Climate changes and the need to adjust supply chains

Climate change is occurring and affecting the entire population as well as key sectors of the national economy, concludes the Third US National Climate Assessment (NCA) report. Overall, summers are longer and hotter with longer periods of extended heat while wildfires start earlier in the spring and continue later into the fall and rain comes down in heavier downpours.

The costs of these changes are stunning. For example, a 2011 drought in Texas and Oklahoma contributed to $10bn in direct losses to the agriculture industry. Hurricane Sandy caused around $75bn in damages. The report also estimates the Gulf Coast states face annual losses totaling $14bn from stronger hurricane winds and rising sea levels. In fact, a Louisiana highway critical to moving oil and gas is sinking and flooding, and a 90-day shutdown would cost the nation $7.8bn.

It also cites cumulative costs from sea level rise and flooding at as much as $325bn by the end of this century if the seas rise by four feet. 40% of that would be incurred in low-lying Florida, and more than a quarter would come in the populous north-eastern US. Losses for just a one foot rise would total about $200bn.

Although some of these changes will bring some benefits such as longer growing seasons in some areas, the overall report spells bad news. For industries, this also means the need for regular supply chain monitoring and planning to deal with the impact these changes bring.

More companies are publishing annual sustainability reports outlining goals and initiatives to reduce their impact on nature. For example, FedEx noted in its report it is rebalancing its fleet and optimizing routes. By doing this, FedEx Express has improved total fleet miles per gallon within the US by 14.1% since 2005, saving over 53m gallons of fuel or approximately 472,700 metric tons of carbon dioxide emissions, with a goal of improving by 20% by 2020. The company also operates one of the largest fleets of commercial hybrid trucks in North America, consisting of more than 329 hybrid-electric trucks, and operates 19 all-electric trucks in Los Angeles, US, London, UK, and Paris, France.

UPS also is expanding its hybrid-electric fleet and offers a carbon neutral shipping option. UPS purchases carbon credits to give customers a way to”offset” the emissions produced by the transportation of their shipments and is verified by Société Générale de Surveillance (SGS), an inspection, testing and verification company.

A political ‘hot button’, this latest assessment calls for continued mitigation steps including regulations and programs to reduce carbon emissions, as well as necessary planning and investment to deal with the known impacts. Some see this increasing government regulations, citing those already implemented on vehicle emissions as well as new solar power initiatives. Regardless, the climate is changing and as it does, the supply chain will need to adjust.