Climate change is already hitting your supply chain: how to measure the risk

A supplier who fails to deliver, an order that slips, a cost that rises without warning. For years, these problems were chalked up to market volatility or one-off failures. But one recurring factor is becoming harder and harder to ignore: the climate.

The evidence is overwhelming. In Economist Impact's Trade in Transition research, more than 99% of the executives polled said their supply chain is already affected by climate change. In many cases, that translates into lost profit, lost time and lost stability.

From climate risk to operational problem

For a long time we have framed climate change as a future risk, tied to long-term scenarios, emissions reduction commitments and strategic plans. That logic is starting to fall short.

Extreme weather events such as heatwaves, droughts and floods already affect infrastructure, production and transport in uneven, unpredictable and increasingly frequent ways. And they do so in a fragile context: supply chains today are more global, complex and interdependent than ever, which makes them more efficient but also more vulnerable.

A climate event in a single location can trigger a chain reaction. A drought cuts production and causes raw-material shortages, rising costs and delays. A flood severs a key route and throws planning out of sync. A heatwave slows a port to a crawl and holds up incoming goods, with a direct effect on stock.

What is at stake: cost, continuity and control

The impact is felt above all in sectors that depend heavily on natural resources or global logistics networks, such as food, retail and manufacturing. The consequences are not always immediate: sometimes they surface weeks later as accumulated delays, last-minute supplier switches or cost increases that are hard to explain.

The problem is not each individual incident but its cumulative effect, which ends up hitting three critical business variables:

• Cost: more volatile raw materials, more expensive transport and lower operational efficiency.
• Continuity: difficulty meeting deadlines and maintaining service levels.
• Control: a lack of visibility over what happens beyond direct suppliers.

The financial dimension is enormous. According to CDP's supply chain report ("Strengthening the chain"), the scope 3 emissions of the supply chain are, on average, around 26 times greater than a company's operational emissions, and the climate risks disclosing companies report add up to roughly 162 billion dollars in potential costs. Even so, only 15% of the companies reporting to CDP are driving emissions reduction initiatives across their supply chain.

From efficiency to resilience

For decades, supply chains were optimised for efficiency: cutting costs, tightening timelines, removing redundancy. Today's context forces a change of approach. The question is no longer only how to be more efficient, but how to be more resilient. That means changing how decisions are made:

• Assess suppliers not only on cost and quality, but on their exposure to climate risk (location, resource dependency, operational stability).
• Build environmental variables into procurement, to avoid concentrating risk in particular geographies.
• Review logistics routes and alternatives in the face of recurring disruptions.

The climate scenario analysis popularised by the TCFD is still a useful tool for anticipating how different climate futures would affect a supplier network. Worth knowing: the TCFD task force was disbanded in 2023 and its recommendations are now folded into IFRS S2, which is the live reference today. But making these decisions runs into a basic obstacle: most companies have neither a complete view of their supply chain nor the ability to cross operational data with climate variables.

Anticipating instead of reacting

The problem is not a lack of information, but how it is used. In most supply chains, supplier data, logistics variables, impact indicators and external factors such as climate or regulation sit apart, in different systems, with no joined-up reading. The signals are there, but they arrive late or never connect, which means many decisions are taken once the problem is already obvious.

What changes with a platform like Manglai is the ability to integrate that data using artificial intelligence. By crossing operational information with environmental and risk variables in a single system, the supply chain stops being a series of fires to put out and becomes something more predictable. This lets operations teams:

• Identify critical suppliers before they fail under climate stress.
• Spot hidden inefficiencies that inflate operating costs.
• Automate traceability, cutting the manual work now lost chasing spreadsheets for audit.

In practice, this means better-grounded procurement decisions, more precise management of the supplier network and a clear reduction in the time spent on audits and compliance. From now on, the difference will not lie in who gets hit, but in who is able to get ahead of it. If you want to strengthen the calculation of upstream emissions, our guide on AI in scope 3 calculation explains how to overcome the supplier-data barrier.