cycles on paved surfaces with warmer and more variable winters.  

Why should HR be involved in supply chain conversations? 

As discussed in the Impacts: Human Health resource, businesses can expect to see reduced productivity through the human health impacts of climate change.  

Higher temperatures can increase risks of heat related injuries (e.g., heat rashes, cramps, heatstroke) and heat exhaustion, leading to reduced cognitive and physical capabilities as well as diminishing workplace productivity^[12]. This is particularly relevant for sectors with outdoor work and physically demanding labour (e.g., construction, farming, landscaping), which may see increasing amounts of heat-related illness or lost production time due to mandatory extreme heat breaks^[13]. But workplace climate change related impacts will likely be felt across other industries as:  

• Extreme storms increasingly cause power outages, leading to lost production and increasing worker downtime.
• Flooding and extreme weather events damage transportation infrastructure disrupting employee commutes to the office or the movement of goods across a region.
• Increasing occurrence of vectors, pathogens, and allergens results in more employee illness and lost production time.
• Greater building cooling needs and climate-control may increase the prevalence of building-related illnesses due to poor indoor air quality, reducing productivity in offices, factories, and institutional buildings. 

What does this mean for businesses? 

The risks to supply chains caused by climate change are significant, and without concerted collective action from all levels of government, the private sector, and the global community, Canadian companies will continue to see increasing challenges in this area of their business.  Some actions businesses can take to prepare for disruptions are: 

• Engage with stakeholders across your entire supply chain to understand your unique risks 
• Adjust business models to include products that are more suitable to new climate conditions 
• Diversify suppliers to mitigate risk of regional disruptions 
• Support economic policies that build capacity for more localized supply chains 
• In areas that are prone to transportation disruption from floods and fires, prepare emergency plans with alternate routes and encourage local governments to plan for and build infrastructure to withstand known risks 

Partners in Project Green’s Building a Climate Resilient Business Resource Kit provides a foundation in the basics of current climate science, the impacts of climate change on businesses, and mitigation and adaptation strategies. Please explore these resources and connect with us to advance your organization’s climate resiliency.

 For more information on climate change mitigation and adaptation from a business perspective:

Mitigation

• Energy Efficiency and Conservation
• Fuel Switching
• Heat Recovery
• Carbon Capture, Utilization and Sequestration/Storage
• Low Carbon Transportation
• Behaviour Change

Adaptation

• Risk Identification 
• Risk Analysis 
• Risk Evaluation and Prioritization
• Implementation of Risk Interventions 
• Monitoring and Review

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[1] Hewer, M., and Brunette, M. 2020. Climate change impact assessment on grape and wine for Ontario, Canada’s appellations of origin. Regional Environmental Change. 20, 86. DOI: Click here for URL

[2] Graff, C. New research finds climate change affecting food supplies for First Nation in Ontario. Accessed May 15, 2023. Click here for URL

[3] Greenhalgh, E. 2016. Climate and Lobsters. Accessed August 8, 2022. Click here for URL  

[4] TechnoServe. 2022. How Your Favorite Food and Drinks are Impacted by Climate Change. Accessed May 15, 2023. Click here for URL

[5] Bikis, I. 2022. Climate changed: Mining industry digs into alternative methods as risks rise. Accessed May 15, 2023. Click here for URL

[6] Brecka, A.f.J., Boulanger, Y., Searle, e.B., Taylor, A.R., Price, D.T., Zhu, Y., Shahi, C., and Chen, H.Y.H. 2020. Sustainability of Canada’s forestry sector may be compromised by impending climate change, Forest Ecology and Management, Volume 474, 2020. https://doi.org/10.1016/j.foreco.2020.118352. Click here for URL

[7] Kara, M.E., Ghadge, A., and Bititci, U.S. 2020. Modelling the impact of climate change risk on supply chain performance. International Journal of Production Research. 59(24) 7317-7335. Click here for URL   

[8] Parker, C. 2021. Major flooding in Canada leads to widespread supply chain disruptions. Washington Post. Accessed August 15, 2022. Click here for URL

[9] The Associated Press. 2022. Britain’s heat wave disrupts travel, health services – and it’s only expected to get hotter. CBC News. Accessed August 8, 2022. Click here for URL

[10] Van Houtven, G., Gallaher, M., Woollacott, J., and Decker, E. 2022. Act Now or Pay Later: The Costs of Climate Inaction for Ports and Shipping. RTI International. Click here for URL

[11] Dedman, K. 2022. Climate Change Risks to Goods Movement. Region of Peel. 

[12] SafetyStratus Research Advisory Group, 2022. The Impacts of Climate Change on Workplace EH&S. Accessed May 19, 2023. Click here for URL

[13] Centers for Disease Control and Prevention. Extreme Heat. Accessed May 17, 2023. Click here for URL