Climate Impacts on Logistics and Supply Chain

Climate Impacts

Climate change and the freight transportation industry are very much intertwined. The freight industry generates eight to ten percent of the world’s carbon emissions, making it one of the biggest carbon polluters on Earth. In turn, climate impacts create secondary effects from infrastructure damage all the way down to micro-scale problems like surety bond claims. 

It’s critical that logistics professionals understand this cycle, as well as the steps to breaking it. By seeing the complex and interconnected ways in which freight transportation and climate change interact, we can analyze ways to stop the process before it’s too late. 

Each of the following five trends represents a dangerous risk to the viability and reliability of the global freight transportation network that businesses rely on around the world. Each also interacts with the others and creates self-sustaining vicious cycles, which is why it’s up to every logistics stakeholder to create a cleaner and greener system to preserve our environment.

1. Carbon emissions contribute to climate change. 

At this point, well-established science clearly points to the effects of carbon emissions on climate change. The hydrocarbon fuels that nearly all logistics vehicles burn release CO2 as a byproduct of their combustion. Other elements of the supply chain such as agriculture and mining also release other greenhouse gases such as methane. 

Unfortunately, these gases don’t simply dissipate after emission. Instead, they remain in the Earth’s atmosphere and accumulate there. When the Earth radiates heat from the sun back into space, these gases absorb it, trapping the heat in the atmosphere—the so-called “greenhouse effect.” 

Over time, the greenhouse effect raises temperatures both in the world’s oceans and on land. 

This simple scientific effect has devastating consequences for the Earth’s environment, from natural disasters to decimated food supplies. 

2. Extreme weather is a threat to infrastructure and fleets. 

Bridges, ports, highways, and other critical transportation infrastructure are all seriously vulnerable to problems caused by climate change. From storm surge flooding to wildfires, weather events caused by climate change are an existential threat to some of the world’s most important logistics infrastructure. 

Logistics vehicles themselves can also be heavily impacted by extreme weather. Rougher seas and more frequent storms can cause breakage on cargo ships or even damage to the ship itself, while truckers will have to navigate through pouring rain more often. 

Impacts on some infrastructure can be mitigated through the construction of protective structures such as seawalls. Logistics businesses can also help protect their fleets by upgrading them to be able to handle heavy weather more effectively. However, if the world economy doesn’t decarbonize enough to reverse the trends of climate change, any improvements may ultimately be rendered insignificant by the scale of the disasters that climate change can cause. 

3. Higher temperatures can wreak havoc on supplies of agricultural raw materials. 

The world’s supply chains—particularly in the food and beverage industry—rely on relatively stable and mild temperatures in Earth’s most critical agricultural production zones. As climate change increases in speed, the global agricultural economy is already beginning to show signs of strain. 

Farming is the most prominent example (though not the only one). Shifting patterns of rainfall and temperature rise are already causing big problems for farmers, who experience longer droughts, higher temperatures, and more flooding than ever before. On top of that, as the ocean absorbs CO2 from the atmosphere, it gradually becomes more acidic, devastating ocean ecosystems that provide fish that feed families around the world. These processes represent existential threats to our food production systems. 

Moreover, the food system itself is responsible for a significant amount of this disruption. The EU’s scientific advisory organization estimates that global food production and distribution are responsible for 37 percent of global greenhouse gas emissions and, as the world’s population continues to increase, that number is only expected to rise. All of this adds up to a heavy impact on agricultural supply chains and transportation. 

4. Political unrest threatens supply chain reliability.

 Climate change doesn’t just affect the physical environment of the Earth—it also affects the human geography of states and societies. As critical resources like water become increasingly scarce and natural disasters become increasingly severe, the political unrest that has rocked the world for the past several years is likely to continue. 

Breakdowns in global leadership make it difficult to coordinate today’s international supply chains effectively. Instability is a serious threat to the seamless cross-border transportation that an international supply chain needs to operate efficiently, particularly when working in low- and middle-income countries. In a time when logistics is more global than ever, the industry can’t afford chaos. 

5. Logistics businesses face greater financial instability. 

When global supply chains experience the devastating effects discussed here, it can have both short- and long-term financial consequences. Some of the effects of climate change on freight supply chains include:

  • Idled fleets and blank sailings
  • Claims on freight broker bonds and insurance 
  • Higher costs for fuel and materials
  • Reduced profitability (and, in turn, reduced investment)
  • Consolidation of the logistics industry into a few large carriers as small businesses are unable to compete

These risks are difficult to mitigate through financial means or business tactics alone. Instead, they need to be attacked at their source: climate change.   

Fortunately, there is good news in the fight against climate change. Businesses in every industry, including logistics, have largely agreed that climate change is a battle that we can’t afford to lose. Industry giants and small businesses alike are mobilizing new resources to make their freight transportation cleaner and help build a more sustainable world.

As the urgency for climate action increases, the interconnected nature of climate change and the logistics industry will become increasingly apparent. Private industry, governments, nonprofits, and everyday citizens must work together to reduce their dependence on fossil fuels and create a logistics industry that protects the planet we all share. 

Climate impacts article and permission to publish here provided by Jason O’Leary. Originally written for Supply Chain Game Changer and published on March 1, 2021.